Produced by One View Commercial
Author/Meng Jiayi
Edit/Wooden Fish
The coffee track is about to change.
According to incomplete statistics from Yilan Commerce, 20 chain coffee brands opened 1,023 new stores in April, an increase of 8.83% year-on-year in February 2023 and 72.8% month-on-month in March 2024, with a total of 41,583 stores.
Judging from the brand's existing stores, Luckin Coffee still firmly occupies the first place, with 18,746 stores, followed by Starbucks and Cudi. It is worth mentioning that although Tims Coffee has been opening new stores, the store stock is showing a downward trend. The number of Tims coffee stores in March was 900, compared to 887 in April.
In April, the speed of store opening of chain coffee brands began to recover. Only 6 of the 20 brands opened fewer new stores than the previous month, with Lucky Coffee opening more than twice as many stores as in March and Cudi and Luckin opening more than double the number in March.
In addition, according to incomplete statistics from Yilan Commerce, the coffee track received a total of 1 financing in April, disclosing a financing amount of 50 million yuan. However, Yilan Business has not searched for relevant information about the brand on platforms such as Narrow Door Dining Eye, Jihai, and Dianping, which may mean that the brand's current market exposure is limited or it is making a low-key layout.
Low prices are not a long-term solution
Since 2024, many people have thought that the price war in the coffee industry has reached a turning point.
The first is that Cudi Coffee, which provoked the price war, silently rose 8.8 to 9.9, and the second is that Luckin reduced the scope of activities of 9.9, in addition, the exclusive 8.8 American style for newcomers in COSTA coffee shop rose to 21.6 yuan, the American style rose to 7.9 yuan for new customers in the sleepless sea 5.9 yuan, and Lavasa Coffee removed the Italian coffee + ice cream combination with 9.11 member price, and turned into a 29.9 yuan croissant with buffalo milk Dirty. These actions all show that brands can't play the price war.
However, Cudi Coffee chose to keep the war burning: on April 29, Cudi Coffee announced that the current store subsidy policy will be extended until December 31, 2026. This means that Cudi is ready for a long-term price war, and in their eyes, the price war will be fought for at least another two years.
At the same time, Starbucks, which is "not interested in getting involved in a price war", is also quietly cutting prices. A number of consumers told Yilan Business that their Starbucks card bags were given coupons of "39.9 two cups" and "49.9 two cups". This means that the average price per cup of coffee can be reduced by 5-10 yuan.
Previously, major brands offered the killer feature of price, mostly to cultivate the market and stimulate growth potential. Judging from the data, the mainland coffee market has made great progress, and consumer habits are slowly developing. According to the "2024 China Urban Coffee Development Report", the scale of China's coffee industry will reach 265.4 billion yuan in 2023, with an average annual compound growth rate of 17.14% in the past three years. The average annual per capita drink was 16.74 cups, nearly double the figure of 9 cups per capita per year in 2016.
It is worth noting that the price war is only the first stage, and now it is time to enter the next stage. Zhu Danpeng, an analyst of China's food industry, pointed out that China's coffee industry is about to enter an all-round and multi-dimensional competition, and the scale of stores, brand effect, service, and customer stickiness are all critical.
From the first-quarter financial reports of Luckin and Starbucks, it can also be seen that the price war is slowly rebounding.
In the first quarter of 2024, Luckin achieved revenue of 6.278 billion yuan, a year-on-year increase of 41.50%; The net loss was 83.174 million yuan, compared with a profit of 565 million yuan in the same period last year, turning from profit to loss. Among them, the operating margin of Luckin's self-operated stores was 7%, compared to 25.2% in the same period last year, and the same-store sales of its self-operated stores also recorded negative growth for the first time since the third quarter of 2022, at -20.3%, compared to 29.6% in the same period last year.
In the same period, Starbucks' operating income was US$8.56 billion, down 2% year-on-year, less than market expectations of US$9.13 billion, and net profit was US$772 million, down 14.96% year-on-year. Among them, the sales of stores in China fell by 11% year-on-year, far exceeding market expectations of a decline of 1.64%.
On the one hand, under the encirclement and suppression of low-priced coffee, it will not only have an impact on high-end coffee brands such as Starbucks, but also bring huge pressure to small and medium-sized coffee brands and independent coffee shops. According to Meituan, Shanghai, which has the largest number of cafes in the world, will see a decrease in the number of independent coffee shops for the first time in 2023, accounting for 55% of the total number of coffee shops, down from 60.1% last year.
On the other hand, there is still a question mark over whether low prices can support a brand's long-term profitability. At the first-quarter earnings conference, Luckin's chief financial officer Jing Jing pointed out that the significant change in Luckin's profitability is mainly due to the fact that Luckin is launching a 9.9 yuan weekly coffee promotion, and the average selling price of Luckin products has decreased.
In addition, the low-price play method is very easy for consumers to generate price anchoring, that is, long-term expectations of low prices, and it is difficult to accept the normal or improved price system, which will also have an impact on brand positioning. Zhan Junhao, founder of Fujian Great Aim Brand Positioning Consulting, told One View Business that for a high-end brand like Starbucks, excessive price concessions may damage its brand image, and "secretly reducing prices" is precisely to maintain its high-end positioning.
Cross-border coffee, just for drainage
It is worth mentioning that this April, it is not only chain coffee brands that are busy opening stores.
On April 15th, Decathlon's first coffee corner COFFEE HOUSE in China opened in Shanghai Wujiaochang, which was opened in the Decathlon store in Wujiaochang and existed in the form of a shop-in-shop. In addition to providing coffee, there are also 3 sports drinks on the shelves, which are just in line with the habits of Decathlon consumers.
From the current point of view, Decathlon does not open a coffee shop to take a share of the coffee track, its main positioning is to serve Decathlon's existing consumers, meet the needs of consumers while shopping, so as to further improve the store experience, extend consumers' time in the store, and strengthen member stickiness.
On April 18th, the first coffee shop of the IP Naiva family under the United States ONE was officially opened, in addition to selling coffee, it also provides blind boxes, dolls and other peripheral products. In the view of One View Business, the opening of a coffee shop by MCN institutions may be to expand the influence of the Naiva family's IP and improve fan stickiness, in order to have more opportunities to cooperate with other brands in the future.
In addition, Laiyifen's first LABmini store in the world also opened on April 29, and launched a combination of "casual snacks + baking + coffee".
On the one hand, the increase in consumer demand for coffee can not only enhance the brand influence, but also enhance consumer stickiness, and on the other hand, due to the high degree of coffee standardization, there is little difference between different stores. Zhu Danphong once said that the degree of replicability, operability and standardization of coffee is very high. This is also the reason why different brands make coffee across borders.
However, even if these brands only open coffee shops to attract traffic to their main business, it also puts pressure on other coffee brands, and on some social platforms, some coffee merchants have expressed dissatisfaction with their cross-border participation.
The competition in the coffee track tends to be white-hot. You Xi, co-founder of Communication Planet, pointed out that more investors and entrepreneurs will enter the coffee industry in the next few years, which also means that the market competition will be more intense.