Costa Coffee's Coffee Market in China

With a taste different from that of Starbucks, Costa is seizing land in China with tricks that Starbucks has used or never used before. Who runs faster in the coffee war between Costa and Starbucks? Who goes further? It is not known yet.

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Costa, headquartered in the UK, is currently one of the top five coffee chains in the world and the number one coffee shop in the UK, with more than 1800 stores in 24 countries. It has been in China for several years, but in terms of popularity, it is far inferior to Starbucks.

At the end of 2006, Costa opened its first store in China in Shanghai, entered the Beijing market in the second half of 2008, and rapidly developed 43 chain stores in Beijing. In April, Whitbread announced a new five-year plan to double Costa's coverage network to 3500 stores and double global sales to £1.3 billion.

Obviously, the expansion of Costa in China will have a direct bearing on whether the above goals can be achieved.

After five or six years of entry into China, Costa finally ushered in its expansion period, marked by its entry into Terminal T3 of Starbucks' exited Capital Airport. On July 5th, British Costa Coffee settled in Terminal T3 of Capital International Airport at its 100th store in China. Costa announced that it would distribute special souvenir cookies to all customers who patronize the Costa store that week and have a free tasting of Costa delicious ice drinks in the store.

In order to celebrate this landmark and important moment, the parent company of Costa Coffee, CEO Andy Harrison of the British Whitbread Group, and John de Cash, president of Costa, came to the scene to launch a campaign. Andy Harrison says Costa plans to open more than 100 more stores in China next year.

According to Costa Coffee, the Chinese market is an "untapped gold mine". According to public data from the Beijing Coffee Industry Association, China's coffee consumption is growing at an annual rate of about 15%, much higher than the global rate of 2%. According to the average level of the international coffee consumption market, the consumption of coffee in mainland China is about 1 trillion yuan, but at present, the annual sales of coffee is only 70 billion yuan.

Paul Smith, president of Costa Asia, announced that the number would rise to 170 by the end of this year and 2500 by 2018, vowing to take away the market share of 1x3 in the Chinese coffee chain. "I will be disappointed if the number of new stores we open in the next 10 years is only between 750 and 1000."

Taste buds clash

Costa dares to challenge Starbucks because of his confidence in his own quality. Melissa Mace, public relations manager of Whitbread Group, the parent company of Costa Coffee, said that Costa is different from Starbucks. "We are the first international brand to bring top handmade coffee to the Chinese market."

The history of Costa dates back to 1978, when Italian brothers Sergio Costa and Bruno Costa set up a bakery on Old Paradise Street in London's Bronx. After 33 years of refinement, to this day, coffee beans shipped to all parts of the world, including China, are still from the factory. Costa is the first coffee chain to embody the concept of "from bean to cup"-from purchasing, storing, mixing, roasting, grinding to making coffee without any third party.

Costa improved the traditional Italian baking method, using slow baking, which took about 22 minutes to awaken the natural aroma of each coffee bean. Although this will greatly reduce the yield, it tastes more mellow than the usual roasted coffee beans, especially avoiding the bitter taste of short-term baking in high heat.

Coffee roasters supervise the roasting of about 35 tons of coffee a week. In the bakery, Costa's first global tasting specialist, Gennaro Pelicia (Gennaro), and his team conduct daily precision inspection, cup testing and recording of coffee samples for acidity, mellowness, sweetness, bitterness and aroma before deciding whether to allow them to be shipped to stores around the world. In 2009, Costa insured Gennaro's tongue for 10 million pounds at Lloyd's in London.

A complete cup of coffee experience also includes the feeling of interacting with the environment. In design, the backstage of Costa is semi-open, and customers can see the whole process of turning coffee beans into a cup of coffee in all directions. The aroma of coffee, the hissing sound of foam and the crash of mixing utensils produced by handmade coffee processing are all experiences that are difficult to replicate.

Coffee master is the soul of Costa grass-roots monitoring. His duties include monitoring the quality of coffee in stores, guiding others, and being responsible for coffee production in stores. Depending on the size of each store, it is usually equipped with one to five coffee masters. The identity of a barista is easily identified by the beans on his collar. The barista wears one bean and the coffee master wears two beans.

Completely different from Starbucks' taste, Costa coffee beans are light and complete because of their light roasting, while Starbucks coffee beans are deeply roasted, bitter and thick. As for the judgment of the two flavors, Wu Jiahang, general representative of the Columbia Coffee Association in China, said: "shallow roasting requires higher quality of coffee beans, because the taste of coke will mask the original quality or defects." In other words, I want to taste a good cup of coffee, which will not be deeply roasted. "

But it also puts Costa in a dangerous position, challenging the entire market with its own taste. Faced with such a situation, Wu Jiahang said: "Coffee consumers will evolve in the direction of pursuing coffee quality." When this is not limited to Starbucks, consumers have more choices in comparison. "

Replication experience

What Starbucks thinks about is not only its taste, but also its experience culture. Starbucks believes that people's stranded space is divided into homes, offices and other places. Starbucks is committed to seizing the third stranded space for people. The exquisite piano performance on the spot, the music background of European and American classics, popular and fashionable newspapers and magazines, exquisite European ornaments and other supporting facilities strive to create a noble, fashionable, romantic and cultural atmosphere for consumers, so that drinking coffee can become a kind of life experience, not only for leisure, but also to experience fashion and culture.

Starbucks not only makes coffee well, but its cups are also full of meaning, which is very popular with "cup control" people. In order to cater to the interests of different consumers, Starbucks has designed corresponding cups for different consumers, such as large, medium and small sets of cups designed for families, as well as cups suitable for lovers, including large cups with large capacity for men and small cups suitable for women with exquisite colors and fashionable designs. In addition, the cup design is very user-friendly, such as the accompanying cup design, in view of the busy business travelers driving or talking about things, Starbucks specially designed the cup lid with one-hand switch, and the curve design of the cup is easier to handle. At the same time, the anti-skid pad at the bottom of the cup can make the cup not easy to slip and is suitable for putting on the desk.

And Costa can now do that and surpass it. Unlike Starbucks' emphasis on the "third space" outside the home and company, Costa strives to create a "home" feeling.

"although this is not much different from Starbucks' regular customer culture, I personally feel that the atmosphere of the Costa store is more cordial and more like going home," Wu said. The big cup of Costa Coffee is always on people's mind, and a girl with little strength really needs two hands to hold the cup when she orders a big drink, so this cup is designed as a double-ear cup. Two cup handles make it easier to use. The coffee cups sold by Costa Coffee are the same as those that drink coffee in the store, and there are also accompanying cups, but the style is relatively simple.

On the face of it, Costa replicates Starbucks' experience culture. In fact, Costa is a perfect blend of family culture and handmade coffee. This is also in line with their slogan printed on the card: provide an unparalleled coffee experience.

But consumers do not buy it, and they need to be tested by the market.

Close-fitting tactics

At present, the expansion rate of Costa coffee ranks first in the domestic market, with 2 or 3 new stores opening every week. In the Chinese market, Costa has adopted a "personal" strategy, with almost every store close to Starbucks. This is very similar to having KFC next to McDonald's.

Close-to-body tactics not only save the costs of market analysis and investigation, but also improve their popularity by taking advantage of Starbucks' preconceived position in the hearts of consumers. The reason why Costa dares to fight hand-to-hand combat is because he is at ease with his "backers". Bosmiao said: "to find strong Chinese local companies to cooperate is the best way of development."

Before entering the Chinese market in 2006, Costa spent three years doing Chinese market research, in which, in addition to investigating consumer psychology and market conditions, the focus was to select a suitable partner. In 2006, British Whitbread Group and Yueda Group invested 51% and 49% respectively to establish Yueda Costa (Shanghai) Catering Management Co., Ltd., which is responsible for the development and operation of Shanghai, Hangzhou, Nanjing, Guangzhou, Wuhan and other cities. In 2008, Hualian Kashijia was established by 50% each of Whitbread Group and Hualian Group in the UK, responsible for the development and operation of Costa in Beijing, Tianjin, Shandong, Liaoning, Jilin and Heilongjiang.

In the joint venture, Whitbread Group, as the parent company of Costa, boldly delegated power to local partners who are familiar with the situation in China to make decisions and use global unified design requirements, training system, operation management and other standards to control the quality of development.

Future joys and sorrows

While Costa is still keen on joint ventures, Starbucks has begun to abandon this model and move towards direct operation. On June 2, Starbucks Coffee announced a high-profile agreement with Meixin Group to take full ownership of Starbucks stores in South, Central and Western China. At the same time, Meixin will wholly own Starbucks stores in Hong Kong and Macau.

Previously, Starbucks had acquired full ownership of its stores in North China. This means that Starbucks has achieved 100% sole proprietorship in the mainland, with the exception of East China. According to the newly announced agreement, Starbucks will take 100 per cent ownership of its operations in Guangdong, Hainan, Sichuan, Shaanxi, Hubei and Chongqing. As a result, Starbucks seeks to have full control of more than half of its retail stores in mainland China while accelerating growth in the mainland market.

In the same joint venture model, Starbucks' partners Meida, Meixin and Unification obviously do not have the channel advantages of Hualian Group, a Costa partner in the North District. Hualian Group provides a fast track for Costa with 70 large supermarkets and department stores and 10 shopping malls. Relying on Hualian, Costa can easily get the exclusive right to stay in large and high-end shopping malls.

To make matters worse, Hualian is the tenant of some Starbucks stores. It is conceivable that the day Starbucks moved out of Hualian was the beginning of Costa's entry. This day may not be far away.

Starbucks high-profile buyback shares, a big battle of "purification", the aim is to enable the implementation of decision-making power more quickly, to prevent the implementation of measures by other shareholders, while buyback shares, can reduce the diversion of benefits.

When Starbucks "eats alone", Costa is still sharing meals with others, which may be good for Costa's expansion, but in the long run, as the business expands, the disadvantages of the joint venture model will become apparent, such as "monopoly of power" or trend. Increasing the number of direct stores will not only make management more flexible, but also further expand profits. Direct marketing won't be tempting to Costa, but maybe it thinks the time hasn't come yet. But when it takes this step, it will find that its old rival Starbucks is already ahead of it.

Whether it is the joint venture model or the experience culture, Costa is replicating Starbucks. However, Starbucks occupies a favorable brand position in the eyes of Chinese consumers. This requires Costa to come up with something different from Starbucks to attract consumers.