60 cents a cup, it's selling like crazy on Douyin

1. Who is paying for instant black coffee?

Coffee consumption belongs to the "three highs" track of high frequency, high repurchase rate and high growth, which is very promising. iMedia Research even predicts that the scale of China's coffee market will exceed one trillion yuan in 2025. According to Dongxing Securities' calculations, the growth rate of China's coffee market has remained above 20% in the past five years. If we refer to the development of coffee consumption in the Japanese market, the scale of China's coffee market is expected to exceed 5 trillion yuan in 30 years.

Currently in the domestic retail market, coffee products are mainly divided into instant coffee (pre-packaged coffee), ready-to-drink coffee and freshly ground coffee. According to iResearch Consulting, instant coffee still has the widest user group, accounting for more than 52.4% of the market in 2020.

Image source: iResearch

If we use one sentence to explain the rapid growth of black coffee this year, Kas believes that the core lies in "coffee becoming a daily routine." Compared with freshly ground coffee or more expensive coffee liquid, an obvious advantage of instant coffee is that it is cheap.

At the same time, many young office workers drink coffee mainly for "refreshing". The original, pure and rich characteristics of black coffee meet the needs of new consumer groups. More and more workers regard coffee as "life-saving water", and the consumption demand for black coffee continues to increase. It has become a daily drink and has also provided a broad living soil for instant coffee, which focuses on convenience and speed. According to data from new media platforms, young women are the main users of black coffee.

The audience profile of Douyin's "Black Coffee" topic video is: 82.35% female, 17.65% male, 40.92% aged 18-23, 32.73% aged 24-30. Young people love black coffee, which has also led to innovations in packaging and functionality. Now, refreshing and convenient carrying are no longer the most painful "pain points", but health and appearance have become the key points to impress young people.

According to a survey by The Paper, consumers' preferences for instant coffee are ranked in the order of appearance, health, price, and taste . It is worth noting that in addition to the demand for cheapness and refreshing, more people buy instant black coffee for weight loss, fat reduction, swelling reduction, and body slimming.

According to data from the Magic Mirror Intelligence Market, in the Tmall platform instant coffee product review area, the most frequently used word related to efficacy is not refreshing, but weight loss. When drinking instant coffee, exercise is more frequently mentioned than going to work.

The 2023 China Urban Coffee Development Report shows that in the five major cities of Beijing, Shanghai, Guangzhou and Shenzhen, fat loss, nutrition and accompanying meals have become the main consumption motivations. At the same time, the "Main Reasons for Chinese Coffee Consumers to Drink Coffee" also shows that 60% of consumers choose coffee mainly for relaxation; 49% of consumers choose coffee because they like the aroma of coffee; and 58% of consumers choose coffee because of its refreshing effect.

Source: 2023 China Urban Coffee Development Report

Looking back at the history of coffee development, coffee was initially a functional product for refreshing the mind. When it changed towards the direction of spiritual pleasure and taste pursuit, it was precisely the proof of the increasing perfection of this category.

2. Coffee, which costs less than one yuan per unit, is selling like hot cakes on Douyin

In the field of instant coffee, Douyin has become one of the platforms that brands are competing to establish themselves on.

Data from Jiuqian’s middle platform shows that the GMV of Douyin’s e-commerce “instant coffee” category in 2022 was about 7.5 times that of 2021. In the first two months of 2023, the GMV of Douyin’s instant coffee category has exceeded 1/3 of Tmall, a year-on-year increase of 69%.

Under competition, many instant coffee brands have launched a " price war" - 9.9 yuan can not only buy 20 sticks of black coffee, but also a "Glacier Cup" for free. In the coffee category of Douyin Mall, the top-selling products are often not those brands that have already made a name for themselves on traditional e-commerce platforms. For example, the instant coffee of the Academy of Agricultural Sciences costs only 14.9 yuan for 51 packs; the instant black coffee of the 10-pack of Unicorn comes with sugar and a cup, and the price after the coupon is less than 5 yuan. In total, the price of a single cup of these brands' products is less than 1 yuan.

Douyin "Black Coffee" product search results TOP6

How did they make their products popular on Douyin? Besides low prices, what other strategies did they use?

Kas noticed that the keywords in the popular videos promoting instant black coffee are quite similar, all pointing to "body anxiety" and "self-discipline", such as post-New Year body remedy, artifact for quitting binge eating, body management period... as well as "awakening the dream of weighing 90 pounds", "a course of treatment for three months", and "self-discipline check-in for 20 days".

If the three words "black coffee" in this type of video are replaced with XX meal replacements and XX weight loss pills that were popular many years ago, there is no contradiction. This reminds us of the white kidney beans that were popular last year. From February 13 to March 13, 2022, the estimated GMV of a single product of "Renhe White Kidney Bean Tablet Candy" reached 20 million, and the price was low, 65 yuan for 60 tablets. (Click here to view: 2 million boxes sold in two live broadcasts, who is paying for weight loss products) Similarly, this year's black coffee is coming in full force, and it has also benefited from the "demand for weight loss".

For example, the brand "Bao Muscle Unicorn", which has made a big splash with black coffee products in the past two years, started out as a light food brand. Its target audience is people who are into fitness and weight loss. In addition to black coffee, its main products include oatmeal cereal bars, whole wheat European bread, protein bars, chicken breast jerky, etc., which means that instant black coffee and other foods form a "closed loop" of exercise, fitness and fat loss. In the live broadcast room, the brand sells black coffee with the main slogans of "Teach you how to get rid of plus-size women's clothing without exercise" and "The same style as Liu Mouhong", and recommends protein bars with the help of "high-end sugar substitutes, both pregnant women and children can eat" and "2,000 Douyin influencers are selling them".

@暴肌unicorn official flagship store

In addition to bundling food for sales, the leading brands in the black coffee category are using a two-pronged approach of self-broadcasting + distribution to drive sales growth.

Take Four Cats as an example. This is a coffee brand founded in Yunnan. Its advantage is that it is close to the coffee origin, owns coffee plantations and self-built factories, and can better control costs.

@FourCats Official Flagship Store

Screenshot of Douyin video Four Cats was founded in 2014, and it was not until 2021 that it upgraded its brand. The name was changed from the original Four Cats to "Four Cats", and the four Yunnan Tile Cats (Yunnan's unique guardian beasts, an intangible cultural heritage) were used as the brand image.

At the end of 2021, Sizhimao started operating the official Douyin account and started live streaming more than three months later. The live streaming room adopted a daily broadcast strategy from the beginning, and in April 2022, the live streaming rhythm was set to "never set" (24-hour live streaming).

At present, Four Cats focuses on the advantage of "cost-effectiveness". Its main product "High Mountain Coffee Blue Mountain Espresso" is priced at 69.9 yuan, and users can receive 110 cups of coffee and a coffee cup. At the brand self-broadcasting level, Four Cats has set up a matrix live broadcast room. Some are positioned as factory-type accounts, focusing on displaying factory content, and the target users are young people in small towns; some are positioned as promotional accounts, and some are positioned as theme-type accounts. Different accounts will change the theme of the live broadcast room according to different marketing nodes.

@四只猫TikTok account matrix

In addition, 4Mao has also set up a large number of live broadcast rooms for celebrities. Top anchors such as Luo Yonghao, Crazy Little Yangge, and Jia Nailiang have all sold the brand's products. According to an exclusive interview with Douyin TMT, Douyin currently contributes nearly half of 4Mao's sales, making it its most important marketing position. 4Mao's overall sales in 2022 will be 400 million, and the target for 2023 is 700 million.

3. The end of the price war

Despite the strong momentum, instant black coffee still has many problems to solve in order to break through the restrictions of categories and scenarios. Yu Yue, head of consumer investment at Huachuang Capital, once said that for an industry like coffee that has no absolute threshold, competition is becoming increasingly fierce. "Under the current model of e-commerce, it has quickly entered a red ocean competition, which has many challenges in managing product strength, channel construction capabilities, marketing promotion, and even pricing."

In the red ocean, most brands are still competing on price. In the instant black coffee segment, coffee giants (such as Nestle and Luckin Coffee) have already responded and are increasing their layout efforts. They still have an overwhelming advantage over new brands in terms of product research and development, supply chain capabilities and brand influence.

"New power" players do business with a small number of people, lock in a segment of the population and category, and can quickly enter the market, but the deeper this "cognitive monopoly" is established, the more difficult it is to develop across categories, and what is tested is the brand's cross-category management capabilities. The core channels of new brands are concentrated in short videos, live e-commerce and shelf e-commerce platforms, while the advantage channels of traditional giants lie in the coverage of supermarket retail channels.

At the same time, there are more and more players across borders, categories and even industries, and user needs are complex and changeable. If "new force" brands want to develop in the long term, they still have to face attacks from strong competitors.

In order to continue to tap the potential of the market and form differentiated competitive barriers, new brands will eventually enter into an omni-channel and omni-region layout, which involves agents, distributors and other intermediate links, and will inevitably face problems such as organizational capacity building and resource integration. This is also a difficult road to take. Previously, some analysts pointed out that the biggest pain point facing instant black coffee is the lack of grade , because the grade determines the price.

If the quality is not good enough and the price is low, the brand will lose its profitability. It is only a matter of time before franchisees leave. When a large number of franchisees leave, the brand will lose its foundation. The end of the price war is sustainable pricing, not self-imposed restrictions.

In addition to low-price competition, instant coffee may develop towards high-end, personalized, customized, and large-scale development. Brands with innovation and upgrading capabilities and national layout capabilities will have the last laugh.