Why are there huge market opportunities for 24-hour soy milk restaurants?

After getting off work late at night, you can always see a 24-hour soy milk restaurant. Why has the soy milk and fried dough sticks market risen in recent years, and what market opportunities will there be in the future? Let's take a look at the analysis in this article.

Someone said: "A glass of wine late at night is not as good as a glass of soy milk in the morning. A breakfast that soothes the body and mind can wake up early risers far better than an alarm clock." I would like to add a prerequisite to this sentence - especially for foreigners who are traveling and have to catch a high-speed train or plane, soy milk, fried dough sticks and steamed buns in the morning can best warm every dusty traveler.

When traveling, I usually choose to eat at a street-side pancake truck or a nearby McDonald's chain store in order to get up early! Of course, if there is a traditional Chinese breakfast chain store (such as Yonghe King, Hongli Village, Xiandianwang, etc.), this will be my first choice! Because it can be seen with the naked eye that chain breakfast stores are cleaner and more sanitary than roadside stalls, and they also provide space for you to sit down and enjoy your meal slowly.

However, most traditional restaurants open at 8:00 am and 10:00 pm at the latest. Those who rush to the restaurant early are doomed to miss out on this leisurely and delicious breakfast. During this Spring Festival trip, I visited Jiahe Soy Milk, a 24-hour chain breakfast restaurant in Yangzhou, which helped me solve many problems of hunger during the trip.

I walked into Jiahe Soy Milk at 5:20 in the morning and 11:00 in the evening. I was the only table of customers in the whole store, but the staff were still busy, which aroused my curiosity about this kind of traditional chain restaurant that is online 24 hours a day.

1. Why will the soy milk and fried dough sticks category usher in huge market opportunities in the future?

The eating habits of China's east, west, south and north are very different. For example, tofu pudding in the south is sweet while that in the north is salty. The south likes to eat meat buns while the north likes to eat steamed buns. The south likes to drink boat porridge and lean meat porridge while the north often drinks white porridge!

Soy milk and fried dough sticks are the most widely used traditional Chinese snack in China. People in both the north and south have been eating them since childhood, and the market does not need to educate users. Soy milk and fried dough sticks stand out from many breakfast categories and become a new category track promoted by the catering industry.

Do chain restaurants selling soy milk and fried dough sticks only sell soy milk and fried dough sticks? Of course not! Most traditional Chinese chain restaurants sell two branches, namely breakfast + lunch and dinner.

Breakfast is mainly Chinese snacks such as soy milk, fried dough sticks, steamed buns, egg pancakes, wontons, noodle soup, mixed noodles, etc., while lunch and dinner are mainly fast food such as braised pork rice, chicken chop rice, chicken leg rice, etc. The difference is that these food categories are sold at all times, so customers can have breakfast or fast food at any time, which effectively solves the user's dietary needs.

Why has the soy milk and fried dough sticks market become popular in recent years? What market opportunities will it have in the future? There are mainly four factors that influence this:

1.1 The Chinese breakfast market has a huge potential

At present, the scale of China's breakfast industry is nearly 2 trillion yuan, and the market space is broad.

According to Mintel's forecast, the size of my country's breakfast market is expected to reach 2.57 trillion yuan in 2025 under a neutral assumption. Although famous brands such as KFC and McDonald's have also entered the breakfast market, according to NCBD's research, Chinese breakfast is still the first choice for Chinese consumers. (Content quoted from [Caitong Securities])

1.2 Urbanization and the elimination of street vendors

Twenty years ago, we were still in a social environment where street vendors were prevalent and buses stopped at any time. At that time, the key words about the social environment were chaos, dirtiness, lack of rules, and unfairness.

With the transformation and advancement of urbanization, the social environment has gradually entered a controllable and regulated fast lane, and Chinese breakfast shops are also rapidly iterating and upgrading.

Earlier, breakfast shops were mainly mobile roadside stalls and husband-and-wife shops, where the chefs made fresh soy milk and fried dough sticks, and customers bought and left;

In 2008, the Ministry of Commerce launched the Breakfast Model Project, which sold breakfast at the entrances of streets and communities in the form of convenient breakfast carts.

After that, the urbanization process accelerated, the breakfast project continued to upgrade, and unlicensed roadside stalls were banned. In 2013, Taoyuan Military Village opened, leading the upgrade of traditional Chinese snack brands;

However, with the upgrading of consumption, the category track focusing on the collection of traditional Chinese snacks has expanded, and the categories have begun to differentiate, with the emergence of various soy milk and fried dough sticks shops, sauce-flavored pancake shops, egg pancake shops, wonton shops, noodle shops, etc.

These soy milk and fried dough sticks shops, noodle shops, and wonton shops have become the fastest way for people to solve the problem of filling their stomachs. When you are hungry, you just need to go out and choose from any store, big or small. However, these Chinese snack shops often lack brands, the production process is not standardized, and the store cannot be replicated.

The rise of chain Chinese restaurants such as Jiahe Soy Milk has solved the above three core problems: branding, standardization, and chain operation. Chinese breakfast restaurants with brand support can make customers feel more assured, increase user loyalty, and have greater hidden market opportunities.

1.2.1 Small categories, big business

As mentioned earlier, breakfast is everyone's hope for a new day. People need to eat breakfast every day. Breakfast is a necessity in life and has a high repurchase rate. Soy milk and fried dough sticks are basically made of flour, with low raw material costs and large profit margins.

Importantly, the biggest difference between traditional Chinese snacks and traditional Chinese food is that the production process of traditional snacks can be standardized, while Chinese food cannot be standardized. Therefore, each sub-category of Chinese snacks has the potential to become the next standardized McDonald's or KFC.

Soy milk and fried dough sticks seem to be a retail business of low profits but quick turnover that is supported by 5 or 10 yuan. However, due to its high investment-output ratio, user stickiness, high repurchase rate and standardization, once the business scale is formed, each sub-category will become a large-scale business.

1.3 Digitalization + New Technology Empowerment

If the advancement of urbanization has enabled Chinese restaurants to be branded, then new technologies have made it possible for Chinese restaurants to become chain stores.

We know that mobile roadside food trucks are mainly run by couples, and the main operating costs are the cost of raw materials and equipment (including food trucks, tableware, etc.). After the food truck store becomes a chain restaurant, its operating costs increase significantly.

The cost structure of a chain breakfast shop includes: franchise fee, store rental, decoration fees, water and electricity charges, labor costs, machine depreciation, raw material costs, transportation costs, takeaway fees, operating expenses, and other expenses.

If you want to open a physical chain breakfast restaurant, you will need to invest hundreds of thousands of yuan in the early stage, and it will take a long time to break even. If the cash flow is not enough during this period, the restaurant may go bankrupt before the income and expenditure are balanced. Therefore, the less the initial investment cost, the faster it will be able to break even. Reducing costs and increasing efficiency are the key issues that need to be solved when a restaurant is just starting out.

With the empowerment of digitalization and new technologies, breakfast shops can reduce costs and increase efficiency to the greatest extent, quickly verify ROI, and promote on a large scale, which has created huge market opportunities for them.

1.3.1 Digital empowerment

On the one hand, although traditional Chinese breakfast shops do not yet have store location data as strong as Luckin Coffee, they can still rely on digital empowerment when selecting store locations, and franchisees can choose relatively cost-effective stores based on their financial conditions.

On the other hand, self-service scanning code ordering, electronic payment (billing data can be queried), WeChat DingTalk IM tools, cashier recording user portraits, digital statistics of user data, cross-regional data networking, private domain accurate recommendation of products and preferential information, etc. are all important manifestations of digital empowerment of offline breakfast shops. The process is shown in the following figure:

1.3.2 Refrigeration Technology Upgrade

With the upgrading of frozen dough technology, dough can be frozen and stored well after mass production. Pastry chefs no longer need to get up early and stay up late to make dough by hand, and can also purchase dough from dough suppliers at a lower price, which greatly reduces the store's labor costs and production costs.

1.3.3 Artificial Intelligence Empowerment

With the development of artificial intelligence, it is no longer a new thing to see robots serving you in restaurants or hotels. The use of robots can greatly reduce the number of catering service personnel. In terms of service quality, the standardized service of robots can also effectively reduce the number of customer complaints caused by different service personnel qualities.

2. How does a 24-hour traditional Chinese snack restaurant make a profit?

Even if a project has a large market size and development prospects, if the business model does not work, investors will naturally be unwilling to invest, let alone operate 24 hours a day and burn money. What did the 24-hour traditional breakfast shop do right?

2.1 How do traditional Chinese snack chain stores that operate around the clock make a profit?

The general business model of chain restaurants consists of four business models: franchise fees + offline stores + membership recharge + online takeaway.

2.1.1 Franchise Fee

Because technologies such as frozen dough reduce costs and increase efficiency, it has attracted a large number of people who were not previously engaged in bread or noodle shops to join, lowering the entry threshold for franchisees.

The more franchise stores a brand has, the higher the total franchise revenue will be. In addition, breakfast cakes are a daily necessity, and users have high consumer stickiness, so franchisees will be more willing to renew their memberships. In short, with franchisees joining, the supply and demand relationship begins to operate, and the stronger the brand appeal, the more it will feed back to the store business, ultimately forming a closed loop of business leverage.

2.1.2 Offline stores

Offline store revenue is limited by the maximum number of users and average customer spending that the store can support. To achieve the highest turnover, digital means can be used to increase the turnover rate. At the same time, characteristic positioning can be used, such as "offline limited dishes", "catering + entertainment", "catering + parent-child" and other scene creation to increase the average customer spending of offline stores.

Of course, if you want to increase the overall net profit, pre-prepared meals can reduce cost output by at least 10%, which is the main reason why most restaurants now introduce pre-prepared meals.

2.1.3 Member Recharge

In order to lock in user consumption in advance, many stores use the means of "deposit 300 and get 50" or "10% off for members' recharge consumption" to increase sales.

When members deposit cash in advance, stores have more cash flow for various store investments and daily project operations.

2.1.4 Online food delivery

Generally, online food delivery is the second growth curve of store revenue. It is not like offline stores with strong local geographical restrictions. As long as there is a store near the user's area, they can place an order for food delivery on their mobile phone and have it delivered to their door. Users are willing to pay higher prices and food delivery services, and stores can get more incremental users.

2.1.5 The third growth curve

In addition, many Chinese restaurants are also exploring the third growth curve - group meals. The main users of group meals are mostly B-end users, such as travel agencies, enterprises, activities, etc. The user scale of group meals is large, and the pricing is lower than the normal selling price. Overall, group meals are an important business.

2.2 Is operating around the clock the optimal solution?

As far as I can remember, apart from McDonald's, KFC, and 24-hour convenience stores, most of the stores that initially claimed to be online 24 hours a day eventually either readjusted their business hours or closed down. Are 24-hour chain breakfast stores like Jiahe Soy Milk the best solution?

I think Chinese breakfast shops should also adopt the 24-hour operation model, mainly based on the following considerations:

2.2.1 Changes in young people’s eating habits to cultivate their minds all the time

I once read an introduction that the reason why Europeans and Americans are generally obese is because McDonald's fast-moving consumer goods were introduced, which attracted young people with their cheap and large portions. Hamburgers, fried chicken, and French fries are high in calories and can easily lead to obesity. After decades of changes in eating habits, McDonald's is like a regular meal for Europeans and Americans. Therefore, Europeans and Americans are generally fatter than Asians.

Similarly, even though most Chinese people still prefer to eat Chinese snacks, you will find that younger users are more willing to choose McDonald's for breakfast and lunch.

Just as McDonald's uses breakfast combos to counter Chinese breakfast, Chinese breakfast chains can also use a full-time operation strategy to counter McDonald's erosion of the catering market share and cultivate users' Chinese dietary mentality. 24-hour Chinese breakfast restaurants are a defensive strategy against fast-moving consumer goods such as McDonald's.

2.2.2 Work the latest shift, go to the wildest disco, and eat the most Chinese food

Nowadays, we rarely see young people who go to bed early and get up early. Many young people today are living a life of going to bed late and getting up early. They are under pressure from work, competing with each other, and are troubled by obesity and overwork... They work the latest shifts and live the most anxious lives. The more anxious you are, the more you want to eat. The more you eat, the easier it is to gain weight. The fatter you are, the less healthy you are.

Can a 24-hour Chinese breakfast shop be considered to provide young people with another "health-preserving" and stress-relieving eating option that is more suitable for the physique of "Chinese babies"?

2.2.3 Cost reduction and efficiency improvement to achieve full-time operation

Digital applications, robot introduction, and AIGC use (customer service response, user feedback response, etc.) have greatly saved the store's manpower. Even if it is open 24 hours a day, it does not require too many people on duty, and will not cause manpower redundancy. It is precisely because of the results achieved in reducing costs and increasing efficiency that Chinese breakfast shops have the confidence to operate all the time.

Liang Shiqiu said: "When I was a child, my breakfast was almost always a set of sesame seed buns and fried dough sticks, and I never got tired of eating them." Cheers, soy milk and fried dough sticks!

References:

• Soy milk and fried dough sticks category: gross profit margin 60%, net profit 40%
• Production capacity released to stabilize growth, group catering business takes off again
• Continue to optimize the single-store model, expand stores and group meals nationwide
• Baby Food: 2023 Semi-annual Report

Author: Kaka; WeChat public account: Kaka's Product Notes