Starbucks’ China Myth

Sometimes surfing the Internet and offline experience are completely different. For example, I saw a hot search on Weibo today: #Why are fewer and fewer people drinking Starbucks in China#. After thinking about it, it seems that this is indeed the case. I really haven't had Starbucks in a long time.

Then, I went to a nearby Starbucks to take a look: Well, there are quite a lot of people, and there are not even a few empty seats.

I can even create a hot word to describe this phenomenon called "anti-Xiaohongshu effect". What you want to finish is actually okay offline.

Starbucks' fiscal year and natural year are really different

#Why are fewer and fewer people drinking Starbucks in China# The biggest basis for this hot search entry is Starbucks’ latest financial report for the first quarter of fiscal year 2023: In China, Starbucks’ same-store sales fell by 29%, and the same-store transactions fell 28%, and the average customer unit price decreased by 1%.

In conversion, the unit price per customer decreased slightly, but basically remained the same, and sales dropped by nearly 30%, which is indeed a loss of about 30% of consumers, which sounds like a collapse.

However, most of the media discussing this, including well-known media such as "Sanlian Life Weekly", confuse the first quarter of the 2023 fiscal year with the first quarter of the 2023 natural year. Therefore, looking at the data alone, it is easy to make people think that spring is blooming , When everything is recovering and everyone's tourism consumption rebounds strongly, only Starbucks is left out and no one cares about it.

In fact, the first quarter of Starbucks' fiscal year 2023 corresponds to the three months from October to December 2022.

Looking back from October to December last year, we can probably recall the reality at that time: first, the movement of people was restricted, then released, and then there was a wave of infections, and the online and offline economies were greatly impacted.

In fact, Starbucks also stated the specific situation in its financial report: During the peak period of infection, nearly 1,800 Starbucks stores had to close that month, while the total number of Starbucks stores in China was close to 6,100.

If you just look at last year’s financial report data, the performance of most catering companies is not very good. For example, Haidilao’s annual revenue in 2022 will drop by 15.8% (but it is finally profitable); Annual revenue fell by 4.2%, and net profit also plummeted; Yum China, which owns KFC, saw a slight drop in revenue last year and a halved net profit.

Therefore, it is of little reference value to talk about the financial report data of last year, especially the last quarter of last year. Of course, there are indeed a small number of catering companies that have grown during this period, such as Ruixing.

This situation has also appeared in some recent car reviews. Because January 2023 includes the Spring Festival holiday, the car deliveries of major car companies will drop significantly compared to the entire month. Therefore, at this time, the year-on-year data in January and February are of little reference. The year-on-year decline in the delivery of a certain automaker in January cannot be absolute evidence of its decline.

Starbucks defines the coffee space, Luckin defines China's coffee products

At the beginning of 2019, Ruixing was sentenced to death with reprieve by many people because of the financial fraud incident, and he would repeat the mistakes of ofo. At that time, I wrote an article " Ruixing can't beat Starbucks, but it may not be the next ofo ".

Core point of view: Although Luckin is tied to Starbucks in marketing, its commercial positioning is completely different from Starbucks. It takes the route of cheap national coffee. Starbucks’ core competitiveness is still the "third space". Starbucks will not sell lattes worth more than a dozen yuan, and Luckin will not open a cafe of several hundred square meters in the most expensive business district in Shanghai. The continuous growth and low price space of China's coffee market, as well as Ruixing's low starting point at the time, gave Ruixing the opportunity to obtain sufficient market space and high growth rate.

Four years later, Ruixing did embark on a completely different path from Starbucks and managed to survive.

The reason for mentioning Ruixing is that although it is quite different from Starbucks, the Chinese coffee market is currently defined by these two.

Starbucks defines the spatial attributes of coffee, and Ruixing defines the product attributes of Chinese coffee.

Once you understand this, you also understand the situation and myths of Starbucks in China.

The growth of our demand for coffee space is much smaller than the growth of demand for coffee products. The expansion of the Chinese coffee market is due to the gradual acceptance of coffee products by consumers and becoming a daily drink, rather than the fact that we prefer to spend lazy afternoons in a coffee shop.

As an addictive drink, coffee has always been considered a golden track. Once barriers are established, it will be difficult for other competitors to cross the river to attack the city. Coca-Cola and Pepsi, the two giants of carbonated sugary drinks, have a similar logic. In other markets, they can only be defeated by time, not by opponents.

The particularity of the Chinese market lies in the fact that the market capacity here is huge, and at the same time, there is a huge gap in people's spending power: some people are keen on small-batch Geisha hand poured in private estates in boutique coffee shops; Some people pass by the Ruixing stall in the office building to buy a cup of iced Americano and take it to the work station; as well as the cold-extracted freeze-dried powder in the drawer of the worker, or the unlimited supply of Nestle instant in the company's tea room….

Among these scenes, only when facing Starbucks, it is completely directed at the space, and the others are more or less directed at the coffee itself.

An obvious but easily overlooked reality is that most Chinese people do not like to drink pure coffee. For most people, the bitterness of dark-roasted American style, the sourness of light-roasted boutique hand-washed, or a small cup of espresso on top , which is equivalent to "difficult to drink".

Ruixing, who knows this well, is not so much making coffee as making coffee-themed sugary drinks. Last year we wrote an article " Ruixing, please don't add sugar!" "Come to complain about the sweeter and sweeter Luckin drink.

Generally speaking, coffee beverages like coconut green cold brew, latte, etc. do not need to add sugar, but most of Luckin’s fancy lattes have a high sugar content, and Luckin’s sugar is so sweet that it is sad.

But this is also an obvious reality. Human genes have determined that we like to drink sweet, not bitter and sour.

The essence of Luckin's definition of Chinese coffee products is to make sweet coffee drinks that Chinese consumers love to drink. Under this general logic, it is the rapid iteration of the product development end, the expansion of categories, and the discovery of hot products such as raw coconut latte.

The tea and coffee vertical media "Kamen" previously wrote " Investigation on Sinking Cafes: Fruit Coffee is Questioned, but Coffee Flavored Milk Tea is Generally Popular ", which is about the transformation of coffee drinks into milk tea, the meaning of milk tea, that is, "plus milk and sugar".

Some people also say that Starbucks Frappuccino and many seasonal limited drinks are also sweet and sweet. Why don’t you enjoy the bonus of coffee milk tea?

The answer may lie in product research and development. Luckin has been able to launch more than 100 new products every year in the past two years, and it is completely possible to launch two new models every week. This speed is unmatched by Starbucks.

In addition to the speed and quantity of research and development, Starbucks also has the common disadvantages of foreign companies in China: slow response to market demand, or even no response.

After Ruixing launched Raw Coconut Latte in April 2021, it sold 70 million cups a year, which not only supported Ruixing’s growth, but even allowed Ruixing to surpass Starbucks to become the first customer of Dexin Foods, a supply chain company. Because the raw coconut milk in raw coconut latte is supplied to Ruixing by this company.

Both the B-end and the C-end are so popular. Starbucks has not launched a similar product until now, but the cherry blossom flavored latte arrives every spring. I complain every year, and it comes out every year.

In the field of fundamentalist coffee drinks, Starbucks itself is not good at it. Taking lattes as an example, Starbucks' famous stunt is "stable production", which means that it doesn't taste bad or bad when translated. However, brands such as Manner and JPG, which focus on cheap and high-quality coffee, can provide a pretty good cup of latte at 20 yuan or even cheaper, even if the cup is small and most of them are taken away.

However, I never finished a large Starbucks latte from beginning to end.

Starbucks' China Myth: The Impossible Triangle of Space, Product and Scale

Strictly speaking, it is not rigorous to define Starbucks products as bad.

On the contrary, I think that Starbucks' product capabilities are stronger than any cafe, and it can throw Luckin, which is known for its research and development capabilities, eight thousand miles away.

For example, the barrel-brewed whiskey cold brew, which is available for a limited time every summer, is two or three grades ahead of other imitations in terms of smoothness and aroma; the coffee-containing cocktails produced by Starbucks winery Bar Mixato opened in a few cities are also of high average level; now The sour lemon cold brew available in almost every coffee shop is far from the original version of Starbucks Shanghai Roastery; Milan Ode to commemorate the opening of Starbucks Milan Roastery, blended with Piccolo Coffee and Mocha Coffee, amazing…

However, in most Starbucks in most cities, most of the time, we cannot drink the above-mentioned drinks, because these drinks cannot be scaled at all due to raw material production, barista requirements and price factors.

Therefore, the green aprons who earn a small salary every month can only take out the concentrate from the semi-automatic coffee machine, add water and ice, or froth milk, and make industrialized iced Americano or flat white, and give them to those who are not satisfied with the taste. Customers with too high expectations.

And at the bar counter of Starbucks Selected Stores, people who chat with black apron baristas and make up for hand-made coffee with coffee beans are only a very small part of Starbucks' overall customer base.

Howard Schultz, the soul of Starbucks, did not foresee Starbucks' product problems, so after he stepped down as CEO last time and only served as chairman, he focused on promoting the development of Starbucks' high-end stores.

But this cannot solve the impossible triangle problem of space, product and scale. The large number of ordinary Starbucks stores still have clean windows and good WiFi, but the products are still mediocre and not cheap.

Just like the 210,000 Citroen C6 is full of shortcomings, but the 120,000 Citroen C6 is perfect, if the price of Starbucks drinks with a large amount of tubes can be the same as Ruixing, I believe no one will care about Starbucks products, but since it has chosen to be the most The best space in a good location, so a large part of the money we spend on Starbucks coffee becomes rent and decoration expenses.

When people discuss whether there are fewer and fewer people drinking Starbucks in China, what actually reflects is that in this wave of popularization of coffee that is visible to the naked eye, Starbucks has not benefited from it. It is Luckin, Manner, Nova, And Lucky Coffee is developing new coffee audiences.

Those who are still willing to spend more than 30 yuan for a cup of coffee also have more choices, such as M Stand, See Saw, Peet's Coffee, and various local coffee brands.

It may not be that fewer and fewer people drink Starbucks, but four out of ten people choose Starbucks, but now four out of twenty people still choose Starbucks.

At least, when we have a need for space, Starbucks is the first thing we think of. After all, it has so many stores and is so easy to find.

When we only need coffee, there are too many choices.

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