Fisheye Coffee Sun Yu: Making specialty coffee more popular is a strategic track that has not been encountered in a hundred years

【Tron Q】

What does a good company look like, and what are the characteristics of successful cattle people? On their road of struggle, what are the "pits" that need attention, and what are the most important changes?

Chuang Q asked some excellent Huachuang faction, investors, industry cattle people to throw questions, but also hope to share their ideas to you.

The protagonist of this dialogue is Sun Yu, founder and CEO of Fisheye Coffee. While studying at the University of Washington, Sun Yu ran a coffee shop in Seattle, and after graduation, he worked at Apple and Amazon respectively, and returned to China in 2007 to participate in the creation of Apple's online store and first direct retail store in China. In 2010, Sun Yu opened the first fisheye coffee shop in Sanlitun and proposed to "make a good coffee that is not expensive to drink", which is the earliest batch of specialty coffee shops in China and enjoys a high reputation among senior coffee fans.

Fisheye Coffee's Bluff latte, small white coffee, and nitrogen coffee have endured for a long time, including the recent grapefruit oatmeal series jointly launched by Fisheye and Oatoat. Sun Yu said: "What we are doing is to make specialty coffee more popular, jump out of the original small and beautiful business model, can not quickly expand, standardize, automate the circle, so that more and more people can access high-quality coffee, delicious and inexpensive coffee." ”

As an ultra-long LTV (life time value) product, in Sun Yu's view, the coffee market in China is far from saturated, that is, the tip of the iceberg, the early stage of the outbreak, and the imagination space of the market is great. "This is a high-frequency consumption, with a very strong brand stickiness track, this is a strategic track that has not been encountered in a hundred years."

The full text is shared below:

Q: Yu Yue, head of consumption investment at Huachuang Capital

A: SUN Yu, founder & CEO of FISHEYE Fisheye Coffee

Yu Yue: Thank you for accepting the visit of Tron Q. First of all, Fisheye coffee first started from boutique cafes, and now you still adhere to the concept of specialty coffee? How do you understand specialty coffee today?

Sun Yu: I think when people talk about specialty coffee, different people pay attention to different points. From my point of view, I may have to look at two aspects: in addition to the problem of business model, it is more about the quality of coffee. When I talk about specialty coffee, sometimes it's quite simple, it's a demand, a very high-quality coffee quality. What we are doing is to make specialty coffee a little more popular, jump out of the original small and beautiful business model, can not quickly expand, standardize, automate the circle, so that more and more people can access high-quality coffee, delicious and inexpensive coffee.

Yu Yue: I have a personal feeling, in the past, the quality of coffee in the United States, Europe and Japan was particularly high, but in recent years, the level of Chinese cafes, including coffee products, will soon exceed the level of overseas.

Sun Yu: Right. From the perspective of product standards, as a new e-commerce market, Chinese coffee products will have a higher starting point. China's daily consumer goods, whether from the creative, or from the standardization, or from the marketing of a lot of ideas, play, from the speed of the european and American market has surpassed the European and American market, this is beyond doubt. In terms of the innovative way of offline drinks, as well as the way of business models, there are actually many models suitable for the Chinese environment. For example, the establishment of takeaway, the takeaway platform is very unique in the Chinese market.

When it comes to foreign markets, like the United States, e-commerce is basically Amazon's dominant, in fact, there is not much competition. There are a variety of platforms in this regard in China, from new consumption, whether online or offline, you will find that the acceleration is far beyond foreign countries. Abroad has largely stagnated.

Take the simplest example, because we also make fisheye coffee fairy cup freeze-dried powder. During the pandemic, I tried to send some to friends in the United States, and even friends in the Middle East, and their response was particularly good. You will imagine a market so mature as coffee, they are still very recognized for the form of the product, some categories, they will feel that this is a very novel thing, so you will feel that the gap in the middle is very strong.

From the perspective of offline coffee shops, China's offline catering will be standardized and chained in the future, and it is possible to see new brands come out, and the scale can be very large. In terms of coffee production standards, the first two days I saw the latest report, one of the data is that the number of coffee shops in Shanghai is already the largest city in the world. Sometimes our understanding and speed of the coffee market has not kept pace with the development of market scale. Specifically, the density of coffee shops in Shanghai's Jing'an District is extremely high, and the standard of production, even from foreign observations, is already very high. In recent years, from the perspective of professional coffee competitions, our players have also won the world championship. From this point of view, China's coffee market and the overall consumer market, both online and offline, are far faster than those of European and American countries in terms of development speed.

Yu Yue: You also mentioned that the offline coffee stores are also very hot now, and indeed, in the past two years, the capital has also given very high expectations and valuation levels to the model of offline stores, how do you think about the current industry status?

Sun Yu: I think it is the general trend, and I follow the trend. In recent years, from the perspective of traffic as a whole, from the perspective of investment targets, and even from the perspective of people's consumption habits, it is very obvious to turn from online to offline, not that the power of online has been greatly weakened, but that the offline ecology is to cater to a new consumer demand. Therefore, you also see a lot of new retail forms, including the form of catering, in line with China's national conditions will appear quickly, such as the model of small shops, the mode of takeaway, takeaway coffee is really invented Chinese, in fact, in the past hundred years, in terms of the maturity of Europe and the United States, coffee is not a scene of takeaway. Take the simplest example of a coffee cup lid. In the early days, there was a problem when making coffee takeaways, and coffee would spill out during the takeaway process. When this demand arises in China, it must solve such a problem. So we have also spent a lot of energy and developed a spill-proof cup lid, in the process of takeaway, unless it is upside down or flat, generally will not be spilled, so we will see a lot of new innovations in the line of the line.

Another driver, including Luckin Coffee. Luckin Coffee in the early days is to run a very clear goal to achieve the goal quickly. But, in the middle of the process, one of their logics, I understand him is a carrier, more is the logic of traffic. Attract real users through coffee carriers, which is a very low cost, how to achieve revenue and profitability through users in the future. We can see that offline models, including offline, really validate very high growth efficiency. Before an offline restaurant can open 2,000 to 3,000 stores in two years, this is an unimaginable thing, no matter how it is achieved, no one will think that this is a feasible thing. We are now seeing that, at the very least, rapid scaling is feasible. Going with the flow, this is the overall trend at present.

Yu Yue: What is the expansion plan of Yuyan's own offline store in 2021? Will there be any innovation seen above, including the business model of offline stores?

Sun Yu: In the past year or so, we have mainly done several things:

First, the small shop model, before talking about Blue Bottle, or some traditional specialty coffee, why do we say that it is small and beautiful can not be copied, whether from the supply chain end or from the store model end, there will actually be several key points. One of the biggest key points is that the use of semi-automatic manual methods to carry out drinks is extremely dependent on people, requiring at least one year to two years of full-time professional barista work experience, plus at least 3 months of training in the company, to meet the standards of brand production, which is a very high recruitment cost and training costs. That's why even the most mature coffee market in the U.S. and Japan, like Blue Bottle, was acquired by Nestlé in 2017 on the scale of 50 or 60 stores.

The problem to be solved by the entire industry is to ensure the quality of high-quality products while greatly improving efficiency and having scale. One of the things that Fisheye does is how to standardize, automate, and use a lot of the latest technology, including in the cloud, when new products are released, like mobile phone updates, this thing we spent more than a year to verify, so we can run quickly, and we have solved the problem of people.

Second, when we talk about China's offline freshly ground coffee market, we have an inertia to take China's large market as a whole, in fact, there is a little deviation. In my judgment, offline freshly ground coffee is the market of China's TOP 20 cities, including most of the provincial capitals, who do not need to be too entangled in 1 line, 1.5 line or 2 line, but to sum up, the next five to ten years to focus on doing is the TOP 20 cities, each city is very large. One of the things we did was to put some points in cities with different types of consumption habits as a verification model, not only in Beijing and Shanghai, but also in Jinan, and in Hangzhou. It was verified that this model can work.

Third, continue to refine the supply chain. We already had our own wholly owned coffee bean roasting plant in 2012, and we still have a lot of control over the coffee bean roasting supply chain.

Fourth, menu. Fisheye's menu is a curtailment of the classic coffee menu, that is, go to any coffee shop, any brand of coffee shop can order coffee, such as latte, American, cappuccino, Flat White. The purpose of this is that when you streamline the core SKU, you can better refine the supply chain and product control, including cost control.

Fifth, in addition to the core menu, we frequently launch coffee drinks or coffee drinks with fisheye characteristics. One of the most intuitive expressions is that in the summer, in addition to the Classic coffee in Starbucks, the sales of menus account for more than 50% of the turnover revenue. We're not making the menu bigger, we're talking about one or two new products coming out every month, or some coffee specialities. For example, last summer's coffee jelly poplar manna. This is because of the emerging and rapid development of the coffee market in China, can not copy the mature United States, Japan, Europe in the past hundred years of coffee drinking history of the market situation, 2021 in China to do a coffee brand, only sell coffee, only for the core coffee lovers, I think this is a very narrow, dirty and tired a job, need to attract more user groups through new selections. To put it bluntly, users of Xicha, even if they are not heavy coffee users, can find their favorite drinks to fisheye. In other words, the threshold for new consumers to access your store is greatly reduced through the offline model.

In addition, we have also done some things, what we do is a consumer brand, really not to circle the layer, or some people circle themselves into a certain channel, a certain format in the form of pure selling. One of the very good characteristics of coffee is that it is a very high-frequency consumption of things, whether it is coffee, there are many extended things around it that can also be done, which is why online FMCG products are made, because this thing is always a combination of online and offline, draining each other and attracting new guests to each other. Relying on my own supply chain, I quickly put on a very rich coffee FMCG product, whether it is freeze-dried coffee products, or coffee bean cans, coffee renewal packages, but also from the online perspective to greatly reduce the threshold for new consumers to contact the brand. Otherwise, the range of customers you can reach is limited to the range that the store can cover, so this is always the combination of the density of the line and the width and dimension of the expansion of the online crowd. This is what we have done in the past year, so that this year we can run fast, make rapid replication, and play a very deep foundation.

This year's fisheye market focus is very clear, that is, urban strategy and large density. We'll pick one or two cities, and in that city it's not a dot, it's not a paving. We will be the most core white-collar group in this city, because for the crowd, our model is white-collar, not only a cup of coffee a day, maybe a cup in the morning, a cup in the afternoon, whether it is to pick up or take out, all from us. What we're going to do is quickly form the density of brands in the city. To put it bluntly, we hope that in a few months, by the time of Q3 and Q4 this year, in the white-collar area at the core of the city, FishEye will be the second largest coffee brand besides Starbucks.

Yu Yue: You just mentioned that white-collar workers are the core customer group. In your eyes, will there be any difference between FishEye's customer base and other coffee brands?

Sun Yu: I don't think so. Coffee brands aside, let's talk about price bands. We look at it from the bottom, if you say 10-15 yuan, it may be called floor price coffee, the main consumption scene of floor price coffee is convenience stores and foreign fast food chain brands that provide coffee services, which is a very large base, the storefront is particularly many, all convenience stores basically put an automated coffee machine to provide coffee has become a typical standard. I think it's hard to define very clearly in this price band what a consumer of coffee is.

Quite simply, this audience is particularly mixed, some people buy two breads and get a cup of coffee; some people may be to solve the problem of caffeine intake, and they don't care much about what quality is, that is, convenient or cheap; there may be some people who are very loyal Starbucks users, fisheye users, or other specialty coffee brand users, he may be a coffee old cannon, a coffee lover with a very deep depth. Would he normally drink such coffee? It is possible that it will not, to pursue better things, but in order to facilitate and solve the problem of caffeine intake, he may also go to this place to consume, but this can screen out a group of people who have a little pursuit of the quality of coffee, add a few dollars to enter the next 20-30 price band to find a better product.

At present, from the perspective of brands, the largest user group of Coffee consumption in China is actually the user group of Starbucks, which is a very large stock market. Starbucks has been conducting coffee education in China for more than two decades. From the early days when I simply thought that this was a foreign brand, to Starbucks drinking a cup of coffee is very exemplary, in fact, more to Starbucks to ask people to talk about things, I want this space, I want this scene. This has been talked about for many years before, and it is the scene of the third space. I think this demand will still exist for a long time, but there are many other obvious needs, that is, the combination of the previous social attribute scene to the functional attribute scene. One of the things we have to do, the most direct thing is to attract the existing very large stock market, we provide better products, there is a very obvious and very competitive price system, so that more people can get the product, which involves the logic of point and density.

In the future, brands need to pay more attention to the so-called incremental market. You imagine the post-95s and post-00s, for this generation, the first contact with coffee in his life is likely to be not instant coffee, the first intimate contact with coffee is in the coffee shop next to it. For this generation, we should never again talk about coffee as a foreign product, an imported product, a very normal daily drink in life. When they enter the golden age of work, that is, two or three years after graduating from college, four or five years, what do they drink when they are at work? To drink coffee, it is a very daily drink, and it will definitely have higher requirements for quality. It is not necessarily that coffee lovers have higher requirements for quality, but the frequency of consumption has also increased significantly. If the frequency of consumption increases significantly, it may be greeted by the fact that it can no longer be like the current 35, 36, 38, close to the 40 Starbucks price point. Quite simply, the price has to come down, it's going to be cheaper, the better stuff is cheaper, and it's going to continue to maintain the high-frequency consumption scenario, which is a new trend I'm seeing. Grasp the core stock market users, and continue to grasp the consumption habits of young people after 95 and 00 on the brand side and product side, which is also our next work.

Yu Yue: In the past year, I have seen tea brands such as Heytea and Naixue's tea, and even brands that make bottled beverages in Yuanqi Forest have also begun to pour into the coffee field, what do you think of this trend? Will they be the new variables in the coffee market?

Sun Yu: I don't think so, it's a thing in the DNA of a brand. But the future trend is never everything for two, black and white things, tea is definitely to cut into some coffee things. The logic I just said is the same, our coffee menu will also make coffee drinks in the future, but also make tea things, bubble things. Did you say that Fisheye transformed into a milk tea shop? I think no, the core users are always different, who is your DNA, even if it does not attract new users to come over, its own users have a demand for slightly more different products. Even a heavy coffee lover will sometimes drink other things, otherwise why can Starbucks sell so many Starbucks. Of course, I wouldn't think of it as a very large cut. You carefully observe the coffee things of Xicha, and more is also the scene of coffee drinks with Heytea characteristics. That's my understanding.

Yu Yue: Recently I saw that you and Oatoat jointly launched a new oat milk gift box, including last year and AMINO MASON shampoo brand out of mint drinks, that taste is very good. Fisheye coffee often does brand co-branding or cross-border marketing, what is the big idea in marketing and cross-border marketing?

Sun Yu: Last year, many people called us the "scumbag" brand, of course, in quotation marks, and we did a lot of co-branding things. In terms of purpose, a joint name may not allow you to make an extremely big hit through a joint name. Through a very strong joint name, a very large hit only exists in the tide brand. You can't say which is good and which is bad, just to see if it is suitable for different brands at different stages. Sometimes it is true to do something fun, and sometimes it is not necessary to expect much effect from the co-brand, but the PR value it produces and the change in user sentiment on the brand are actually quite helpful. First of all, you are a very young brand, a dynamic brand, not a brand that is unchanged and special Boring. In addition, it is very affordable that the user population of different brands should be relatively similar when choosing. It's impossible to find some particularly old-fashioned brands and we do something like this. They value cooperation with Fisheye, and the biggest value of our brand is also what the portrait of the core users is, so there will be a lot of interesting things to do together.

You also just talked about our cooperation with Oatoat, which is a strategic cooperation that we have done, and it is not quite the same as doing short-term joint signing. In fact, we are the first coffee brand in China to quote oat milk to add to the drink, and we provide customers with the choice of oat milk. In this process we found that this part does have a certain demand, no longer fresh milk is good or oat plant milk is good, I think there is no good or bad, everyone has different requirements for the product, give you more choices, through oatoat to cooperate, I think their product research and development capabilities are still very strong, because in terms of doing oat milk this thing, single drink oat milk is delicious and this thing is not delicious with coffee, is two completely different product logic, They worked very closely with us and did some R&D stuff. As the first attempt, we also developed a new series of grapefruit oat lattes, ice lattes, and iced milk teas. The taste is very special, the first sip is very peculiar, the market response is very good, and we sell very well. Keep the brand alive and create some different synergies and product innovation with different brands. This is our cross-border marketing idea.

Yu Yue: How does FishEye operate its membership system and private domain customer base?

Sun Yu: When we talk about new consumer brands now, it is a completely different concept from ten or twenty years ago. Ten years ago, twenty years ago, mature brands to do marketing is still relatively traditional, different forms of advertising, with product publicity. Now at present, it is more traffic-oriented, traffic plus communication, you want to convey the message of the brand, can reach your users, you and users will be very deeply bound.

Figuratively speaking, we do a few things. First, a very important carrier for the combination of online and offline stores is the Mini Program. It is possible to go to the store to consume a key scan code can become a member, the Mini Program can not only be consumed in offline cafes, but also can be taken out through the Mini Program, and e-commerce products can be sent through e-commerce. The most basic way of playing, many times the traditional full gift, buy 8 cups get 1 cup, but we have changed from paper collision to a landing mini program to complete. In addition, issue a coupon to one of your admirers and spread it through a small program through fission. Suitable for small programs, suitable for this era. For example, in an era like WeChat, all of them are convenient for dissemination. That is to say, not only do you need to open the Mini Program when you drink coffee, but you hope that more and more times you can open the Mini Program, and then the user's analysis will be carried out according to the data as a support for data.

Another thing that is done more, sounds more earthy, but the actual application is still quite effective: through the offline drainage. Each store has its own user base and operates uniformly through the headquarters. This is the simplest way to connect a brand with temperature and can see and touch it to customers in this way. The most basic operation and the most promotional information should be put in, and we will use only users with private domain traffic in the group to experience the new product in advance. Because our store model covers the surrounding white-collar workers, so these people are like neighbors, which is a form of our private domain. In any case, one direction of the future is traffic-based, but the concept of traffic is far beyond the simple purchase of traffic by e-commerce ten years ago, which is a more general concept.

Yu Yue: In the past two years, capital has invested a lot in the coffee market, and even has a more and more vigorous momentum. In your eyes, what is the help of capital to the Chinese coffee market? What are common understandings or even misconceptions?

Sun Yu: When it comes to the capital level, the coffee track is very complicated, whether it is online or offline, which specific subdivision direction is online, the logic of selling goods in a channel or the logic of the so-called brand, or the all-round and so on.

First of all, coffee is a brand new track, this track has several very big features, the first is from the United States, Japan, Europe has a century of coffee drinking history of mature markets, is a very long LTV (life time value) thing. The user's life is really from 18 years old can drink all the way to 80 years old, and few products can achieve such a long LTV.

In addition, the coffee brand is very similar to cigarettes, with high frequency consumption, and the user's loyalty to the brand is extremely strong. For example, if cigarettes don't change from brand to brand every day, basically a brand can last for decades, and the same is true for coffee in mature markets. Brand viscosity, in China has not yet been fully displayed, not to say that in China will not show it, but china's coffee market to provide users with differentiated choices of brands are too few, and the time is too short, this is the future with the capital side of the consumer side, the market more and more in-depth understanding, everyone is also in the process of learning, this is very recognized by everyone. This is different from milk tea, does milk tea have brand stickiness elements? Absolutely. Any category that does consumption has brand stickiness, but milk tea is more of a new product-oriented. Today I may prefer, if you talk about fruit tea, you may prefer brand A. Milk tea stuff will definitely be solved in brand A. If a new delicious thing appears next to brand B, I won't be nervous. It is difficult to have a brand feature, say what kind of thing my product features are, the function is a product update speed and market-oriented things, there are new products constantly updating, but whether it is Starbucks or other brands, there is a sense of brand belonging in the long run, which will make users go with this brand for a long time. I think that's the first point, there's a growing recognition of how different coffee is and how strategic is important.

In addition, there is a concept that I have been saying, when you talk about the coffee offline business, don't look at the coffee offline store as a catering project. Whether it is from the perspective of valuation or the value-added effect of the store on the brand, what you do is not a catering project, you are doing a consumer product. Now that the market is starting to recognize this, valuations can be very high. It's not a bubble, it's about recognizing that the future can bring more extensible value, which is the power of a consumer brand.

Another thing, that luckin verified one thing, is that the demand in the coffee market is real. Many people have said that Starbucks has so much density, and there are no other demand markets besides Starbucks. Because there is a threshold for drinking coffee, not to say that drinking a cup of milk tea, there is no threshold for consuming milk tea, because people are mammals, mammals are born with a love for the taste of sweetness, and all other perceptions are cultivated. To make people drink coffee, it is not that you are not a coffee drinker, you do not drink coffee at all, I tell you that this cup of coffee does not cost money, I send you, you will not drink. Therefore, you see so many real cups, which is where the real user needs are.

All kinds of signs, now you can see, whether offline or online, the coffee market in China is far from saturated, is the tip of the iceberg, the early stage of the outbreak, the imagination of the market space is great, this is a high-frequency consumption with a very strong brand stickiness track, which is a century of strategic track. The coffee track is getting hotter and hotter, and investment institutions and investors are looking more and more deeply at this matter, and the process of learning quickly, I think this is a very good phenomenon. There may be new trends in the future, such as investing in pure main force to do FMCG products, whether it can be understood as the logic of channel selling goods. Because offline business needs to combine online and offline, and offline is to occupy the "mountain" very quickly and quickly establish the image of the brand, so the consumer brand is currently worth the efforts of a place.