He didn’t even meet, the boss of Hey Tea led the investment of this coffee for hundreds of millions of yuan

He didn’t even meet, the boss of Hey Tea led the investment of this coffee for hundreds of millions of yuan

Hey Tea, which is valued at 60 billion yuan, has set its sights on the coffee track with a market size of 215.5 billion yuan.

 

On July 21st, Hey Tea led the investment, Hony Pakfook followed up with the investment, and Seesaw Coffee completed an A+ round of financing of over 100 million yuan. Not long ago, HiTea itself just completed a $500 million Series D financing on July 13th. The investment in Seesaw Coffee is the first foreign investment of Heytea after its D round of financing.

 

The whole process is like a race against time.

 

Until the signing was completed, Wu Xiaomei, the founder and CEO of Seesaw Coffee, did not have time to meet with Xicha CEO Nie Yunchen. With co-acquaintance Hony Capital’s managing director and CEO of Baifu Holdings, Wang Xiaolong led the line, the three made a voice call one night in July and quickly reached an agreement.

 

Another reason for the two “no time to exchange” is that Seesaw coffee has entered the fast lane of expansion, and Wu Xiaomei is busy looking at “points” and new stores everywhere.

 

“Seesaw Coffee has to complete the goal of 100 stores by the end of the year.” Wu Xiaomei said to Tiger Sniff. As of the end of July 2021, the number of Seesaw Coffee stores in operation is 32, which means that Seesaw Coffee will expand the number of stores by 300% within four months.

 

Expand your horizons to the hot specialty coffee track in 2021 ( specialty coffee: Specialty Coffee is the hottest coffee segment in 2021, Manner, Seesaw, M Stand, etc. are all local specialty coffee brands ) “Quick shop opening” is The common choice of almost all participants.

 

“Coffee is the only track in the consumer goods sector where Moutai Weights Co., Ltd. can be reborn.” A senior investor who did not want to be named said that the addictive nature of coffee and the explosive growth of the market made the investment circle not daring to miss opportunities. The store coverage and the resulting “point-to-point battle” are the focus battles that all specialty coffee brands are facing.

 

“The next year will be of vital importance to Seesaw Coffee. This is a critical cycle that will determine whether we can rise to a higher level.” Wu Xiaomei said.

 

Spending money to grab a store?

 

The “coffee spot” war has started, which is regarded as the key battle around the offline traffic entrance.

 

In June, Manner Coffee announced the opening of 50 new stores in a single month. It is reported that the number of Manner stores is expected to exceed 400 by the end of the year ( in January 2021, the number of Manner stores will be 120 ); M Stand Coffee will open 10 new stores every month. The speed of expansion of stores will reach 100 stores by the end of the year, which will be 10 times the number of stores in the previous 9 years; even Ruixing, which has been delisted, has not given up on the plan to open stores. In January this year, Ruixing Fortunately, it is announced that the scale of self-operated stores is expected to exceed 4,800 in the next three years.

 

A Shanghai commercial real estate sales manager said that specialty coffee brands often regard Shanghai as the first battlefield . Three to five brands will be interested in a good spot before the epidemic, but today there will be six to ten brands to inquire. “During and after the epidemic, rent reductions in some shops have created a rental bonus period for coffee shops, which has also allowed more brands to quickly appear in the market.”

 

The influx of hot money has made all parties involved in the point-to-point war “army” adequate.

 

On July 23, M Stand completed 500 million yuan in Series B financing; on June 16, Manner Coffee completed the fourth financing within 6 months; on April 15, Ruixing Coffee refinanced 250 million yuan through private placement Dollar.

 

Wu Qianqian, an investor who has been paying attention to catering and new consumption fields for a long time, told Tiger Sniff that the investment circle still regards “coverage” as a key indicator for evaluating specialty coffee brands , which also forces brands to open stores quickly after financing. “The logic of the investor is actually to hope that the invested brand will affect the minds of users as soon as possible.” Wu Qianqian said that most institutions and individuals that invest in coffee will set expectations for the number of stores of the invested company, so the investment boom will inevitably bring “Points are scarce” in the coffee market .

 

Two key elements constitute the underlying logic of most investors. The first is the explosive growth of the market.

 

The research results from Frost&Sullivan show that the overall size of China’s coffee market has reached 215.5 billion yuan in 2020, and the overall revenue of China’s freshly ground coffee market will reach 157.9 billion yuan in 2023. According to a research report on the coffee industry by Dongxing Securities in 2020, China’s coffee consumption growth rate is as high as 15%, and it is expected to reach 1 trillion yuan by 2025-which means that China will become the world’s number one in five years. Big coffee consumer market.

 

Another key element is the development trajectory of Starbucks and Luckin: through rapid expansion in a short period of time, the two brands have successfully occupied the “mental position” of consumers , and thus generated a mental dividend.

 

With the changes in the epidemic situation and the influx of new brands, the rental dividends in the Shanghai coffee store market have gradually disappeared, but the major brands have not slowed down their expansion pace, which means that the cost of points has risen.

 

The increase in cost is not the only result of the point-to-point battle. In some areas suitable for opening coffee shops, the phenomenon of “coffee getting together” is already obvious. Wu Xiaomei said that in the supermarket where a certain Seesaw coffee is located in Shanghai, Starbucks alone has three, and there are six other specialty coffee shops nearby.

 

Faced with this situation, stores need to be continuously upgraded to increase store appeal. It is understood that Seesaw Coffee will “drain traffic” by means of theme linkage, regular design updates, and store activities. In a sense, the cooperation between Seesaw Coffee and Hey Tea is also based on this. In August, Hey Tea and Seesaw Coffee will jointly organize offline events. M Stand is also racking its brains for store traffic. In Guangzhou, M Stand opened its store opposite the Apple flagship store. In order to attract customers, M Stand deliberately arranged a futuristic split mirror on the store ceiling.

 

Hidden behind the point-to-point battle, there are also the “positioning differences” of different specialty coffee brands . Take Manner coffee as an example. Manner takes the high-efficiency of small stores as its core strategy, does not pursue the length of time customers stay in the store, and continuously compresses the store area based on this. In contrast, Seesaw Coffee uses a different strategy. In Wu Xiaomei’s view, the potential competitiveness of Seesaw coffee shops is the persistence of the “third space” concept. She believes that compared with the third space defined by Starbucks, there are still opportunities for the third space based on acquaintances to socialize. “In China, Starbucks’ sense of business is obvious, and other brands still have opportunities for scenes like chatting with acquaintances.”

 

This “positioning difference” also gives different coffee brands more buffer space in point selection. Take Manner coffee and Seesaw coffee as examples. They require different types of stores. In Shanghai, the core stores of Manner coffee in the early days will appear in the most popular alleys, alleys, and roadsides in the form of “window shops” within 10 square meters. Seesaw coffee will appear in stores with an average of 100 square meters in supermarkets, centers and other places.

 

Traffic wars are not only offline. For today’s specialty coffee track players, online traffic is already a key focus that cannot be ignored.

 

Ruixing, which focuses on socialized operations, has already regarded private domain traffic as the key to future development. In Ruixing stores, Ruixing will place the social WeChat QR code in a conspicuous position. When consumers enter the WeChat group, there will be a unified operation staff from Ruixing headquarters responsible for daily “maintenance”-Ruixing passed the daily The mode of issuing coupons in the group attracts consumers to repurchase.

 

For Seesaw Coffee, live streaming and other traffic gameplay are the focus of efforts. In 2021, Seesaw Coffee has cooperated with Li Jiaqi and Sydney Live Studio, and has frequently linked with some Xiaohongshu KOCs. Embracing new traffic works well for Seesaw coffee. Since Seesaw coffee shops have the characteristics of online celebrity check-in shops, the grass planting at the new traffic end can often be converted into store consumption, and the turnover of some stores has increased by about 5% from the previous month. And Manner Coffee and M Stand Coffee have opened official accounts on Douyin, and Manner Coffee will regularly publish event news through short videos, while M Stand Coffee will directly “link” to the store page. You can also see each of them below the page. “Check-in video” in the store.

 

However, the continuous increase in online traffic prices is increasing the cost of coffee brands.

 

A coffee entrepreneur who did not want to be named said that the cost of launching new traffic terminals may become an “anxiety” point for coffee brands in the future. “In 2021, compared with 2020, the price of some traffic has increased by more than 20%, while the conversion rate and ROI have declined year-on-year.” With more specialty coffee brands pouring in, this trend may become more obvious.

 

Cross-track linkage may be a solution to the flow pressure.

 

Take HeyTea’s investment in Seesaw Coffee as an example. The two actually have similarities in some tones: It is reported that the design teams of HeyTea and Seesaw Coffee are the same team, and the two also have similar markets in terms of the taste and tonality of some products. judge. Some coffee practitioners believe that through in-depth cooperation, fans of both sides can form a circular flow, which may bring increased traffic to both sides.

 

An industry insider said to Huxi that it is not uncommon in today’s new consumer market to enrich the race track through cross-border investment. Tang Binsen, the founder of Yuanqi Forest, has invested in projects including Ramen Talk, Panda Brewing, and Pan Women’s Square through its Challenger Capital. At present, some of the invested projects have shared channels with Yuanqi Forest. “Yuanqi Forest and Xicha are both unlisted, but highly valued companies. How to add new stories beyond their main business will affect the future market value of both.”

 

Hidden behind the competition between stores and online traffic, there are actually the “invisible wars” being carried out by specialty coffee brands: sourcing, supply chain, and informatization. These key links hidden behind every cup of coffee may ultimately affect the development trend of various brands.

 

The invisible war of coffee

 

Yunnan·Pu’er.

 

Coffee grower Ma Ming has received 6 batches of guests from Shanghai and Shenzhen in the past 20 days. They come from different specialty coffee brands but come for the same purpose: he hopes to sign an annual framework agreement with Ma Ming’s coffee plantation .

 

In the coffee circle, this kind of “locking the source of goods” has become a must-answer question for specialty coffee brands after the epidemic . Specialty coffee emphasizes flavor. This means customized cultivation at the coffee bean level. According to Ma Ming, different coffee brands have different requirements for coffee bean varieties, watering methods, and drying methods. This difference will eventually be reflected in the taste of the drink: fruit The aroma, acidity, and bitterness are different.

 

The two key sources of coffee beans have become a must for the masters of specialty coffee brands . The first is high-quality sources of coffee beans in key international coffee production areas such as Ethiopia, Australia and Brazil. However, these international sources of goods are often controlled by international giant wholesalers. With the increase of local companies pouring into this track, the international giant wholesalers have begun to raise prices. The “black swan” incident will also affect the international supply of goods. Take Brazil as an example. In 2021, the Brazilian coffee producing area will encounter a drought in a century, followed by frost, which has led to a significant reduction in coffee production.

 

In this case, local brands must seek “long-term cooperation” and “deep cooperation.” A person in charge of the purchase of a coffee brand said that major specialty coffee brands will negotiate “long-term cooperation agreements” with international suppliers as much as possible. If there is no such long-term agreement as a guarantee, fluctuations in international coffee prices are likely to wipe out start-up companies.

 

Zhang Yu, head of the Seesaw coffee supply chain, said that “Seesaw Coffee will stabilize the price of coffee beans through a combination of long-term contracts and scheduled locks.” Take a certain coffee bean from Kenya as an example. Special treatment is required during processing. As early as 2020, Seesaw coffee has placed an order and obtained a “commitment” from price to supply.

 

Senior coffee practitioner Mengqi said that the competition for international sources is actually in sync with the expansion of major brands’ stores . “When the number of stores increases exponentially in an instant, it is difficult for you to quickly replenish the supply of goods, because international suppliers generally have their own shipping rhythm.” This means that when a brand decides to expand the number of stores, in advance During the one-year coffee bean stocking phase, it is necessary to “dare to place orders”-but it also requires the brand to pour more cash into the coffee beans.

 

Another focus of the dispute over supply is the origin of Yunnan coffee beans where Ma Ming is located . Research data from the Yunnan Academy of Agricultural Sciences shows that 98% of domestic coffee beans are produced in Yunnan.

 

The core reason why Yunnan coffee beans are sought after is that Yunnan coffee beans do not have tariffs and shipping impacts, which means lower costs compared to Brazil and Africa . For brands, the origin of domestic coffee beans means a more controllable source of raw materials: brands can communicate with growers in depth, and customize the production of “flavored” raw beans that meet their own needs.

 

But Yunnan coffee beans are scarce . In terms of overall production, Yunnan coffee beans accounted for only 1.5% of the total global coffee production, and unlike Brazil’s Great Plains, Yunnan has many hills-this means that there are no coffee beans giants in Yunnan, only tens of thousands Small plantations and farmers, and all brands face a key challenge: to negotiate one by one, and strive to sign the new year frame.

 

High-quality farms are the most scarce. Every year there is a coffee bean planting competition in Yunnan, and the top-ranked farms have risen in value . It is these “head farms” that local specialty coffee brands ” squeeze and break their heads” .

 

But this is not the full picture of the fierce competition: like other fruits, coffee beans will also have the distinction of “extra-grade fruit, first-grade fruit, and second-grade fruit”. In most farms, the most scarce one is premium beans— -Often the yield is less than 10% of the entire farm .

 

The premium beans in these head farms are the focus of competition for specialty coffee brands. But this requires real money investment, and even the cultivation of trust over a long period of time. Take Seesaw Coffee as an example. Seven years ago, Seesaw Coffee began to deploy a coffee bean base in Yunnan. In order to allow the farm to produce coffee beans that meet the needs of Seesaw, Seesaw even provides seeds and planting training for free. When some farmers’ confidence plummets due to natural causes of production cuts, Seesaw will also cover the losses out of pocket.

 

After continuous financing this year, Manner immediately put his energy into upgrading the supply of goods in Yunnan. According to a local person familiar with the coffee industry in Yunnan, the commissioners of Manner Coffee frequently visited coffee farms in Yunnan and tried to cooperate with a number of “award-winning farms”. In fact, as early as 2015, a series of Yunnan coffee beans appeared in Manner’s store. I refuse to complete statistics. At present, there are at least 20 large-scale farms in Yunnan that have in-depth cooperation with Manner.

 

In addition to the source of coffee beans, the supply chain upgrade battle is the focus of every specialty coffee brand .

 

In May of this year, Luckin’s hot coconut latte was “out of stock”. For this reason, Luckin Coffee apologized through the official Weibo. It is worth noting that the root cause of Luckin’s out of stock is not the coffee beans, but the coconut milk in the raw coconut latte.

 

Luckin’s raw coconut latte has chosen two suppliers, Fino and Yecui, and the two suppliers provide pre-made frozen raw coconut milk according to Luckin’s orders. This model is actually the usual method of most domestic coffee shop brands-pre-judge orders and purchase in advance . However, the popularity of raw coconut latte in the market exceeded Luckin’s expectations. When Luckin urgently “reversed” the supplier, it encountered great difficulty: the coconut milk itself, the raw material coconut, has limited domestic production. The two major suppliers need to book coconuts in advance for smooth production.

 

According to many coffee industry insiders, Luckin’s out-of-stock incident taught many insiders a lesson: In the coffee industry, Luckin’s informatization, digitalization, and supply chain systems are among the forefront of the local market, but they still can’t do the right thing. The market reacted quickly.

 

“Supply chain upgrade is a systematic project, which not only means that you need to improve sources of goods and suppliers, but also need to match informatization methods to truly achieve data connectivity.” Wu Xiaomei said that after Seesaw financing, an important investment direction is the supply chain. Overall upgrade, “fast decision-making” and “traceability” are the goals. On the one hand, informatization and database allow brands to respond quickly according to market demand and supplier conditions; on the other hand, it can make coffee as a drink truly realize The end-to-end traceability from the coffee bean farm to the beverage in the store.

 

Mengqi participated in three internal coffee industry forums in 2021. She said that Starbucks, McDonald’s and other international giants in the supply chain and informatization have become a high-frequency word in the chat of domestic coffee entrepreneurs. “Simply put, it can be boiled down to self-built controllable supply chain efficient information system , but both of these require real money investment.”

 

The CIO of a head Chinese food company told Hu Xiu that in the past six months or so, some coffee brands have begun to dig into the catering industry . “In particular, some Western food brands with good information technology and Chinese food brands with strong supply chains have been poached.” This industry insider believes that this trend is actually good, because coffee upstarts finally realized a key issue : The upgrading of supply chain and informatization is not only the competition of equipment and supply base, but also talents.

 

At the moment, popular coffee brands such as Seesaw and Manner need to take a longer-term perspective. After all, there are still some problems that cannot be solved by “money” in the coffee market: for example, how to find enough high-quality “store managers” while expanding rapidly. Match the overall management ability of the team to the scale.

 

After all, in the coffee track, people are castles.

 

At the request of the interviewee, Ma Ming is a pseudonym )

 

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