Starbucks coffee beans are produced in Yunnan at a low cost

Phoenix flowers are blooming brilliantly in the sun on the streets of Pu'er, a small city in the southwest border. In Dakaihe village, which is less than 30 kilometers from the city, the sky is constantly pouring into distant thunders. under the low cloud curtain, 79-year-old Yang Jinhua is next to a coffee tree with green fruit to take shelter from the rain.

She is one of the oldest farmers in the coffee village adjacent to Xishuangbanna. Every year, 300 kilograms of fresh coffee fruits picked at home are acquired by foreign coffee giants in the form of shell beans or coffee rice after simple processing such as peeling, fermentation and drying.

So "ten miles different days" is called "the root pole can also sprout" microclimate. It is this climate that makes Pu'er, which is famous for its tea, a secret coffee paradise and the back garden of Starbucks and Nestl é.

Seven or eight years ago, Yang Jinhua's coffee forest was still a tea mountain. Today, she only retains a very small area of tea trees between the coffee trees.

After a number of investigations, the reporter found that in the just-concluded harvest season, Starbucks bought shell beans locally at a price of 11,12yuan / kg. Coupled with the baking cost, the "bean cost" of a cup of freshly ground coffee priced at about 25 yuan is only a few cents.

Exploring the secrets of the origin

Most of the foreign brand coffee beans are produced in China.

The earliest records can be seen in Arab legends, the largest growing place is in Brazil in the southern hemisphere, the most expensive elephant dung coffee is produced in Thailand, and the most popular well-known brands Blue Mountain, civet, Manning and Kona are all imported-coffee seems to be a little less Chinese when it comes to coffee.

Men and women in office buildings in Shanghai enjoy a cup of fragrant freshly ground coffee in the afternoon, which is permeated with Western-style flavor by default, but few people understand that the origin of the contents in the cup is actually an out-and-out local product, made in Pu'er, a "tea village" on the border of Yunnan.

Starbucks bought a total of 5000 tons of shell beans in Pu'er last year. " Hua Honglin, branch secretary of Dakaihe Village, Nanping Town, Simao District, revealed to reporters. When the reporter integrated local information and followed the clues to visit this village where foreign giants on the outskirts of Pu'er concentrated on buying coffee, he was holding a meeting of coffee farmers in his capacity as "president of the Dakaihe Village Coffee Association."

On the sidelines of the meeting, Hua Honglin told reporters that Starbucks was already the second largest buyer of coffee beans in Dakaihe Village besides "familiar customers" Nestl é. "Nestl é grew coffee here in the 1980s, and now it has also introduced improved medium-grain seeds. Last year, Nestl é bought more than 10000 tons of coffee rice in Pu'er, of which 700,800 tons were purchased in Dakaihe Village."

Subsequently, the reporter confirmed through a number of channels that Starbucks purchased about 4000-5000 tons of shell beans in the entire Pu'er region last year. Wang Jinlong, chairman of Starbucks Greater China, said in an interview with the media in 2010 that based on Starbucks' daily consumption of 10 kilograms of coffee drinks in a single store, it would take about 6000 tons of raw coffee beans a year in the Chinese market.

In other words, most of Starbucks' coffee beans consumed in China now come from Yunnan.

Starbucks has its own initial processing plant in Pu'er, so it buys shell beans from farmers, that is, fresh coffee fruits are picked by farmers, peeled, degummed, washed and dried after fermentation, and then dried to retain 12% moisture. After the acquisition, the company tests according to the company's own standard cup, including diameter separation, color separation, gravity separation, etc., to remove the shell. After the completion of the whole initial processing process, it becomes coffee rice. Enterprises such as Nestl é and McDonnell, which do not have initial processing plants in Hong Kong, generally purchase coffee rice directly, and the next deep processing process of coffee rice is subhead roasting. " Wang Yong, a senior coffee roaster, explained the processing technology of coffee to the reporter in detail. Experienced coffee technicians like him are very popular in Pu'er.

In fact, Nestl é had been ploughing the border town for 13 years when Starbucks opened its first coffee shop in China. The act of "growing coffee in the 'tea village', which is still somewhat curious in the eyes of many laymen, has long become a strategic arrangement for Nestle's advance layout because of the favorable natural conditions of Pu'er.

"in Pu'er, the Tropic of Cancer crosses the border and belongs to the same latitude as Colombia, a world-famous coffee growing region. It is a golden area for coffee cultivation. The American Special Coffee Association has also compared Simao small seed coffee with Colombian coffee. The overall score of Colombian coffee is 85.88%, Simao small seed coffee is 88.75%, which is 3 percentage points higher than Colombian coffee." When Zhu Zhihong, director of the coffee factory of Aiyi Group, Starbucks' only partner in the Asia-Pacific region, told reporters about the "Pu'er coffee" raised in purdah, he could not help feeling that the retelling of the score was even more accurate to two decimal places.

Official data show that Yunnan coffee production accounts for 98.8% of the country's total output, while Pu'er coffee production accounts for 57.8% of Yunnan's total output. At present, 70% of the coffee beans produced in Yunnan are carved up by coffee giants such as Starbucks, Nestl é and Maxwell, while coffee exported from Pu'er accounts for 77.8% of Yunnan's total exports.

Cost accounting

The "bean cost" of 300ML freshly ground coffee is 35 cents.

Zhu Zhihong is 1.9 meters tall, but he is half from Shanghai. Before joining Aiyi, he laughed and said that he had been a "boiler burner". Zhu's father is from Shanghai, and now he still has an apartment in Huma, Baoshan. "the family speaks in Shanghainese." In 1992, he came to the Donghai Brewery in Jinshan County to learn the whole brewing process, and still recalls "swimming in the petrochemical seaside swimming pool."

Because of this profound origin, Zhu Zhihong's first words when he saw the reporter was, "so many people in Shanghai love coffee. Do you know Pu'er coffee?" The reason for this question is that people in the capital knew almost nothing about Pu'er coffee when they attended the coffee night party in Beijing at the beginning of the year.

This makes Zhu Zhihong feel sorry for it. Because at this time, Pu'er Coffee has been hand in hand with Starbucks for more than a year, and the coffee bean processing plant of Aishi even rents the plant of the initial processing plant of the joint venture. Last year, the initial processing sales of shell beans in the joint venture plant reached more than 100 million. Aishi Fine processing Plant has also made more than 10 million sales.

The cooperation between the two sides was originally "affectionate and intentional." Starbucks took a fancy to the quality and cheap raw materials of Pu'er coffee beans, while Pu'er wanted to use foreign giants to improve the connotation and popularity of the brand, but the reality is still "bony." it is obvious that foreign investment is more profitable in this bilateral cooperation.

"Aili's own coffee beans mainly come from two plantations, one is the village of Zade, which is located at the junction of Pu'er and Xishuangbanna, with nearly 9000 mu of coffee forest, and the other is in Manzhongtian, Simao District, with 6000 mu." Zhu Zhihong told reporters that at present, the annual output of coffee beans produced by the two bases is about 400 tons. "the target of the finishing plant this year is 100 tons, with about 150 tons in stock. These beans are sold to Starbucks and are first processed by joint venture factories."

According to the reporter's understanding, the purchase price of shell beans reported by Starbucks to farmers in the last harvest season was 11,12 yuan / kg, while the ex-factory price of coffee rice baked by the Aisha fine processing plant was 69 yuan / kg, which also roughly reflects the import cost of local cooked beans in Pu'er.

"A cup of more than 300 milliliters of coffee generally requires only 5 grams of roasted beans, and the Italian coffee machine at both ends holds no more than 20 grams, so each cup is no more than 10 grams of coffee beans." A local coffee trader, who spoke on condition of anonymity, told the reporter that based on the ex-factory price of 69 yuan per kilogram, the cost of five grams of coffee beans should be 0.345 yuan. "now the average price of each medium cup is 25 yuan, and one kilogram of coffee beans can be sold for 5000 yuan. The ex-factory price is less than 70 yuan. Even if the costs of tax, transportation, manpower and store rent are added, the cost per kilogram of coffee beans should not exceed 200 yuan. We can see how big the profit space of freshly ground coffee is. "

Another local coffee owner, who goes by the pseudonym Xu Kai, analyzed to the reporter that the "bean cost" of instant coffee is lower. "A bag of instant coffee generally uses only 0.5 grams of coffee beans, and the rest are additives, even if they are calculated on the basis of good beans. Excluding defective beans, 0.5 grams of coffee beans costs only 3 cents." The reporter noticed that the price of a bag of 13 grams of instant coffee on the market is about 1 yuan.

According to Xu Kai, the price for foreign investors to buy Pu'er is based on the suspension price of coffee at the New York Futures Exchange at 08:30 every day, plus daily foreign exchange fluctuations, and after converting the price per pound into kilograms, it will reduce its own profit margin and form a quotation. "it usually loses about 15 cents per pound, that is, a net profit of more than US $330 per ton." Based on the purchase volume of 5000 tons, Starbucks could make a price difference of 1.65 million US dollars by reselling the raw beans bought from Pu'er last year.

"Nestl é makes the wrong offer with Starbucks. Nestl é offers two or four times a week, while Starbucks offers two or five times a week, and Starbucks' offer per kilogram is 30.4 cents lower than Nestl é." Perhaps because they do not want to offend the foreign giants in the "slap" Pu'er, the above-mentioned people all asked for their real names to be withheld in interviews.

Profit perspective

The gross profit margin of the Asia-Pacific region is 16 times that of Europe.

According to Zhu Zhihong, Starbucks will set up its own bakery in China in the next three years and has already made a verbal agreement with Aixin. Starbucks now buys less than 10,000 tons in Yunnan, which is negligible compared with the global total of hundreds of thousands of tons, so it sets up baking plants in Europe and the United States to reduce transportation costs after roasting and avoid overseas deployment of technicians. "in that case, the willingness to set up a roaster in China in the future means that Starbucks will continue to expand its coffee purchases in Yunnan.

"the roasting machine of Starbucks abroad is the Rolls-Royce in the machine, with a maximum capacity of 5 tons and a minimum stir-frying volume of 500 kilograms. The roasting and delivery vehicles have to wait in a long queue of several kilometers, while the machines in our finishing plant are much smaller, only 50 kilograms and 100 kilograms. Zhu Zhihong said frankly that there is a hardware gap among domestic processing companies for Starbucks' share of the coffee bean finishing market, and also described Starbucks' ambition to purchase and process raw materials in China.

While Starbucks has a green eye for Pu'er coffee, it is actually fond of the whole Chinese market. The reporter saw from the company's results in the first quarter of 2013 that Starbucks China / Asia-Pacific region had 47 new direct stores and 78 franchise stores, totaling 125. as of December 30, 2012, Starbucks has a total of 713 direct stores and 2706 franchise stores in China / Asia-Pacific region.

But awkwardly, this kind of China complex is actually supported by the exorbitant profits of domestic freshly ground coffee. Some media have compared the prices of many classic coffees such as lattes, mochas and caramel macchiato sold by Starbucks in China and the United States. it is found that the price of a 12-ounce cup of coffee in the United States is equivalent to about 20 yuan, which is 10 yuan cheaper than the asking price of 30 yuan, which is equivalent to 50% more expensive at home than abroad. While a cup of American coffee in the United States is only about 12 yuan, the domestic price is 22 yuan, which is equivalent to 83% of the price.

Because of the dual role of high pricing and low cost, Starbucks' operating margin in the Asia-Pacific region is much higher than that in Europe and the United States. According to the first quarterly report of 2013, Starbucks' revenue in China / Asia-Pacific region increased by 28.3% to US $214 million, while operating profit reached US $72.1 million, up 25.8%. In the second quarter, Starbucks' store sales in the United States increased by 6% compared with the same period last year. China / Asia-Pacific region grew 8% year-on-year, while Europe fell 2%.

The results also show that the Asia-Pacific region has become the fastest-growing market for Starbucks profits. The reporter saw from Starbucks' 2012 quarterly report that operating revenue in the United States and European countries increased by 14% and-47% respectively in the third quarter, while operating revenue in China / Asia-Pacific reached 37% and operating margin reached 32.4%. It is much higher than 19.8% in the United States and 1.9% in Europe, and 16 times that of the latter.

It is worth mentioning that although the operating gross profit margin is already high, Starbucks last year raised its prices on the grounds of "operating costs", mainly for espresso drinks and freshly prepared coffee drinks by 2 yuan; single order milk or soy milk increased by 1 yuan; "Classic Chocolate" increased by 3 yuan.

For the Chinese side, which has a joint venture with Starbucks, it is not entirely a bargain. "because it is a joint venture with Starbucks, it is difficult for us to expand our terminal sales channels. Now Aiyi only opened its first experience store at the airport. Large cups with the same capacity as Starbucks cost only 20 yuan and small cups cost 10 yuan. Zhu Zhihong also told reporters that although Aiyi has many hot pot restaurant chains in Pu'er City, this model could have been copied, but if it is spread out, it will form a direct competition with Starbucks. "this contradiction needs time and strategy to coordinate. "

Industry competition

The exorbitant profits of coffee attract many kinds of "hunting".

As a matter of fact, the exorbitant profit space of coffee grinding has also attracted many enterprises to "hunt" for business opportunities. Convenience stores, fast food restaurants, and bakeries do not want to see Starbucks "happy alone." they, who did not focus on the coffee business before, also set up the stage to sing a coffee show.

The special coffee counter is equipped with a very decent coffee machine. Press the button, and the noise of coffee beans being stirred and broken makes every "curry friend" feel familiar. The coffee beans in the bean warehouse show a uniform dark brown, and there is no obvious oil glow. The green spherical lights in the leisure area seem to brighten the mood of consumers who steal half a day's leisure. The waiter will deliver the ground coffee to the customer with a friendly smile-McDonald's McCoffee is almost a replica of Starbucks except for the difference in lighting.

In many business districts of Shanghai, the open and secret battle between McCoffee and Starbucks has become a confrontation. McCoffee has already set fire in front of Starbucks headquarters in Seattle: in December 2008, McDonald's erected a gunpowder billboard on a telephone pole in front of Starbucks headquarters saying "$4 is stupid." this was followed by the small print "We started serving freshly ground coffee." "

All Starbucks employees heading north can see this sign. A month later, Starbucks felt the pressure in the face of the menacing fast-food giant, but its subsequent response sparked criticism from the industry: it began to pilot the sale of cheap instant coffee Via in Seattle.

Starbucks' first sinking earned it a global reputation. The English name Starbucks comes from the first mate of Captain Ahab in Moby Dick. It was founded by two teachers and a writer. They opened their first store in Park Fish Market in Seattle, selling only the niche coffee beans that year. In 1987, Starbucks' later soul, Howard Schultz, converted it into an American version of an Italian coffee shop, and the "Wandian" project has now flown into the homes of ordinary people.

However, the "sinking" of the sudden McCoffee sniper attack may not bring fresh vitality to Starbucks. As of last year, there were 516 McCoffee stores in 24 cities across the country, and it is expected that by the end of 2013, there will be more than 750, an increase of 45%. This is because 2000 restaurant stores have laid the foundation.

Reporters from the menu, Starbucks and McCoffee's main products are also very similar, in addition to coffee, McCoffee also sells snow ice, tea, dim sum and so on. In terms of development members, McDonald's offers accumulated point cards and Starbucks has Starbucks cards.

In addition to the strong disruption of fast-food giants, dotted convenience stores are also scrambling to join the coffee camp. 7-ELEVEN, Rosen and the whole family almost unanimously promoted their freshly ground coffee. Because even a cup of cheap coffee with a price of 8 yuan can become the most profitable product in convenience stores. It is reported that in Taiwan, 200 million cups of coffee have been sold through 7-ELEVEN, making 7-ELEVEN the largest "coffee shop" in Taiwan.

"warm feeling card" is difficult to cope with the surging passenger flow.

"We are not fast food. We are a fashionable restaurant with a style of life. When Zhang Jiayin, McDonald's chief marketing officer and vice president, said this, it was like depicting another Starbucks, not a fast food uncle over 50 years old.

Of course, McCoffee needs to break away from McDonald's inelegant grass-roots temperament in order to create a petty bourgeoisie image for itself. after all, for many business elites, McDonald's own temperament may be closer to a "children's party."

However, it is not easy for Starbucks to win in temperament. Just an hour before the deadline, the reporter received a phone call from a friend who was meeting for a drink: "when I went to Starbucks, there were so many people that I couldn't hear you. Let's move to the next door." "in downtown areas, although there are several Starbucks every inch, it is obviously impossible to withstand the surging passenger flow with the ideal appearance of sentiment, petty bourgeoisie, warmth and ease.

Li Chong, a PR of a foreign company, loves to have a coffee addiction when chatting with her clients and friends. "I liked to go to Starbucks a few years ago, but now I can't hear each other clearly across a small round table, so it's no longer suitable to talk about things. "maybe it's because there are too many passengers that the store is expanding too fast, and in Li's eyes, Starbucks's original standardized service experience is not as good as it used to be." in the past, cups of coffee were delivered to the table, but now they basically have to pick up all of them. "

Success also opens a shop, failure also opens a shop. Starbucks' success was due to Schultz's mass production of a warm cafe community atmosphere and sold it to the world. Entering Starbucks is not only a symbol of the successful realization of consumers' own economic status, but also a reflection of taste and spiritual level.

Although the vigorous expansion since then has earned Starbucks impressive results: since it went public in 1992, Starbucks' sales have grown by an average of 20% a year, its profits have grown by 30%, and its share price has climbed 22 times. It has become a "safe haven" for Wall Street investors, but the old "Starbucks experience" is gradually disappearing.

Some observers in the circle commented mercilessly: "commercialization" makes Starbucks' hard-built brand image no longer unique. Even Schultz himself has said publicly that he wants to "find the soul": "We must look in the mirror and realize that it is time to get back to the core and make appropriate changes to restore tradition." and find the passion we all have for the real Starbucks experience. "

But in China, the only market that can reverse the decline in Europe, Starbucks seems reluctant to slow down. Wang Jinlong, chairman and CEO of Chinese mainland Greater China, said in a media interview in 2011. it is hoped that Starbucks will be able to operate at least 1500 stores by 2015, up from 450 at the time. The reporter saw in the financial report that Starbucks plans to add 1300 stores this year, an increase of 22% over fiscal year 2012, of which 600 are planned to increase in China / Asia-Pacific region, and more than half of them will be opened in China.