When specialty coffee “reduced” to fast-moving consumer goods

Specialty coffee “resurrected”?

The specialty coffee that was once crushed by high rents and operating costs now seems to have come alive.

Since last year, the slow industry of coffee has entered the “fast lane”: new and cutting-edge brands have emerged one after another, new categories have emerged in addition to traditional instant and specialty coffee, and capital has been spreading money wildly, betting on coffee that may appear in a few years. Trillion market.

And the only thing they have in common is that they must mention “exquisite”.

In the past, specialty coffee may have been hidden in an internet celebrity cafe in a certain hutong, and the cafe’s principals were mostly literary and artistic youths with turbans and stories; but now, specialty coffee has long since faded away from the internet celebrity label and is heading towards the streets. , And sporadically arranged in shopping malls… Actively breaking the circle is the new attitude of specialty coffee.

Looking at the whole country, Shanghai’s coffee market has become a benchmark in the industry, but it has also been extremely “involved”-more than 8,000 boutique cafes are crowded with old houses and streets under phoenix trees. As a result, Shanghai has emerged from a number of new and cutting-edge specialty coffee brands. , Such as Manner, Yingji and Mingqian Coffee .

In this era when coffee is inseparable from the word “premium”, has the market concentration of specialty coffee been “diluted”? Is Manner, who claims to have a single store valued more than Starbucks , a product of capital? Is the trillion coffee market a false proposition?

“Resurrected”

Specialty coffee cannot be defined arbitrarily, and its concept and standard can be traced back to 1974.

Back then, American Ona Knudsen proposed in the magazine to distinguish high-quality premium coffee beans from ordinary bulk commercial coffee beans. A few years later, under its impetus, the Specialty Coffee Association of America (SCAA) was established, which was later recognized as a specialty coffee organization in the world.

SCAA’s definition of specialty coffee is “from coffee farmers to baristas must have high standards for quality.” In the process of purchasing raw beans, it is necessary to pay attention to the production area, and then perform shallow roasting to maintain the original flavor of coffee beans, so that the evaluation of cooked beans can reach the standard of 80 points or more. In the process of extraction and brewing, the barista must use appropriate utensils to make it. Of course, the taste of specialty coffee does not stop at the product itself, but also on the exchange and interaction of coffee culture…

In short, specialty coffee needs to provide a better experience than chain coffee and instant coffee.

Although there are differences in individual experience, the quality of raw beans purchased can be the first check on specialty coffee.

“If you want to save costs, you can buy beans for more than ten yuan, twenty yuan per kilogram. The price of high-quality commercial beans is about 50, 60 yuan per kilogram, and coffee beans with a starting price of about 80 yuan per kilogram can be shortlisted. The category of specialty coffee beans.” Liu Yu, the founder of a specialty coffee, told the ” Forefront of Entrepreneurship “, but many novice users don’t like the sour taste in specialty coffee beans. Instead, they like the 20-yuan beans, which have relatively better taste. Bitterness is in line with the public ‘s imagination of coffee.

Zou Yang, the founder of Mi Coffee & Infinite Blessing, runs two boutique cafes in Guizhou. She started her business in 2014 and won the 2021CBrC (World Coffee Brewing Competition) national championship not long ago .

“The price of a single green coffee bean in our store is basically around 30 yuan. A small part of the beans come from Yunnan and do not need to pay tariffs. Coupled with lower transportation costs, the price is lower.” Zou Yang said, “The front line of entrepreneurship.” Said, “The coffee beans purchased from Africa are also very cost-effective, and the price of green beans is around 100 yuan/kg.”

But in fact, most Chinese people still have no way of telling the quality of coffee beans for a long time, because specialty coffee has only appeared in the past 10 years.

Nestlé first knocked on the door of the Chinese market with instant coffee, and then Starbucks introduced commercial coffee to China and used 5,000 stores to imprint its “third space” for consumers. At that time, drinking coffee was still a “compulsory”. Consumer behavior.

After 2010, with the rise of Korean drama culture in China, a number of Korean chain cafes began to enter the Chinese market, targeting urban white-collar women, which has a more social meaning. Among them, South Korea’s largest chain coffee shop CaffeBene (coffee accompany you) entered Beijing in 2012.

In 2017, Luckin fought against Starbucks and copied it wildly in the form of low-cost subsidies and opening small stores, setting a milestone for the development of local coffee in China.

In fact, around 2010, specialty coffee has appeared one after another, but at that time chain coffee brands were still in the education market. These niche boutique brands were still on the fringe, mostly hiding in the streets and alleys in the form of independent cafes. The concept of the market has also been ignored.

On the one hand, specialty coffee has always been the most attractive entrepreneurial project for coffee enthusiasts, but after a personal hobby becomes a business, it will face many cruel challenges in the commercial market , such as the high rent and raw material costs of specialty coffee shops, as well as high unit prices. , The flow of people is limited, therefore, many independent brands eventually ended in bankruptcy.

“In the early days, the location of boutique cafes was more inclined to the hutongs in cities like Beijing and Shanghai. The rent was lower than that of commercial centers. Later, they caught up with the rectification of urban hutongs. These policy factors had a considerable impact on the cafes at that time.” Zou Yang said. “After the rise of the concept of specialty coffee, many entrepreneurs have also poured in. This has further increased the rental cost of coffee brands and increased the difficulty of operation, making many specialty coffees disappear .”

But on the other hand, there is no shortage of specialty coffee brands in the market that happened to escape the “front-line fighting” and survived. Since then, the capital “searched for it thousands of Baidu” and captured these specialty coffee “orphans.”

Around 2016, the capital finally got a new bid. Manner, which focuses on the ultimate price-performance ratio, was first a 2-square-meter stall in Shanghai Hutong. After receiving investment from today’s capital, it has successively received investment from well-known institutions such as Temasek, Meituan Dragon Ball, ByteDance, etc.; boutique chain coffee brand Eagle Group is in A financing was just disclosed in June, and the amount is unknown; M Stand, which was established in 2017, also received 100 million yuan in Series A financing in January this year.When specialty coffee "reduced" to fast-moving consumer goods

Photo/ Manner Beijing Raffles Store

Of course, capital money is not just to seek new growth in the coffee market, but to look forward to the “explosive period” of specialty coffee in the market.

Objectively speaking, the current penetration rate of boutique cafes is still low. According to Deloitte’s “White Paper on China’s Fresh Grinding Industry”, the current chain rate of China’s coffee shop market is low, with chain brands accounting for only 13% of all coffee shops. Especially in Tier 3 and below cities, independent cafes accounted for 97%. Most of them were old-fashioned coffee-themed simple restaurants like Shangdao Coffee and Cross-Strait Coffee . Boutique cafes such as Yingji Coffee accounted for less than 1%.

But what is important is that the gradual maturity of the coffee industry supply chain has lowered the barriers to entry for brands. For example, mature roasting factories, systematic barista training, and the increasing standardization of Yunnan coffee beans planting are expected to usher in an explosion in the specialty coffee market. The root cause of the period.

Specialty coffee “fast digestion”

From the perspective of the industry, the maturity of the supply chain also represents another meaning-specialty coffee has begun to go down the “sacred altar”.

Whether it is instant coffee or commercial coffee represented by Starbucks, it is considered an imported product in the Chinese market where tea culture prevails. Therefore, in the early education market, drinking coffee once seemed very stylish.

When tasting different types of coffee, there is an invisible “chain of contempt.” For example, standing at the top of the pyramid is hand brewed coffee, and underneath are espresso, American coffee, milk coffee, and hanging ear coffee. Instant coffee is considered to have lost the coffee flavor and resides in the base of the pyramid.

However, with Luckin subsidizing Chinese consumers in the form of “cutting American leeks” and anchoring the price of coffee to about 20 yuan, the Chinese coffee market has really begun to become popular, rather than a niche game of art.

In other words, the consumption of specialty coffee has shown the trend of “de-elitism” and “de-gentrification”.

According to research data from the Prospective Industry Research Institute, the average annual growth rate of coffee consumption in my country has reached 15%. Driven by first- and second-tier cities, the needs of people in other cities will gradually be awakened, and coffee will change from a “fashionable drink” to a “daily drink”.

In the eyes of post-95 consumers, the price of less than 20 yuan after receiving the coupon can not be compared with the high-end image of specialty coffee in the past.

Sun Yu, the founder of Fisheye Coffee, also said that for the generations born after 95 and 00, the first coffee experience in his life is probably not instant coffee, but at the coffee shop next to him. For them, coffee is no longer an exotic or western drink, but a daily drink in life.

The iteration of specialty coffee is not so much a dilution of the concept of “premium”, but rather believe that under the pressure of large-scale, specialty coffee must take the initiative to enter the mass market. When consumers shift their focus on coffee from “style” and “social” to “products” and “flavors,” specialty coffee brands with higher cost performance will appear.

For example, Manner adopts a small-store business model, which is mostly opened in densely populated office areas. Generally, stores do not exceed 50 square meters, abandoning the concept of third space, and the price is between 10-25 yuan. This network not only bright red coffee behind the star investment institutions, at the end of the 2020 round of investment, the investor is given a brand valuation of $ 1 billion, only 108 of its stores nationwide that time, the average single-store valued at At 12 million U.S. dollars, this figure even surpasses that of the coffee giant Starbucks.When specialty coffee "reduced" to fast-moving consumer goods

Figure / Manner product price list

According to public reports, Manner claims that all of its Shanghai stores are profitable, and that its net profit exceeds 10%; Fisheye Coffee is working hard in the supply chain to build its own roasting plant to ensure the quality of coffee; In addition to designing the store as a ” In addition to the “sacred place”, it is also developing coffee retail products such as freeze-dried powder. Last year, its online sales of premium instant products exceeded 100 million yuan.When specialty coffee "reduced" to fast-moving consumer goods

Photo / Shanghai Yingji Coffee

Among the specialty coffee brands, Manner’s stores have the fastest growth rate and the prices are more cost-effective. Then, taking Manner as an example, how does the low price of specialty coffee achieve?

Sun Yu once put forward the concept of “coffee price band”: that is, the price band of traditional specialty coffee is 40-60 yuan, the customer unit price is high, the product experience is good, the size of the store is large, and it has the attributes of online celebrity check-in. In the Chinese market, this type of store can only be opened in first-tier cities. The price of 10-15 yuan is “floor price coffee”, this price band is composed of convenience stores and foreign fast food chains that provide coffee products such as McDonald’s and KFC .

In his view, in the integrated retail format, “floor-priced coffee” only plays a role in draining traffic, and this price band has clearly entered the Red Sea competition.

Manner happens to be at the edge of this price band.

The cost of the coffee industry is extremely transparent, coffee beans, milk, cups, straws, etc., if you want to rely on products to beat consumers’ minds, you can only use better beans and milk, but in this way the brand will sacrifice a part of the profit.

Some people believe that Manner’s coffee beans are mostly blended from 3-4 coffee beans from different origins, and 3 of them are relatively low-priced, which may not be considered as “fine products”. And its high floor efficiency is due to the narrow store space and the high flow of people around the business district.

Some people also believe that Manner may be Luckin’s number one opponent in the future. Although this point of view has not yet been deduced, if the specialty coffee brand wants to continue to be out of the circle, Luckin ‘s capital game can be used for reference.

 The false proposition of the trillion market?

So, has the potential of the specialty coffee market been overestimated?

The first thing to note is that the non-standardized production of specialty coffee and excessive reliance on the skills and experience of baristas will cause difficulties in the expansion of specialty coffee. There is even a saying in the coffee industry that there are no more than three shops.

“The first consideration for expanding the store is location selection.” Zou Yang said, “Secondly, coffee production lacks standards and process SOPs. Different baristas may have different tastes because the production process of semi-automatic coffee machines is very human-dependent. , And the barriers to entry for baristas are relatively high, requiring at least one or two years of experience as a full-time barista, and the cost of recruitment and training is high.”

This is also the reason why the above-mentioned specialty coffee shops are far less in scale than Luckin. Take the coffee brand Blue Bottle as an example. Although it is known as the “Apple of the coffee industry”, there are only a few dozen stores worldwide.

Individual specialty coffee shops may be profitable, but they still cannot break through the bottleneck of expansion in the short term.

Will Manner be an exception?

In fact, in terms of user needs, “slow coffee” focuses more on environmental experience, and specialty coffee belongs to this category; “quick coffee” focuses more on functional experience and cost-effectiveness, such as Manner.

According to the “White Paper on China’s Freshly Ground Coffee Industry in 2021” released by Deloitte, the proportion of consumption in the “quick coffee” scene has increased year by year, and the number of freshly ground coffee cups consumed in the “quick coffee” scene per capita accounted for 70% of all freshly ground coffee intake .

“To a certain extent, with the participation of capital, the current Manner has greatly accelerated its store expansion, and it has gradually formed a difference from the previous Manner.” Zou Yang said that it is now choosing the direction of making coffee into a fast consumer. products, can achieve faster and better branding, from this perspective, its development direction and traditional specialty coffee is not the same a development path of the.

It is not difficult to see the overall predicament of the coffee industry from the development path of Manner abandoning the traditional specialty coffee.

“In the eyes of financial circles and investment circles, the coffee industry is still not a big track.” Liu Yu said, “The coffee industry has never seen’big money’, especially the specialty coffee market is not as big as imagined. At the same time, this market It can’t stand up to it.”

In his view, most domestic investors hope to obtain high returns in a short period of time, but the coffee industry still has not reached the stage of explosive growth. “If an entrepreneur has no enthusiasm for the coffee industry, but just sees the opportunities in the industry and enters, it doesn’t make much sense in essence.” He added.

Liu Yu is not the first to question the concept of a “trillion coffee market”. Many interviewees said to the “frontline of entrepreneurship” that the addictive nature of coffee gives this market a lot of potential, but it may take a long time to reach the trillions.

Relying on the Internet may be able to conquer the city in a short time, but to wait for the results of the specialty coffee track, you still need to pay more patience.

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