Coffee war: Starbucks China structure adjustment, lucky to spend 200 million yuan to do dessert business

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Starbucks China structure adjustment, layout of China's new development stage

On May 27, Starbucks announced that from June 1, Starbucks China will adjust the existing management team structure, look to the future, and meet the new stage of development with a new structure with forward-looking layout.

Belinda Wong, CEO of Starbucks China, will be promoted to chairman and chief executive of Starbucks China from June 1, 2019, Comprehensive Media reported on May 27. At the same time, all of Starbucks' existing business in China will be reorganized into two business units, Starbucks Retail and Digital Innovation, which will report directly to the newly established Office of the Chairman and CEO.

Starbucks retail business unit will be headed by Cai Dep, chief operating officer of Starbucks China, who will be promoted to president and chief operating officer of Starbucks China retail. Liu Wenjuan (Molly Liu), vice president of digital innovation at Starbucks China, will be promoted to general manager of digital innovation, responsible for digital innovation business unit.

John Culver, president of Starbucks International and Channel Development Group, said, "the new organizational structure will give us more flexibility to mobilize and allocate resources to achieve a balance between short-term business needs and long-term strategic development."

Deal with the "Internet play" and explore the "fourth Space"

For this restructuring of the business, industry experts generally believe that this is Starbucks China continues to dig deep into the "third space" and explore the "fourth space" substantive measures.

As we all know, in Starbucks' business philosophy, creating a "third space" social place is an important business feature. A month ago, Nili, a senior quality manager at Starbucks China, said publicly that Starbucks' corporate culture has always put more emphasis on connecting and communicating with customers, and once thought that the takeout business could not better practice this concept. But in the face of changes in its customer base, it has now injected Starbucks' brand concept into its takeout business.

With the popularity of Internet technology, the prosperity of offline retail is suffering from the impact of takeout business and other brand stores. Especially from the strong attack from Luckin Coffee, which has been listed in the United States, Starbucks needs to respond in the 'fourth Space', which is dominated by online retail platforms.

Unlike Starbucks, which has always adhered to the "third space" theory, Luckin Coffee, who led the B + round by BlackRock, Starbucks's largest active investor, demonstrated a new business model of "Internet play". According to Li Hui, founder of Luckin Coffee's largest external investment institution, Luckin Coffee's success is comparable to a revolution in Internet efficiency, and it is also the inevitable result of maximizing extreme efficiency.

It is worth mentioning that on May 17, 2019, Luckin Coffee, a strong competitor of Starbucks China, landed on Nasdaq as scheduled and rang the bell on the stock exchange. Luckin Coffee's founder and CEO Qian Zhiya also said that high prices and inconvenience to buy have hindered the popularity of coffee in China, with per capita annual coffee consumption less than 7 cups.

Starbucks is also aware of this. Since announcing its strategic cooperation with Alibaba Group in August last year, Starbucks has been adding online "fourth Space" to the road of "Internet + Coffee". In addition to launching special star delivery, box horse star chef, "new retail wisdom store" and other projects, a week ago, Starbucks China launched the latest in-store mobile phone order payment service, officially launched the "online point, go to the store" member exclusive service.

The restructuring of Starbucks China can be seen as a new measure to deal with the "coffee war".

Rui Xing paid 200 million yuan to do dessert business.

According to Qixinbao data, Luckin Coffee (Tianjin) Co., Ltd. invested in Ruixing Bakery (Tianjin) Co., Ltd. on May 23, with Chen Min as its legal representative, executive director and manager, with a registered capital of 200 million yuan. The business scope of Ruixing Bakery (Tianjin) Co., Ltd. is "pastry, bread retail; coffee beverage, fruit and vegetable beverage research and development; prepackaged and bulk food, fruit and vegetable beverage, coffee beverage, coffee bean, coffee utensils sales; self-management and agent goods and technology import and export".

Screenshot source: Qixinbao

On the morning of May 27, it was reported that Chen Min, the legal person and executive director and manager of Ruixing Bakery (Tianjin) Co., Ltd., was the founder of Tuhu car. However, Chen Min, the founder and CEO of Tuhu car, has never held any position related to Ruixing, nor has he personally invested in Luckin Coffee-related companies or teams, according to an official statement issued by Chen Min, who is not the same as Chen Min. According to Luckin Coffee's prospectus, Chen Min, an employee of Luckin Coffee, is one of the founders of Luckin Coffee and currently works as a vice president of the company. He borrowed 10 million yuan in Luckin Coffee's early days and owns 16.67 percent of Ruixing VIE.

Set up a baking company or to increase revenue and reduce expenditure

It is not surprising that Luckin Coffee set up a baking company. In fact, as early as August last year, Luckin Coffee began to enter light foods such as cakes, bread, and chicken rolls. In April this year, Luckin Coffee once again launched deer tea and entered the tea race track. It can be seen that expanding the category is one of Luckin Coffee's strategies after standing firm in the channel advantage. At present, the Lucky Coffee Shop and delivery service contains many cakes and light foods, but most of them are sealed and supplied by third-party food manufacturers, and the daily supply seems to be so limited that they are easily sold out.

Since the beginning of this year, Luckin Coffee has successively launched light foods, BOSS lunches, snacks and other categories, the product line is on a par with Starbucks, and even released a series of new products of Little Deer Tea, focusing on tea drinks and fruit juices to attract non-coffee lovers. According to the prospectus, food sales accounted for 17.6% of Ruixing's revenue in Q1 in 2019.

By contrast, Lucky's rival Starbucks does not make cakes itself, and its cakes and desserts are provided by suppliers. As Starbucks' food sales are relatively mature, including coffee, fruit juices, desserts and corresponding brand derivatives, such as coffee beans. Food sales accounted for 23.2% of Starbucks' revenue, according to Starbucks' 2018 Q3 results.

It is worth noting that Baking (Tianjin) is not Ruixing's first baking company-in January this year, Luckin Coffee Bakery (Xiamen) Co., Ltd. was established with an injection of US $110 million (about 660 million yuan). Luckin Coffee Bakery (Hong Kong) Co., Ltd. was established. However, these baking companies only cover solid beverage manufacturing and some types of beverage manufacturing.

Luckin Coffee spent nearly 900 million yuan to build three baking companies in half a year. In order to improve his product industry chain, expand the product categories of stores, and improve the repurchase rate of products, he significantly accelerated the layout of light food, tea and other surrounding products. The establishment of Ruixing Bakery must be to produce and sell cakes and light food, so as to reduce the marginal cost of the overall business, and further strengthen Luckin Coffee's ambition for the development of peripheral products such as light food, tea, coffee utensils, and so on. fully prepared for the addition of more new users.

For now, China's coffee war has entered the second half, who will eventually ascend the "Iron Throne", the answer will need to be given time.

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