Specialist
Former General Manager at Shanghai Paca Coffee Co Ltd
Agenda
- China’s 2020 packaged coffee market scale, plus future growth rate, major trends and industry barriers by coffee types, highlighting instant, ready-to-drink, drip bag and capsule coffee
- Traditional players vs emerging players such as Saturnbird Coffee – marketing position, competitive advantages, disadvantages and product structure
- Major sales channels of packaged coffee, product profit and price changes of coffee beans
Questions
1.
Coffee has become one of the three major beverages in the world, and the downstream distribution channels of this industry chain are relatively concentrated. Can you first talk about the market scale and growth rate of China’s coffee market in 2019?
2.
As you said, the sales of fresh ground and drip bag coffee increased a lot last year, so have you seen the same sales growth trend in H1 2020?
3.
For China’s coffee market, which market segment do you think will enjoy larger growth potential in the next 3-5 years?
4.
I learned that instant, ready-to-drink, drip bag and capsule coffee all fall under the category of packaged coffee. What about the respective customer persona of these coffee types?
5.
What are the penetration rates of fresh ground, instant, ready-to-drink coffee and the niche coffee types, say, drip bag and capsule coffee in tier 1-2 cities, tier 3-4 cities and county-level cities?
6.
You mentioned that instant coffee accounts for large market share in the packaged coffee market. With nearly 30% of the market share, Nestlé has been occupying the first place in the instant coffee segment. The top seven players together take up 50% of share in this segment, which indicates that the instant coffee market segment is quite concentrated. What’s the reason?
7.
How can new players secure a spot in this highly concentrated instant coffee market?
8.
Since last year, has the competitive landscape of China’s instant coffee market changed? What about the market positioning and product structure of traditional players such as Nestlé, Starbucks, Maxwell House, G7 Instant Coffee, UCC and OldTown White Coffee respectively?
9.
In light of the price range, we can see that Nestlé and Maxwell House price their coffee at RMB 1-3. Coffee priced RMB 10-15 is capsule coffee or the one offered in convenience stores and fast food restaurants. Higher- priced coffee is the one sold in Starbucks and Costa Coffee. There is also some specialty coffee for sale. Many new instant coffee brands first roll out coffee priced RMB 5-10. Among these new players, which ones do you think are promising? How did Saturnbird Coffee enter this market segment?
10.
What are the differences between ordinary and specialty instant coffee in cost structure?
11.
Can you tell us the gross margin of instant coffee brands?
12.
Are there any technical barriers for Saturnbird Coffee to produce instant coffee with the same taste as that of fresh ground coffee?
13.
Do you know Manner Coffee? It is an offline boutique fresh ground coffee brand, mainly targeting mid-to- high-end customers. What’s your view on this brand?
14.
You said such emerging brands can make coffee that is similar to fresh ground coffee in tastes if they use higher-quality coffee beans. According to some reports, Saturnbird Coffee uses Arabica coffee beans, which obtains a quality score of 80 or higher from the Specialty Coffee Association of America, and its cold brew coffee weighs 2.75 grams per small box and costs around RMB 4. Can you talk about major brands’ selection of coffee beans and how they control the raw material cost?
15.
Do instant, ready-to-drink, drip bag and capsule coffee products have different requirements for coffee beans?
16.
Some beverage companies including Lepur and Nongfu Spring have launched coffee products successively this year. If beverage companies produce coffee products, what do you think of their coffee cost compared with coffee brands?
17.
Data shows that ready-to-drink coffee just accounts for around 10% of market share. According to your experience, can you talk about the reason why the market share of ready-to-drink coffee hasn’t exceeded that figure? Are there any difficulties?
18.
Do you think the ready-to-drink coffee’s market share will stay at around 10% or go up in the coming 3-5 years?
19.
Can you brief on the range of gross profits of ready-to-drink coffee brands you are familiar with? Which brand has the highest gross profit?
20.
As we just talked about, there are capsule, drip bag and freeze-dried coffee apart from instant and ready-to- drink coffee in the market. What is the competition in the market like? What are the major players offering capsule, drip bag and freeze-dried coffee?
21.
Do you notice some emerging players such as Yongpu Coffee (永璞), Secre Coffee and Tastelab? What’s your view on these brands?
22.
Are there any differences among cold brew, drip bag and freeze-dried coffee in terms of the technique, taste and preservation?
23.
Some coffee brands have their own factories while some work with third-party factories. Is there a big difference between the two in terms of cost? Which one bears higher risks?
24.
How do these brands ensure the efficiency and stability of their supply chains?
25.
Emerging brands may spend more effort on product packaging. As a result, their products can be sold at around RMB 5 or above, and a case in point is some cold brew coffee, the price of which is close to RMB 10. How do these brands make consumers accept the high price of their products? What’s their pricing logic behind that?
26.
Is there anything else about the coffee market you would like to share with us?
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