Picture source @Visual China
Text | Finance Sixianghui, author | Zhao Tianhe, editor | Guan Dongsheng
Ruixing’s “9 yuan 9” activity has shrunk. It once said that the low-price strategy of the "9 Yuan 9" campaign, which lasted for at least two years, was shaken within a year. As one of the first brands to start a price war, it seemed a little discouraged. Luckin here at
is still quietly testing on the edge of raising prices, while manner over there is "surge" on the road to territory expansion.
On October 30, 2023, the affordable specialty coffee brand manner opened its 1,000th directly-operated store in the North Bund of Shanghai, completing its goal of exceeding 1,000 stores within two years set in 2021 ahead of schedule. In the next day and month, it announced the opening of its 1,100th and 1,200th stores respectively, quickly gaining market share in the specialty coffee track.
Although the coffee industry is filled with smoke, the ceiling has not yet appeared, and the trillions of growth space still leads brands to hunt for gold day and night.
2023 is a milestone for both brands. Luckin’s profits have hit a new high, and manner’s stores have exceeded 1,000. However, after the good news, Luckin is no longer the “9 yuan 9” cup of coffee. , and manner is still the "standard drink for white-collar workers." Lucky goes to the left, manner goes to the right, but where will they end up after the different paths? It took
from 0 to 1000,
manner took 8 years to achieve from 1 to 1000, and Ruixing took 11 months.
In 2015, Han Yulong opened a small shop covering an area of less than two square meters on Nanyang Road in Shanghai, named "manner". The store is simple and only sells affordable specialty coffee. The white-collar workers in Shanghai who passed by and grabbed a cup at this time seemed not to realize that this "shabby" street-facing shop window would lead the domestic affordable specialty coffee market in a few years. From the beginning of
, manner was not very fast. By October 2018, it had only opened three stores in Shanghai.
Manner, who was born first, is a toddler, and Ruixing, who is two years younger, is already staggering and running.
In October 2017, Ruixing was established in Xiamen.
In 2018, when manner with only three stores began to attract capital attention, Luckin had completed two rounds of ab financing, amounting to US$400 million, a total of 4 rounds of financing. The following year, it was listed on NASDAQ in the United States, which lasted only 18 years. months. Luckin was born on a big ship of capital and has been riding the wind and waves all the way. In less than a year, it opened its 1,000th store. Before
html was launched in May, it had 2,370 stores. Of course, the subsequent delisting, financial fraud, and clearing the baggage and packing up lightly have aroused layers of public opinion. However, after all the hardships, the latest financial report shows that as of the end of 2023, the number of Ruixing Coffee's domestic stores reached 16,218, including 10,598 self-operated stores and 5,620 jointly operated stores. Luckin Coffee opened 8,034 net new stores throughout the year, with the number of stores increasing by 97.8% year-on-year at the end of 2022. Luckin has always maintained a market strategy of rapidly expanding stores, and the speed of opening stores is no less than the speed of its meals.is different from Ruixing’s exciting play style of opening and closing, while manner is steady and steady.
In October 2018, manner received its first financing - 80 million yuan from Capital Today. Manner thus entered the wilderness of large-scale expansion and ushered in the competition for capital.
From December 2020 to June 2021, manner completed 4 rounds of financing in just 6 months. Among them, when temasek Temasek invested in February 2021, the company was valued at US$1.3 billion. In May of the same year, the valuation had risen to US$2 billion. One month later, this number jumped to 2.8 billion US dollars, and the single store valuation exceeded that of Luckin at the time. In less than 4 months, the valuation doubled, and manner’s appeal to capital is self-evident.
In March 2022, manner opened more than 200 new stores in ten cities, accelerating its nationwide layout. Deeply cultivating the "affordable boutique" track and riding the capital train, while blue bottle, seesaw, m stand and other specialty coffee brands in the same track have fallen into stagnation in scale, manner broke through the barriers and became the domestic specialty coffee in just 8 years. It is the first local coffee brand in the industry with more than 1,000 stores.
"The right to interpret taste ultimately belongs to the consumer."
Although each has its own strategy for staking a claim, the rule of survival remains the same - "cost-effectiveness".
Luckin’s online sales developed earlier. Its stores are simply decorated and have a clear buy-and-go style.When you click on the Luckin mini-program, you will find that the face price of coffee is above 30 yuan. The price is mainly reduced in the form of subsidized coupons, leaving room for maneuver. After subsidies, the average price per cup is about 15 yuan.
announced in June 2023 that "9 yuan 9" will be a normalized activity and will last for at least two years. If the price is lower, will the quality shrink? Luckin co-founder and CMO Yang Fei once said, "Don't consider profits now, let's talk about it in 3-5 years." At the expense of huge losses, seizing market share at low prices is a strategic choice, and in terms of quality, Luckin claims to start from the four major High-quality Arabica coffee beans are selected from coffee-producing areas.
A consumer who buys an average of 2-3 cups of Luckin every week said that he prefers Luckin’s creative coffee to traditional coffee. As for how she views the shrinking of the 9 yuan 9 activity, she said that she will not be greatly affected. At present, Luckin Coffee still has a cost-effective advantage, but she believes that her acceptable ceiling for Luckin’s price is 20 yuan. Another consumer who has no specific brand preference said that for him, there is no obvious difference in the taste of coffee at similar prices on the market. If Luckin raises the price, he is likely to choose a more cost-effective coffee.
Before the era of Luckin’s rapid store expansion and crazy subsidies, specialty coffees had their shining moments. There were seesaw and m stand in China, and blue bottle abroad. However, due to the natural barrier between quality and scale, Due to factors such as low standardization and high costs, this track has not yet become a reality. Blue Bottle, which costs about 50 yuan per capita, has been established for more than 20 years and has more than 100 stores around the world. Seesaw, the earliest chain specialty coffee brand in China, closed its stores in many places across the country before the Spring Festival. During this period, the number of stores nationwide did not exceed 200.
Boutique is both a tonality and a price. Some brands position "boutique" in various aspects such as quality, location, decoration, etc. Coffee and "atmosphere" work together, and the price rises with the cost input.
At the beginning of its establishment, manner focused its "high-quality products" only on the quality of coffee. is different from Starbucks' "third space" strategy. Manner compressed rent and decoration costs through the small store model, thus ensuring that customers are satisfied with the "atmosphere" The cost of paying the bill is relatively small. The price of a single cup of is basically in the 15-25 yuan range. At the same time, there are few promotions. The only normal one is "bringing your own non-disposable cup can save 5 yuan" to promote the concept of environmental protection.
Unlike Luckin’s fully automatic coffee machine, Manner uses Lamarzocco’s semi-automatic coffee machine. Some models cost around 100,000 each and require manual completion of steps such as pressing powder, extracting coffee liquid, and latte art. Compared with fully automatic coffee machines, semi-automatic coffee machines improve the quality, but at the same time they also reduce the degree of standardization.
Because of this, the barista is key. It is understood that Manner once only recruited baristas with work experience, and the threshold was lowered after the epidemic. A manner barista in Beijing said that he had work experience and could start operating in the second week after joining the job, while another manner barista who joined the job with no experience received about a month of training.
In addition, the salary level of manner baristas is also higher than that of their peers. Taking Jing'an District, Shanghai as an example, boss direct employment data shows that the monthly salary of Luckin baristas is around 6,000-8,000, while that of manner is around 8,000-12,000. The two baristas interviewed also said that the salary level at Manner is indeed more impressive.
The presentation of coffee depends on various interlocking links. A specialty coffee green bean trader once summed it up in a popular way: "Raw materials account for 6 points, roasting accounts for 3 points, and brewing and extraction account for 1 point." As a consumer, the straightforward question is "does it taste good or not?" The right to interpret taste ultimately belongs to consumers, and consumer love is the survival rule for a brand to develop in the long term.
"Special Way"
In terms of strategy, the two brands have a low duplication detection rate.
First of all, in terms of products, Luckin boldly innovates and has mastered the "coffee +" formula. It has launched a number of popular products, including raw coconut latte, which sold 300 million cups in two years, and sauce latte. Daily sales exceeded 100 million yuan. The initial product structure of manner only includes three categories: black coffee, milk coffee and hand-brewed coffee. At the same time, some fixed new products will be launched every quarter. At present, manner has a much richer variety of drinks. Although it is not as good as Luckin, it can still see innovative drinks and more popular combinations on the market.
In terms of marketing, co-branding is commonplace for Luckin. According to incomplete statistics, Luckin Coffee has conducted at least 12 co-brands in 2023, including Line Puppy, Kweichow Moutai, etc., covering various fields. I believe there is always one. Can impress consumers. manner is much more conservative. According to incomplete statistics, there were only 4 joint signatures last year. However, what is interesting is that one of them included a joint signature with LV, and the theme was "Limited Time Bookstore".
This is not the first time that manner has been in contact with LV. The other two are the LV spring and summer show in September 2022 and the LV Yayoi Kusama special series in December. Being able to cooperate with international luxury goods is an opportunity to gain exposure and popularity. In addition, manner has also cooperated with Shanghai Pudong Art Museum, Majestic Theater, HR Helena, etc., which makes people feel that manner seems to have implemented the "high-quality" idea into the field of co-branding, and there have been many cooperations that are consistent with the brand's tone. object.
However, as co-branding activities of various brands become more and more frequent, will consumers suffer from co-branding fatigue? When the consistent co-branding strategy is not enough to support new growth points, how will the brand seek new ideas?
The requirements for specialty coffee on baristas and coffee taste have made manner slowly let go. Unlike Ruixing's rapidly maturing "takeout" model, manner only opened takeout 7 years after its establishment. First of all, a cup of manner’s coffee needs to stay in the hands of the barista for a longer time, which will reduce the amount of coffee cups produced. Before this, manner’s daily cup volume has exceeded the overall industry level, and the offline order volume has been quite saturated. .
However, the overall area of manner’s stores is about 5-30 square meters, while Luckin’s is about 30-50 square meters. When manner gradually expanded from a small store of a few square meters to a comprehensive store with the help of capital, it faced difficulties in terms of manpower, When resources are sufficient, increasing sales through takeout is the best option, and takeout technology is constantly being upgraded, so the coffee delivered to customers will not lose too much taste.
It is worth noting that Luckin Coffee fully opened up franchises for the first time in January 2023, accelerating its expansion plan. At the end of February this year, Luckin Coffee announced its fourth quarter and full-year financial results for 2023. Luckin's current ratio of directly-operated stores to joint-operated stores is less than 2:1. In 2023, Luckin Coffee's total net revenue was 24.903 billion yuan, and revenue from self-operated stores was 17.880 billion yuan, an increase of 8.27% from 9.786 billion yuan in 2022. %; joint-venture store revenue will be 6.226 billion yuan in 2023, an increase of 102.8% from 3.069 billion yuan in 2022. It can be seen that franchise stores are the key engine of revenue growth.
Manner has not yet opened any form of franchise or agency, and more than 1,000 stores are directly operated. Brands that use fully automatic coffee machines sometimes produce the same drink in different stores with different tastes. Brands that use semi-automatic coffee machines face greater resistance when it comes to quality control, especially when it comes to positioning themselves as specialty coffee. The unstable taste of the product will not only lose consumers, but also damage the brand reputation. At this time, acting too hastily will not bring about the ideal expansion effect. However, as scale continues to deepen, the pressure of direct sales may force brands to open up diversified sales models.
Should the price increase or sink, that is the question
Ruixing, which seems to be prosperous on the surface, has actually been in a state of large losses for a long time, and did not achieve profitability until the first quarter of 2022. Under non-U.S. accounting standards (GAAP), Ruixing's Operating profit was RMB 16.1 million, compared with an operating loss of RMB 364 million in the same period in 2021. At the same time, the average price of Luckin Coffee has increased from less than 12 yuan per cup to about 15 yuan per cup.
has only been profitable for one year. In June 2023, Luckin announced the normalization of the “9 yuan 9” activity and increased “money-burning subsidies”.
Ruixing's financial report shows that Ruixing Coffee's operating profit under U.S. accounting standards (gaap) in the third quarter of 2023 was 961.7 million yuan, a decrease of about five percentage points compared with the second quarter (18.9%); store-level profit margin It also fell by six percentage points. However, Guo Jinyi, chairman and CEO of Luckin Coffee, said at the performance meeting that the decline in profits in the third quarter was normal and fully in line with the company's strategic expectations. At the
2023q4 conference call, Ruixing said that the primary strategic focus in the future is to continue to focus on expanding market share.As soon as the words fell, in February 2024, the "9 Yuan 9" activity shrunk. In view of the strong response from consumers, Luckin finally increased the number of products in the activity from 8 to 10. However, the trend of being the first to die out has also aroused suspicion in the market. The low-price strategy is a double-edged sword. Even if it can quickly sink into the market in a short period of time, are consumers loyal to the brand or the low price? When the psychological price for Luckin remains at RMB 9.9, further price increases may lead to the embarrassing situation of user loss. The average daily volume of a single store of
manner in 2022 will be about 500 cups, while that of Luckin will be 400 cups. The average unit price per customer for the former is 22 yuan, and for the latter it is 15.2 yuan. The initial cost of a single cup of Ruixing was as high as 28 yuan, which dropped to 13.3 yuan in 2019. It will be 2022 when “making money with every cup” will truly be realized, while the cost of a single cup of manner is around 11 yuan. Manner’s revenue in 2020 It is 200-300 million yuan, with a net profit margin of more than 10%. It has achieved "making money with every cup" early and has strong single-store profitability. This is also an important factor in attracting capital attention in the early stage.
What needs to be cautious is that Manner's smooth store expansion is inseparable from the capital and market's optimism about the prospects of China's specialty coffee chains. However, investors seek returns, and chain brands need to expand on a large scale and improve single store efficiency to improve performance. They will definitely do so. Be prepared to enter the market.
However, the current data on the degree of sinking of manner is average. The Jihai data report shows that the degree of brand sinking is calculated from 0-5. 0 means that the degree of sinking is the lowest, that is, all brand stores are opened in first-tier cities, and 5 means that the stores are in first-tier cities. Fifth-tier cities.
As of June 2023, manner's sinking index is 0.22. In comparison, Starbucks' sinking index is 1.19, and Luckin Coffee's sinking index is 1.75. A manner barista said that his store is only 20 square meters, and there is no third space. The daily cup capacity is about 120 cups, while another manner barista's store has two or three tables, and the daily cup capacity is about 120 cups. About 400 cups. Since it is in an office building, there will be more customers working in the building.
Picture source/manner The pricing of specialty coffee on the official website
is not competitive compared with brands with crazy prices. Although it can become the first choice of some consumers due to its taste, at present, quality seems to be in absolute decline. It is not impossible to stay behind in the face of low prices. The sinking market heralds a more severe test.
's large-scale requirements for production speed are getting higher and higher. It can be found that the time difference between buying a cup of Luckin and manner in the mini program is getting smaller and smaller. A manner barista suggested that if you want to drink better coffee, you can go to a store with fewer customers. Obviously the production speed will have a greater or lesser impact on the quality of the coffee.
In order to "take advantage of" the customer flow of Starbucks, manner prefers to open its stores next to Starbucks. Although manner invests less in the third space, it will attract customers who have high requirements for coffee quality, and the town has already opened one Whether Starbucks can welcome manner is still unknown.
Summary
iiMedia Consulting data shows that the coffee industry is expected to maintain a growth rate of 27.2%, and the Chinese market size will reach 1 trillion yuan in 2025. Under the huge incremental space, brands are racing against time to seize market share, and even bear huge losses in expansion. As the leader in the industry, there is no doubt that low prices were Luckin’s former advantage, but the market is ever-changing, and the shrinking of the 9 for 9 campaign will inevitably involve changes in strategy. The brand will be embarrassed by consumers’ sensitivity to price increases, and as a price parity The leader in the boutique track, Manner is gaining momentum. In an industry that clamors "coffee is sold cheaper than water", it can break out of the tight siege, but perhaps the climbing period is not far away, and low prices will not be its advantage. , how should manner find new ideas in the sinking market? Although Luckin is on the left and Manner is on the right, how to seize market share is a common issue for both of them.
