Behind Lucky's crazy growth: the rapid rise of coffee demand in China?

Lucky's current growth is mainly driven by the opening of stores, and short-term losses continue under the subsidized education model. Lucky has 2370 stores as of 2019Q1, and plans to accelerate the opening of 2500 stores in 2019. At this stage, lucky is shop-driven, the actual unit consumer purchase volume has not increased significantly, before the formation of stickiness, the marginal benefit of permeability has a decreasing trend. Considering the subsidy. At this stage, the average unit price is only 9.8 yuan, while the current operating cost accounts for more than 200%. Considering the follow-up costs and comparing with Starbucks, we believe that even if the long-term amortized cost is close to the limit, the idealized operating profit margin can only reach 2%, and the customer unit price needs to be increased through a new operation model or product structure. In fact, we believe that Lucky does not constitute an obvious customer overlap for Starbucks, and there is no overlap in demand for instant coffee at the corporate end, but is close to the price and demand positioning of the whole family, McCoffee and so on. The company's products focus on the middle range of 10-20 yuan, to improve the consumption conversion rate and regional coverage, but in the process of transformation, the profit model may not be able to catch up with the typical enterprises. We estimate that the initial investment of the express store is about 400000 yuan. According to the plan to open 2500 new stores in 2019, 1 billion yuan will be needed, and taking into account the current loss of the stores, it is expected that the funds raised this round can only maintain the operation within 1-2 years, and there may be financial pressure in the follow-up.

1 the demand for coffee in China is growing rapidly, and the potential demand for freshly ground products is four times that of that in China.

1.1 Coffee consumption is becoming more and more popular, and franchised brands have replaced curry food to become the market leader.

Coffee, tea and cocoa are called the three major drinks in the world. According to the data of the International Coffee Organization, in 2017, the total amount of global coffee production was 10.08 million tons and the total consumption was 9.9 million tons, and the global coffee market grew steadily.

China has been drinking tea since ancient times, and coffee culture has been in its infancy for a long time. For a long time, Chinese cafes have been dominated by overseas chain brands such as Starbucks or minority independent cafes. The pursuit of the brand is greater than the taste, the environment is more concerned about the price, and is closer to the experience economy.