In the streets and alleys of Shanghai, there are countless cafes with unique decoration styles, and the brightly dressed "hipsters" have become the new key for cafes to open the door to the consumer market. In addition to the supporting roles of fashion life, coffee has also become a "spiritual pillar" in the life of "workers".
While niche cafes struggle in their quest for uniqueness, chain cafes are already on the road to capital markets. On the occasion of the sixth anniversary of Manner coffee, the news in the market is that Manner plans to go public in Hong Kong next year. But the company's founder, Han Yulong, denied the company's plans to go public.
In August, Tim Hortons China, a Canadian coffee chain that operates its China operations, planned to list on the NASDAQ through a merger with blank checking firm Silver Crest Acquisition Corp.
This is also after Luckin Coffee, two more Chinese coffee companies have been rumored or planned to be listed on the capital market.
Chinese stomach loves "imported products"
China's coffee market is huge and growing rapidly. According to the "China Coffee Market and Industry Survey and Analysis Report", it is expected that the size of China's coffee market will continue to grow, and it is expected to exceed 330 billion yuan in 2024. According to the London International Coffee Organisation, compared with the global average growth rate of 2%, China's coffee consumption is growing at an astonishing rate of 15% per year.
Among them, consumers in first- and second-tier cities have become the main force of coffee consumption. According to deloitte's survey data released in April 2021, consumers in China's first-tier cities and second-tier cities have developed coffee drinking habits, especially in first-tier cities, due to the fast pace of life, consumers have regarded coffee as a "daily drink", with per capita consumption of 326 cups/year.
The growth of consumer demand has accelerated the development process of coffee enterprises. According to enterprise investigation data, since 2018, as of September 30 this year, a total of 80 investment and financing cases have occurred in China's coffee circuit, with a total amount of more than 15.193 billion yuan. From the perspective of the number of enterprise registrations, from 2018 to September 30, 2021, a total of 81,500 coffee-related enterprises were registered.
Specifically, according to the data of enterprise investigation, from the third quarter of 2018 to 2021, the financing amount of Chinese coffee enterprises has shown an upward trend. Affected by the epidemic in 2020, the financing situation of the coffee industry is "small and scattered", and the financing amount of a single project is small, with a total of 13 financings, and the financing amount is also small, 206 million yuan.
In the first three quarters of 2021, the amount of financing for coffee enterprises has exceeded the whole of 2019, reaching 5.984 billion yuan, and the number of financing has reached 30.
(Data source: Qi Cha Cha, Capital State Research Institute)
During the first three quarters of 2018-2021, five companies, including Manner coffee and Luckin Coffee, received five financings, which was the most funded enterprise in the period.
From the perspective of financing projects, Luckin Coffee has become the financing king in the past three years. Luckin Coffee raised 2.650 billion yuan and 5.590 billion yuan in 2018 and 2019 respectively, and 1.654 billion yuan in 2021.
Upstarts and lunatics
The development of coffee brands in China is still in its infancy. Coffee consumer goods are mainly divided into three categories: instant, freshly ground and ready-to-drink. Representative brands of freshly ground coffee are Starbucks (SBUX. US), Luckin Coffee, Costa, etc.; Representative brands in the ready-to-drink coffee market include Nestlé, Starbucks, UCC, Master Kong Benasong Coffee, etc.; In the instant coffee market, there are many types of participants, representing brands such as Nestlé, emerging brands such as Three and a Half Meals, etc. The overall coffee market presents a situation in which ground coffee, ready-to-drink coffee and new power brands compete together.
Among the enterprises whose main products are coffee, Luckin Coffee and Starbucks have broken through the Chinese market, followed by manner coffee, Costa and other coffee chain brands.
In 1999, Starbucks opened its first store in Chinese mainland. Over the next 20 years, the "rare and expensive" Starbucks coffee expanded rapidly in China.
According to Starbucks' fiscal third quarter, the number of Starbucks stores in China exceeded 5,000, pushing the number of stores worldwide to a record 33,295.
Starbucks China same-store sales grew 19 percent in the third quarter and expects China same-store sales to grow 18-20 percent for the full fiscal year 2021.
In China, the "blood road" is also Ruixing Coffee. Compared with the price of a cup of starbucks coffee for more than twenty yuan, the price of Luckin coffee is much more common. Under the strategy of price war, Luckin Coffee has grown rapidly.
From October 2017, Luckin Coffee opened its first store in Beijing Galaxy Soho. To more than 4,000 stores, Luckin Coffee took four years.
As of July 31, 2021, Luckin's self-operated stores in China have reached 4,030 and 1,293 franchised stores.
In early February 2020, Muddy Water, a well-known short-selling agency, released an 89-page short-selling report, pointing out that Luckin fabricated the company's financial and operational data and questioning Luckin's business model.
According to the 2020 annual report previously released by Luckin, the company's net loss last year was 5.603 billion yuan, compared with 3.161 billion yuan in the same period of the previous year, an increase of 77.25% year-on-year.
In April 2020, Luckin Coffee exposed financial fraud, and its rapid expansion model alerted the entire coffee market. In 2020, the domestic coffee market showed a rationality different from Luckin Coffee. Judging from the financing of coffee projects since 2020, most of them are concentrated in specialty coffee, and the amount of financing is generally small.
In the past two years, Manner, which specializes in low-cost specialty coffee, has become the darling of the coffee track. As a new upstart of the coffee brand, Manner coffee currently has more than 200 stores nationwide and a valuation of $3 billion.
The rise of Manner also represents a change in the competitive landscape of coffee in China. According to the "White Paper on China's Freshly Ground Coffee Industry", China's freshly ground coffee head brands are mainly large chain brands with comprehensive product value and multi-scene application, but from the perspective of the competition pattern of the first line and the new line, the cost-effective coffee brands that focus on the "fast coffee" scene and the specialty coffee brands that focus on the "slow coffee" scene are gradually seizing market share.
Ready-to-drink coffee fights
According to data from the Prospective Research Institute, in 2020, Nestlé ranked first in China's ready-to-drink coffee market with a market share of 42.6%. However, due to the low threshold of ready-to-drink coffee, strong portability and diverse channels, it has become a red sea for major brands to fight.
There are also a large number of ready-to-use coffee market competitors, including Nestle, Master Kong, Unity, Suntory, Nongfu Spring (09633.HK), Coca-Cola, Mengniu (02319.HK), Yili (600887.SH) and so on.
In 2019, Nongfu Spring entered the ready-to-drink coffee market through carbonated coffee "anthrax". Next, Nongfu Spring launched coffee products such as anthrax specialty coffee and anthrax hanging ear coffee for different consumer groups.
However, from the data point of view, the coffee sales of Nongfu Spring are not optimistic. According to the Zheshang Securities Research Report, the online sales of the Nongfu Shanquan Tao platform in February 2021 were 470,000 yuan, down 39% year-on-year and 30% month-on-month, and the cumulative online sales of the Tao system in January-February 2021 were 1.18 million yuan, down 38% year-on-year.
In February, the market share of nongfu spring ready-to-drink coffee was 3.7%. During the same period, the market share of Starbucks and Nestlé ready-to-drink coffee was 40.4% and 18.5%, respectively.
With a high concentration of head players, in addition to Nongfu Spring, there are also beverage companies moving towards the coffee market.
Dongpeng Special Drink parent company Dongpeng Beverage (605499.SH) recently launched the ready-to-drink coffee brand "Dongpeng Big Coffee Shake Latte". According to the promotional advertisement released by Dongpeng Beverage on its video number, this ready-to-drink coffee uses Arabica coffee beans and new Zealand imported milk sources, does not contain trans fatty acids, and emphasizes "low sugar", with a sugar content of 4g/100mL.
According to the company's 2021 semi-annual report, its energy drinks achieved revenue of 3.547 billion yuan, accounting for 96.59% of the main business income, which is the main source of the company's income.
Dongpeng Special Drink intends to open up the coffee market is also to see the huge potential of china's coffee market and to solve the problem of the company's main product single. However, whether the cross-border coffee products can meet the needs of consumers and truly drive the company's performance growth remains to be considered.
This article originated from Capital State