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In recent years, the consumer market has set off a wave of cost performance, 5 yuan can buy a cup of coffee, 8 yuan to drink a cup of milk tea, the brands behind these products Fangmi Xue Ice City, Helens also rose rapidly with this strategy.
So, what kind of business logic is behind the fame of these restaurant companies?
Highlights of this article:
Catering brands take the cost-effective route, what are the different ways of playing?
The commercial truth behind cost-effective catering
Will cost-effective restaurant companies become the mainstream in the future?
It is generally difficult for consumers to reject a good value restaurant. The successful breakthrough of Wallace and Salia has long proved the feasibility of this strategy.
Especially in recent years, with the rise of Michelle Ice City, this cost-effective trend has become more and more intense in the catering industry, spreading from Western food and tea industry to pubs, coffee industries, Michelle Ice City, Helens and other brands have risen rapidly with this style of play - Helens listed, Michelle Ice City broke through 10,000 stores, and also transformed the industry - the pub industry took off the niche label, quickly became popular, the tea industry aimed at the sinking market, and the overall scale was greatly improved...
How exactly do these food and beverage brands achieve high cost performance? And listen to the observer.
1
Create the ultimate price-performance ratio
Chain restaurant companies have their own tricks
Restaurant companies take the cost-effective route, and there are generally two main ways to play.
The first is the parity strategy, that is, to compete with opponents on the same track with low prices, and to take the Pinduoduo model, which mainly attracts price-sensitive consumers, representing brands such as Mixue Ice City and Helens.
The second is the quality improvement strategy, with relatively affordable prices with high-quality products and services, in order to cultivate consumer loyalty to the brand, Mr. Rice, Tea Yan Yue and other brands are a representative.
(1) Lower the price and break through at parity
Restaurant companies that adopt an affordable strategy are targeting market vacancies in the track.
Taking the tea industry as an example, there are xi tea and naixue tea in the range of 25 to 30 yuan per capita, and there are also a little bit of tea in the range of 15 to 20 yuan per capita, and similarly, products with per capita 15 yuan or even less than 10 yuan also have their consumer groups.
According to the red meal big data, in the 2021 tea sample stores, the per capita consumption price in the range of 10 to 20 yuan has 70.98% of the stores, accounting for the highest proportion and the most fierce competition. About 9.45% of the stores in the range of less than 10 yuan per capita, accounting for a relatively low proportion.
In the range of 10 to 20 yuan, the book also burns immortal herbs, ancient tea, tea hundred ways, Shanghai aunt and other powerful brands in the battle, it is very difficult to highlight the siege, and in the range of about 10 yuan per capita, there are few opponents. Michelle Ice City found this market vacancy, quickly and accurately seized this market with affordable products of about 10 yuan, and became the hegemon of this place with 20,000+ stores.
At the same time, in other catering tracks, there are many examples of the rise of relying on affordability strategies. For example, before the rise of Wallace, there were not many affordable chain brands in the Western-style fast food market, and the price of products of brands such as KFC and McDonald's was not affordable to all consumers; before the emergence of Sarea, there were few Western restaurants with per capita consumption of less than 50 yuan in the domestic market; before the breakthrough of Helens, the industry was also popular with pubs of 100 yuan per capita.
For consumers who yearn for parity, affordable brands such as Wallace, Saria, and Helens are a better choice. Affordable restaurant companies provide similar products at lower prices, which can eliminate consumers' concerns about price, lower the threshold for decision-making, and make it easier to obtain larger market capacity. Therefore, Wallace, Michelle Ice City and Helens are the brands with the largest number of stores in their tracks.
In addition, other affordable restaurant companies also have a bright performance - Sweet Lala has opened more than 5,000 stores, and set a goal of breaking through 10,000 stores next year, and the development momentum is quite rapid. Saria has been steadily developing, warming up in the post-pandemic period. In October 2021, Saria released its financial report showing that revenue is expected to increase by 19% in fiscal 2022 (ending August 2022) and consolidated net profit is expected to increase fivefold from the previous fiscal year.
It can be seen that in recent years, the development of restaurant companies that take the parity route is still good.
(2) Improve quality, focus on cost-effective experience
In addition to achieving high cost performance through low prices, it is also a common practice in the catering industry to create a cost-effective experience by improving quality.
Because with the improvement of living standards, consumers have higher requirements for the experience of catering - on the one hand, the price can not be too high, on the other hand, the quality and experience are better. Quality upgrading is a major development trend in the catering industry in recent years.
For example, in the Category of Chinese Rice Fast Food, the representative brand of Chinese rice fast food was Zhen Kung Fu. At the beginning of the entry of "foreign fast food" into China, such brands ushered in the trend of fast food, conquered the problem of Chinese food standardization in one fell swoop, and also made their stores expand rapidly.
Nowadays, consumer demand is not limited to full stomachs, but such brands are still adopting relatively old-fashioned practices: de-chefs, standardized production, but failing to provide consumers with the more diverse experience they want.
In this context, new rice fast food brands based on fresh stir-fry are rapidly rising, such as Mr. Rice and Little Girl Home and other brands have developed rapidly in recent years, and the freshly fried experience they provide is also unsatisfactory by traditional fast food stores.
For example, in order to ensure "real stir-frying", Mr. Rice does not set up a central kitchen, does not pre-produce semi-finished products and finished dishes, but realizes real stir-frying through strict control of the production of the back kitchen and a high-quality chef team. Based on this feature, Mr. Rice quickly established his own brand segment, and his number of stores and revenue increased year after year. According to the village-based prospectus, as of September 30, 2021, Mr. Rice added 104 stores compared with 2020, and the operating profit for nine months increased by 178% year-on-year.
△Image source: Mr. Rice's official public number
Freshly fried fast food has become a popular trend, and even the Chinese fast food head brand Laoxiang Chicken also provides freshly fried dishes in some stores to provide a better dining experience.
In the tea industry, brands such as Tea Delight are also providing value-added services at relatively affordable prices. For example, on the basis of high-quality raw materials, tea color is used to brew tea base, and also use cream, nuts and other materials with tea base to enhance the taste and level of tea drinking. In addition to the product, the tea color is also in the service force: to provide customers with free claims, as long as the customer is not satisfied, you can ask the store to make a cup of the same milk tea for free, the store also provides free hot water, masks...
With cost-effective products and services, the tea color of Deep Ploughing Changsha has not only become a local characteristic punching point, but also attracted consumers from all over the world to take the high-speed rail or plane to Changsha on holidays or weekends to drink tea and color.
2
The commercial truth behind price/performance ratio
The product is cost-effective, and consumers are naturally willing to buy it. However, cost-effective products are not available to all catering businesses. For the same pizza, Salia can make a profit for twenty or thirty dollars, but a small merchant will lose money when she sells it.
What kind of business logic is behind this?
(1) Small profits but high sales
In the change of the general environment, many catering enterprises have said that when the profits are meager, the reason why the restaurant companies that rely on the parity of the circle are not bad is to rely on small profits and high sales.
That is, on the one hand, through the stable and standardized supply system to control the cost, on the other hand, through the large store scale to achieve high sales.
To achieve small profits and quick sales, the first is to build a stable supply chain system to control the cost of food procurement. In order to achieve this goal, affordable restaurant companies have made different attempts.
Some enterprises have realized the standardization of ingredients and production by going deep into the source of ingredients, building their own food production bases and central kitchens to better reduce costs. For example, Michelle Ice City, Wallace, Salia and other restaurant companies have adopted this method. According to relevant data, by improving the construction of the supply chain system, the net profit margin of Mixue Ice City, which takes the parity route, is about 25%, which is quite good in the tea industry.
Saria has made a lot of efforts in the construction of the supply system, and she is determined to be a "direct selling manufacturing enterprise" in the catering industry, and is committed to opening up raw material development, processing, manufacturing, transportation and other links to achieve industrial development. It is understood that Saria grows related ingredients on her own farm and also runs her own factory to process sauces and burgers.
Another part of the affordable restaurant companies have embarked on a centralized procurement model, such as Helens and Mr. Rice, directly docking upstream producers to remove intermediate links. Compared with the self-built production base, the centralized procurement model requires lower construction costs and can also bring product and price advantages to enterprises.
For example, Helens, who is engaged in the liquor business, chooses to let professionals do professional things, and directly sets up its own product line in the supplier factory to produce the required liquor products, instead of building its own factory.
The second is to expand the scale of stores and achieve sales and turnover growth with more stores, so as to improve the overall revenue level.
After creating a good supply chain system, its huge production capacity is by no means something that ordinary restaurant companies can digest. Therefore, sharing costs through store scale and digesting supply chain capacity is a common business model for restaurant companies. Moreover, the supply chain construction of restaurant companies is generally carried out in parallel with the expansion of stores.
In terms of the speed of store expansion, the restaurant companies that take the franchise or partnership mode are faster than the restaurant companies that directly operate the route.
Michelle Ice City and Tianlala chose to expand in the form of chain franchises, laid out thousands of franchised stores across the country, and quickly became the head brand of affordable restaurant companies. The huge store volume can also be well matched with the raw material factory and self-built warehousing and logistics center with continuously increasing production capacity.
According to late reports, from 2020 to 2021, Mi Xue Ice City has achieved the goal of 10,000 stores to 20,000 stores in just one year, and its expansion power is mainly due to the "lean production" reform of the core factory and the introduction of multiple large-scale raw material processing machines with "top ten national production capacity".
Wallace adopts the Fujian model of "store crowdfunding, employee partnership, and direct management" as the core. Partners need to be internal employees, Wallace provides partners with certain technical and equipment support, so as to reduce the threshold of entry and ensure the speed of expansion. At the same time, Wallace also retains control of the store by holding a certain amount of store equity to reduce the management cost of the store.
In contrast, brands such as Mr. Rice, Salia, Helens, and Cha Yan Yue who take the direct-operated model are slower in expanding, but they have not given up their attempts to expand rapidly. Whether it is Mr. Rice or Helens, store expansion has accelerated in recent years.
(2) Break into the sinking market and decentralize the site selection
Restaurant companies play a low-price strategy, which is followed by lower gross profit. To achieve the ideal revenue, the passenger flow must be maintained at a high level, but the rental cost can not be too high, so affordable restaurant companies have adopted a precise decentralized site selection strategy.
On the one hand, some affordable brands aim at the sinking market to quickly run a staking, such as tea and Western-style fast food, there are representative brands such as Michelle Ice City and Wallace. This is a flexible use of a decentralized site selection strategy.
After years of market cultivation, tea and Western-style fast food have a stable audience. The advantage of the category is that the market education cost is low, and the brand does not have to spend a lot of time and money to cultivate the audience. At the same time, the long-term development of the category has also cultivated brands with different characteristics, and the competition on the track is relatively fierce.
Therefore, for affordable restaurants in the large category of tea and Western-style fast food, it is a good choice to sit in the sinking market. First, there are many giant brands in first- and second-tier cities, and fierce competition, while there are relatively few well-known brands in lower-tier cities. Second, with the advancement of technology and technology, the consumer demand of lower-tier cities is converging with that of first- and second-tier cities. Consumers in lower-tier cities accept the same set of publicity programs on the Internet, but they cannot buy the corresponding products in reality.
In this case, Michelle Ice City, Sweet Lala, wallace took the lead in laying out the third-tier cities and below, and then counterattacked "Lujiazui" from the "small county", which is a better expansion strategy. According to Red Food big data, as of April 2022, the number of stores in Michelle Ice City, Sweet Lala, Wallace and below accounted for 53.7%, 79.2% and 59.6% of the total number of stores, respectively, exceeding half of the total.
Since the passenger flow in lower-tier cities is relatively concentrated and mainly distributed in the core business circles, the location preference of the above brands in lower-tier cities is in the core business districts with more people, and the red food big data shows that the shopping center stores of the above brands in the third-tier and below cities account for a relatively high proportion, between 10% and 30%. In first- and second-tier cities, the above brands tend to have lower rents around residential areas and schools, and are less likely to be stationed in shopping malls. The three brands account for less than 15% of shopping malls in first- and second-tier cities.
On the other hand, other cost-effective brands tend to choose non-core business districts or non-core locations of core business districts in first- and second-tier cities to reduce the pressure on stores caused by high rents without excessive loss of customer flow. Helens and Saria followed this path.
Because the category of pubs is relatively niche and moderate, even if there is a long market cultivation period, the popularity in China is not high, and the market development is difficult. Therefore, Helens is currently mainly targeting first- and second-tier cities with low market education costs. According to the 2021 financial report of Helens, about 65.86% of Helens' stores are located in first-tier and second-tier cities.
As a cheap Western food, although the public recognition is high, as a foreign brand, the layout of the domestic drop is more cautious, and it also focuses on first- and second-tier cities, and there is no plan to open a sinking market. According to red food big data, 97.78% of Saria's stores are located in first-tier and second-tier cities.
Because the two brands of Helens and Salia have a strong brand appeal and a stable consumer group, as long as the geographical location is convenient enough, even if the store is not very conspicuous, there is no need to worry too much about no customers coming to the door.
Taking the first-tier city of Guangzhou as an example, one of Sariya's stores is located on the second floor of Weiye Plaza in Longdong Commercial District, Tianhe District. Near the Longdong business district, there are Guangdong University of Technology and South China Agricultural University, which concentrate a large number of students and customers, which is a prosperous area. Although Weiye Plaza is located in the center of the business district, the environment is relatively old, and the door is not too prominent, which does implement the strategy of "good location and poor location" in Salia's site selection logic.
The location of one of Helens' stores in Guangzhou is the 3rd floor of the university town go go Xintiandi. Go go Xintiandi is the most popular shopping mall in Guangzhou University Town, with a concentration of people from ten universities. As a result, most of the other popular restaurant companies are located on the first floor of the street, while Helens has chosen the 3rd floor, which is relatively remote.
Thanks to Helens' decentralized site selection strategy, its rental costs have been greatly reduced. According to its prospectus, the rental expenses per square meter of Helens' stores in first-tier and second-tier cities are 4.6 yuan / day and 2.6 yuan / day, respectively, which are lower than the average rent of domestic retail properties.
3
Will cost-effective restaurant companies be the mainstream of the future?
Cost-effective play is popular, and many brands have successively thrown themselves into this wave. In 2020, Michelle Ice City hatched the same low-priced coffee brand "Lucky Coffee", and as of January 2022, the number of stores nationwide has now reached 500. The RISSE Tavern, which benchmarks Helens, has attracted considerable capital attention and received tens of millions of yuan of investment from sequoia China Seed Fund in September 2021.
Observers can't help but wonder, in the future, will the cost-effective play be a major trend in the catering industry? To answer this question, the observer believes that it can be discussed from the two perspectives of the consumer end and the restaurant enterprise end.
(1) Consumer side: Price sensitivity persists
At present and in the future, it is foreseeable that the price-sensitive consumers in the entire consumer market will still occupy a certain proportion, and there will not be much change in the long run. There will still be room for low-price playing strategies.
At the same time, in the case of the persistence of the epidemic haze, the uncertainty in life continues, people are more inclined to use savings to cope with unknown risks, and the amount of money naturally placed on consumption will be reduced. According to the questionnaire survey of urban depositors released by the People's Bank of China in the fourth quarter of 2021, 51.8% of residents tend to "save more" and 24.7% of residents tend to "consume more", about half of the former.
The willingness to spend is much lower than the willingness to save, which will make the public's demand for affordable meals greater. At the same time, people also tend to maintain a similar standard of living, and consumers who have developed the habit of drinking coffee and milk tea will not easily give up this consumption habit.
Therefore, the observer believes that the way of playing that improves quality without raising price is likely to prevail in the future.
(2) Restaurant enterprises: the rise of cost-effective play
At present, different catering categories have appeared cost-effective play. The mid-to-high-end tea brands led by Xi Tea and Nai Xue's tea took the lead in reducing prices, setting off a trend of price reduction in the tea drinking industry.
And Chinese dinner is also doing the exploration of light meals. The positioning of this type of restaurant is between fast food and dinner, which not only has the speed of fast food, but also provides the eating experience of meals. Taking Jingoge Hong Kong soy sauce chicken as an example, the unit price of its shopping mall store is between 70 and 80 yuan, and the unit price of its community store is lower, only half of that of the shopping mall store, which is a powerful attempt to transform Chinese dinner to light meal.
In the future, it is difficult to say whether cost-effective restaurant companies will become the mainstream, but it is certain that they will still have a broad market, and they will continue to move in the direction of affordable quality, and will not easily abandon quality and experience and purely pursue low prices.
(3) Avoid blind parity
Among the cost-effective restaurant companies mentioned above, the smallest tea color also has more than 300 stores. The mature standardization system and large-scale procurement of large-scale restaurant enterprises can bring extremely low cost input. At this point, most small and medium-sized restaurant companies are difficult to do.
For small and medium-sized restaurant enterprises with smaller scale and insufficient funds, blindly using parity strategies will compress profits, but costs cannot be reduced accordingly through scale effects. Therefore, the parity strategy does not necessarily apply to all restaurant companies, and restaurant companies that want to follow the trend need to act cautiously.
brief summary
There is no doubt that the rise of Wallace, Saria, Michelle Ice City and Helens reflects the effectiveness of the cost-effective strategy, and also explains the huge attractiveness of the cost-effective strategy for the consumer market.
In the future, the cost-effective strategy will still be useful, but how to use this strategy well and create more Honey Snow Ice City and Helens is not difficult in itself. So let's wait and see who will take the lead.
Source | Food & Beverage Brand Observation
Author | Red Food Brand Research Institute
Design | Huang Lihui
Resources:
1. China Catering Category and Brand Development Report 2021 | Red Food Brand Research Institute
2. Michelle Ice City will reach 20,000 stores, and the founder said that the new goal is to "feed and drink well for people around the world for two dollars" | Late Finance
3. The per capita consumption is only more than 30, but the annual income is 10 billion yuan, what is the Saria Italian restaurant? | 36 Kr
4. Tea color: What is the secret of a cup of net red milk tea? | Triad Life Weekly
5. The fourth quarter urban depositor questionnaire survey report 2021 | Released by the People's Bank of China
6. Mi Xue Ice City brainwashed the whole network, and has silently earned 6.5 billion | Open Pineapple Finance