The coffee market has recently become active again. Dongpeng Special Drink recently launched the ready-to-drink coffee brand - "Dongpeng Big Coffee", and Yum China has also increased the layout of the coffee track. This has also added a fire to the fast-growing coffee market.
As Chinese consumers become more and more receptive to coffee, the coffee market has ushered in a multi-party scuffle. The ready-made coffee stores represented by Starbucks and Luckin, the cross-border brands represented by Tongrentang and Dongpeng Special Drink, and the innovative coffee brands represented by Santo and Yongpu Coffee are secretly competing in the market, forming a situation of "three-way war".
Industry insiders pointed out that coffee is a category with obvious growth momentum in the beverage industry, the current first-line market is not saturated, increasing the density of layout is a short-term trend, and resources will also be concentrated to advantageous brands. But in the sinking market, coffee consumption is still in the educational stage, and cross-border coffee brands face greater competition.
Mixed underground coffee market
From Starbucks to Luckin to the various specialty coffee brands that are now opening stores, the coffee market has poured in more and more players in recent years.
Seeing the great potential of China's coffee market, more and more foreign coffee brands are entering the domestic market. Recently, Yum China and Italian coffee brand Luigi Lavazza S.p.A. ("Lavazza") announced that the two companies plan to accelerate the expansion of Lavazza's coffee shop network in China through a joint venture, with the goal of opening 1,000 stores in China by 2025. As of August 31 this year, Lavazza Coffee Shop has about 22 stores in Shanghai, Hangzhou, Beijing and Guangzhou.
In February 2019, Canadian coffee chain Tim Hortons ("Tims") opened its first store in Shanghai. In May 2020, Tims announced that it has received hundreds of millions of yuan in investment from Tencent and plans to use the funds to further expand the construction of digital infrastructure, accelerate digital upgrading, and quickly open more stores. On June 17 this year, Tims Coffee's 200th domestic store was officially opened in Suzhou. Up to now, Tims Coffee has been deployed in 12 cities in China, including East China, South China and Southwest China, and plans to add a total of 250 stores this year.
Joining the offline battle is also the specialty coffee brand that originated online. On September 19th, the first concept store of Sandun at No. 322 Anfu Road in Shanghai was officially opened under the name of "into the force" and Chinese force flight. In addition to freshly made coffee and bread, there are also retail products such as signature boxed instant freeze-dried coffee, ceramic cups, and water bottles.
Shicui Coffee, which also specializes in portable specialty coffee, is also grasping the layout of offline stores. In 2020, Shicui Coffee opened its first offline store in Shenzhen, and after the Spring Festival in 2021, it opened 5 new stores in two months, and nearly 20 were in the process of renovation and site selection preparations, and the number of stores is expected to reach 50 by the end of this year.
Wang Zhendong, chairman of Shanghai Brown Yue Investment Management Co., Ltd., told the Beijing News that the current domestic coffee market is in the state of "tripartite war" of innovative brands, international chain brands and cross-border brands, and the overall growth rate is very fast, far higher than the average level of the consumer market. Capital blessing has given some innovative brands the opportunity to challenge international chain brands, but it has also squeezed the market for some independent coffee shops to a certain extent.
Cross-border coffee brands have their own tricks
Compared with foreign countries, the domestic coffee market still has a large upward space. Coffee consumption in China is growing at a rate of 15% per year, according to the International Coffee Organisation in London, compared to the global average of 2%. In 2020, the scale of China's coffee market will exceed 300 billion yuan, and it is expected to reach 1 trillion yuan in 2025.
Unlike the main coffee brands, there are many cross-border players in the Chinese coffee market, these brands either want to share a piece of the coffee market or test the water in order to increase the product category.
On September 24, Dongpeng Beverage, the "first share of functional drinks" that flourished in the capital market, announced on its official video account that it launched its first ready-to-drink latte coffee drink, "Dongpeng Big Coffee", officially entering the coffee track. The target consumer group of "Dongpeng Big Coffee" is white-collar workers and students aged 18 to 35, and plans to first shop in Guangdong Province, covering offline and online channels. At present, the product has two specifications of 300 ml and 500 ml, and the recommended retail price is 5 yuan and 7 yuan respectively. For why to make coffee products, the Beijing News reporter recently contacted the relevant person in charge of Dongpeng Beverage, and has not replied as of press time.
Cross-border is not only Dongpeng Beverage. Beijing Tongrentang, a long-established brand for more than 300 years, is also moving closer to a new generation of consumers. On July 17 this year, Tongrentang's IP Zhima Health launched the "Bitter On Bitter Herbs Coffee" series of products at the Taobao Maker Festival. Previously, there were coffee products sold in the "Zhima Health" store. In addition, Shanghai's long-established Shao Wansheng has recently joined forces with Jinjiu Coffee to open the first "fashionable" coffee shop in Shanghai People's Square, Bad Brine Coffee.
McDonald's and Convenience Bee, which has a strong offline store network, are also quietly laying out. On November 16, 2020, McDonald's China announced that its professional coffee brand McCafé (McCaffe) will invest 2.5 billion yuan in the next three years to accelerate the layout of the Chinese mainland coffee market, and it is expected that by 2023, there will be more than 4,000 mcgonami coffees nationwide. In August this year, after the number of stores in the country exceeded 217, the "Sleepless Sea" under the convenience bee's specialty coffee announced the upgrade of the brand logo. Based on the convenience bee's "shop-in-shop model" and the subsequent "independent store model", the "Sleepless Sea" beverage station plans to expand to 1,500 nationwide by the end of this year.
Industry insiders said that Beijing Tongrentang "Zhima Health", Tims, etc. have taken advantage of the momentum to form new characteristics in terms of products and channels, and look forward to reconstructing the order of the coffee consumption industry under new scenes, new products and new groups. However, Wang Zhendong said that cross-border brands generally perform poorly, reflecting the characteristics of equal emphasis on brand power and product power in the coffee market.
The rise of the sinking market is still on the way
According to the "White Paper on China's Freshly Ground Coffee Industry" jointly released by Deloitte China and Mumian Capital in April this year, as the primary penetration of coffee culture in first- and second-tier cities, the frequency of coffee intake by consumers who have developed drinking habits has reached the level of mature coffee market, and coffee has gradually changed from "fashionable drinks" to "daily drinks".
In terms of consumer groups, at present, Chinese coffee consumers are mainly urban white-collar workers aged 20-40 years old, and the frequency of urban white-collar workers who have developed drinking habits has reached 300 cups of coffee per year, and more than 50% of urban white-collar workers will continue to increase the frequency of coffee intake. With the further increase in disposable income, it is expected that the potential coffee consumer population will continue to expand.
From the perspective of brand layout, whether it is Starbucks, Tims Coffee, or the emerging Manner Coffee, Three and a Half Meals, they have placed their own store layout in the first- and second-tier markets. Because the requirements for store location in lower-tier cities are extremely high, only coffee stores in young people's concentration areas can form a brand effect, and marginalized groups have failed to form freshly ground coffee consumption habits. If each brand goes deep into the prime location to open a store, it will raise the threshold of competition and is not conducive to the continuation of the brand site selection strategy.
In addition to the habit of coffee consumption, the demand for "third space" also restricts the sinking of freshly ground coffee shops. The "third space" refers to an informal public gathering place outside the place of residence and work, and its atmosphere is different from the quiet closure of the family, and also different from the dull seriousness of the office, emphasizing the social role of the place, such as cafes, tea houses, bars, community centers, etc. In fact, from today's new tea drinks and freshly ground coffee chain stores, many brands have set their sights on the "third space".
Wang Zhendong told the Beijing News reporter that people's demand for coffee is essentially a demand for urban functions, that is, the needs of business, leisure, social, cultural experience, etc. The key to the sinking process is to see the attributes of the "third space" of coffee. Price can not solve the problem of coffee in the sinking market, how to meet the needs of consumers " third space" is the key.
In fact, it can be seen from the strategies of various enterprises that the sinking market has been put on the agenda. Starbucks clearly mentioned in the plan that stores will sink to more second-, third- and fourth-tier cities, and Luckin Coffee also released a "new retail partner" plan specifically for the sinking market at the beginning of this year. Tims Coffee also placed the first round of expansion this year in second- and third-tier cities.
Wu Xiaopeng, a senior investor in the consumer goods industry, said that in first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, the consumer demand for multiple scenarios such as family, leisure, social networking, and office is strong, and the competition for coffee brands is fierce, and it will continue to be the main battlefield of competition in the future. In the sinking market where the popularity of coffee is not high, there are great opportunities for growth, which will inevitably trigger a fierce battle in the coffee industry.
Beijing News reporter Wang Ziyang
Edited by Zhu Fenglan Proofreader Liu Jun