Capital brews coffee year after year, and the aroma drifts to 2022

In 2022, despite the overall coldness of the new consumption track, the coffee industry will remain hot. Recently, the Chinese business of the global coffee chain brand Tim Hortons officially landed on Nasdaq. It is understood that Tims China adopted the SPAC method for this listing. On September 28 this year, Silver Crest, an “empty shell” listed as Tims China, completed the merger with Tims China.

Capital brews coffee year after year, and the aroma drifts to 2022

  Since entering China more than three years, Tims’s China has grown rapidly. In February 2019, Tims China opened its first store in Shanghai, and three and a half years later, the number of its stores reached 450. Tims China’s revenue is also continuing to grow. The financial report shows that from 2019 to 2021, the revenue is 57.257 million yuan, 212 million yuan, and 643 million yuan respectively, with a growth rate of more than 200%.

Tims China’s losses are also expanding

  But at the same time, Tims China’s losses are also expanding, with net losses of 87.83 million yuan, 143 million yuan, and 383 million yuan from 2019 to 2021, respectively. A “de-bubble” movement is also underway. Compared with the valuation of US$1.688 billion when Tims China was just preparing to go public in August last year, in March this year, after Tims China announced that it had obtained financing, the valuation was reduced to US$1.4 billion.

  Behind Tims China stands the star capital that supports it. In 2020, Tims China received a strategic investment of over 100 million yuan from Tencent, and in 2021, it received a second round of financing, led by Sequoia China, increased by Tencent, and followed by Zhongding Capital. In March of this year, Tims China announced that it had received another $194.5 million in the financing, with investors including Descartes Capital and Silver Crest Management LLC.

  Not only Tims China, but many coffee brands have started a new round of accelerated development this year, which can be described as “going against the trend”. In the Q2 quarter of 2022 alone, there will be no less than 12 investment and financing cases related to the upstream and downstream of the coffee industry. There are also many new things on the track: Lu Zhengyao has entered the coffee track again, many coffee chain brands have set up shop expansion goals, and new players have begun to make coffee across the border.

  Experts from all walks of life seem to think that coffee is a good business, and they do everything they can to grab more market share.

Horse race” expansion

  Since Nestle entered China, coffee has been integrated into the Chinese market for nearly 40 years, but it has really been noticed in the last three or four years. With the iteration of consumer groups and consumption concepts, there is still a lot of room for improvement in the coffee track, and major coffee brands are rolling in in the Chinese market.

  In 2018, Ruixing attracted the attention of the market with its Internet play and rapid store opening, instantly ignited the coffee track, and provided the outside world with new ideas for making coffee brands. Then new consumption gusts came, and cutting-edge coffee brands also took off in the past few years.

  The coffee market saw a second wave last year. In 2021, there will be more than 700 financing events on the consumer track, of which coffee and tea will account for nearly one-tenth of them. Almost every month, related brands will have financing events of over 100 million yuan.

  Coffee brand financing events are concentrated in the first half of 2021. In the first seven months alone, more than 15 coffee brands have announced financing. The new local coffee force, Manner, has raised three consecutive financings within half a year. Investors include Meituan Longzhu, ByteDance, Temasek, etc. The single financing amount has reached hundreds of millions of dollars, which seems to have become the coffee version of “Naixue’s tea”.

Manner coffee shop

  In December, Nova Coffee announced the completion of the B rounds and B+ rounds of financing, with a cumulative amount of over 200 million yuan. Emerging coffee chain brands such as Maocaffe and Crooked Coffee have also received financing one after another. Throughout the year of 2021, coffee brands have had 10 financing events of over 100 million yuan, with a financing amount exceeding 4.8 billion yuan.

  Since 2022, the popularity of the coffee market has continued unabated, and it has continued its explosive growth trend. In February, Shanghai-based coffee chain Seesaw Coffee announced that it had completed an A++ round of financing of several hundred million yuan, just over half a year after its last financing. In March, Tims China received US$194.5 million in the financing, which was the highest amount of financing for the coffee and tea track in the first half of this year. In June, Coffee Wings announced the completion of a new round of financing of up to 100 million yuan.

  Compared with last year, the financing level of the coffee track this year still maintains a high level, which shows that coffee is still a good project in the eyes of investors and entrepreneurs.

  The speed of coffee store expansion can also reflect the popularity of the track. Most of the coffee chain brands in the Chinese market have shown the ambition to open more stores.

  The chain giants represented by Starbucks and Ruixing lead the coffee track with absolute store advantages. On September 27 this year, Starbucks announced the opening of its 6,000th store in mainland China. At an earlier investor exchange meeting, Starbucks plans to have 9,000 stores in China by 2025.

  Ruixing took the steps even bigger. As of the end of 2021, its total number of stores has reached 6,024. According to the statistics of the “New Stores of the Week” released by Ruixing’s official account, from January to June 2022, the number of new Ruixing stores opened exceeded 900. And in terms of financial data, Ruixing also has an advantage. According to the financial report for the second quarter of 2022, the total net income of Ruixing Coffee reached 3.2987 billion yuan, an increase of 72.4% over the same period last year, while the net income of Starbucks in the Chinese market in the second quarter of fiscal year 2022 fell by 14%.

Luckin Store

  Although Starbucks and Luckin are rushing into the Chinese market, China’s coffee market is far from saturated. The “new coffees” that are popular with capital, represented by Manner, Seesaw, M Stand, and Nova Coffee, are also accelerating their expansion.

  When Nova Coffee disclosed its B round of financing at the end of last year, the number of stores had soared to about 1,500. This year, it continued to expand the market through small store caches and alliance models. In June, Nova Coffee announced the opening of 100 stores. Manner is also very good at “doing things”. The number of stores in the first two years of the establishment was only single digits, but since last year, the number of stores has doubled. At the beginning of this year, Manner announced the opening of more than 200 stores in ten cities across the country, and it is expected to reach 1,000 stores by the end of 2023.

  Although the coffee brands that exist in the market have already “killed crazy”, new entrants continue to join the melee this year.

  53-year-old Lu Zhengyao decided to return to his old business after tossing around in an unfamiliar field for nearly two years and launched a new coffee brand, Kudi Coffee; Li Ning, Huawei, Chayanyuese and other giants have also started cross-border coffee. sideline.

  There is no doubt that the domestic coffee market has entered the eve of the melee.

Capital is optimistic about the coffee track

  The investment environment is going through a cold winter, but the capital market is still enthusiastic about coffee. Capital seems to believe that on the coffee track, in the future, China will definitely run out a giant company with a market value of 10 billion or even 100 billion.

  Coffee is an imported product and one of the symbols of Western culture. Compared with developed countries, the penetration rate of coffee among Chinese consumers is not high, and there is still a lot of room for improvement.

  The 2021 China Chain Catering Industry Report shows that the per capita annual coffee consumption in mainland China is only 6.2 cups, compared with 279 cups per year in Japan, 388.3 cups per year in the United States, and 867.4 cups per year in Germany. Even in China’s first- and second-tier cities with higher coffee consumption levels, there is still an order of magnitude gap compared with developed countries.

  At the same time, Starbucks has been in the Chinese market for more than 20 years, and has already established the coffee name; after Ruixing took the civilian and low-cost route, it really brought coffee into the lives of consumers, making “one cup a day” possible. From this perspective, the top two chain coffee giants have successfully educated consumers.

  In this stall, emerging coffee brands and capital all want to seize the opportunity, seize the opportunity, and gain a firm foothold in the coffee track.

  Compared with other tea products, the cost of opening a coffee shop is lower. The coffee product line is relatively simple, the production standardization is high, the stock of raw materials is small, the labor cost is low, and the gross profit margin is higher. At present, the gross profit margin of coffee on the market is about 50%, and the gross profit margin of brands such as Manner and Starbucks is more than 50%.

  In addition, coffee is addictive and functional, and it is gradually regarded as a rigid demand for consumption, which affects consumer stickiness, repurchase rate, and user retention.

  Addictive consumer products run on a long-cycle track. First, it has a stable supply and demand relationship, which can attract high-viscosity consumer demand, thereby achieving stable repurchase; second, its profitability is also stronger, as a necessities, consumers are more sensitive to its price changes Low.

  According to the official data given by Ruixing, its 3-month repurchase rate is greater than 50%; Tims Hortons CEO Lu Yongchen once said that the monthly repurchase rate of Tims Coffee is about 40%; while the member repurchase rate of Seesaw Coffee is 30% -40%. In comparison, the repurchase rate of milk tea is lower. Taking Nai Xue’s tea as an example, as of the end of last year, Nai Xue had about 43.3 million registered members and about 7 million active members, and the repurchase rate of active members was only 35.3%.

  What kind of people are drinking coffee now? Talkingdata data shows that post-95s users of Generation Z are the main coffee consumers. Therefore, those who win young people in the world, and it can be speculated that the next “Moutai” in the Chinese market may emerge in the coffee industry, driving capital influx by virtue of cycle, stability, and profitability.

  For example, one of the reasons why investors are interested in M ​​Stand is that the founders are very young, and the products are also loved by young people.

Towards a different commercialization path

  Whether it’s Starbucks, Luckin, or the up-and-coming rookie’s Manner, M Stand, and Tims China, coffee brands are working hard to raise funds, open stores, and grab the market, but their ideas and strategies are not the same.

  Brands such as M Stand and Lu Zhengyao’s Kudi Coffee choose “big store logic” to sell not only the coffee itself, but also brand value, lifestyle and sense of space, which are closer to the third space form constructed by Starbucks, therefore The unit price is also relatively high.

  The unit price of M Stand’s products is usually more than 30 yuan, and the product line is expanded with three scenarios: coffee daily, afternoon tea and evening. The biggest feature of its store is that, unlike traditional coffee shops that are standardized and commercialized, it has created an industrial and minimalist third space 2.0 model of “one store, one design”, making the coffee shop attractive to young people. An online celebrity store for taking photos and punching cards.

M Stand industrial style store

  Lu Zhengyao’s Kudi Coffee has two modes: standard store and mini store. The mini store is similar to Ruixing, while the standard store focuses on full-time dining. In addition to the coffee and wine of “morning C and evening A”, it also provides meals and snacks. . It is intended to meet the needs of consumers for gatherings, to provide the possibility of socializing, and to find added value other than coffee.

  Under the “big store model”, the labor and operating costs of coffee shops will increase accordingly. Consumers may check in at the store because of curiosity at first, but if the store cannot continue to provide new attractiveness and the unit price of the product has no advantage, consumers may not come again, and the early popularity is only short-lived.

  Brands such as Manner and Nova pay more attention to the cost-effectiveness of coffee, similar to Ruixing’s “small shop model” that can be seen everywhere. Although the brand premium of the small store is not high, it can make small profits but quick turnover and is highly replicable. The single-store model runs through, and the follow-up is the process of Ctrl C and Ctrl V.

  The ultimate in this is Nova Coffee. Not only does it have a small store, but its location is also very flexible. Some Nova coffees even “stay” in other stores, such as bakeries, etc. The entire store is only related to Nova’s logo, coffee, and its cups. Nova chose a more asset-light path, focusing on the scene of young people ordering coffee.

  However, the “small store model” also has risks. First, the number of stores continues to increase, but the brand’s control over franchisees is weak. There are irregular stores and inadequate quality control, which in turn affects brand building; second, new stores are opened. This will bring revenue growth, but this growth is of diminishing marginal utility, and eventually, mature stores may be dragged down by new stores. According to the statistics of Meal Collection, the closing rate of Nova Coffee is higher than the average level of the catering industry.

  Today, the major coffee brands have finished telling the stories they should tell, and capital also prefers coffee brands that have been established for a certain number of years and have the possibility of large-scale profitability. Unless new possibilities are found, the days of getting capital backed by a story are over.

  The world is prosperous, and the capital market always expects China to create its own coffee giant, and is passionate about it. It’s just that when that day will come and what the market competition pattern will be, it is still in a fog.

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