Major coffee brands have entered the Douyin group buying market

This article introduces the new sales channels of major coffee brands, objectively describes the direct profits obtained by these brands, and deeply analyzes the value brought by the new sales channels.

Low-priced coffee has captured the hearts of “heavy coffee lovers”.

On social platforms such as Xiaohongshu and Douyin, coffee lovers have transformed into coffee bargain parties, sharing various tutorials on how to drink low-priced coffee. "Get bargains at Kudi Coffee", "Who wouldn't go get the 0.1 yuan Luckin Coffee", "Manner Coffee's new bargains" are common... For office workers who use coffee as a daily "life-saving drink", low-priced coffee can finally allow them to achieve coffee freedom and be "full of energy" every day.

However, nowadays, "low price" is no longer a temporary marketing strategy for some coffee brands, but has become the new normal for the survival of some coffee brands. According to the data from the catering data query platform Zhaimen Canyan, the average customer unit price of Kudi Coffee is 11.26 yuan, while the products in Douyin group purchases are generally lower than the average customer unit price, around 8.8 yuan and 9.9 yuan, with a discount of 28%. The average customer unit price of Lucky Coffee itself is as low as 8.3 yuan, and its Douyin group purchase still has three coffee products priced at 4.49 yuan and two latte products priced at less than 7 yuan.

Some products of Nova Coffee are also sold at discounts ranging from 42% to 76% in Douyin group buying. Huwen Coffee, which has an average price of 9.8 yuan, has launched a 11.9 yuan double set meal in Douyin group buying.

Luckin Coffee’s relevant person in charge once publicly stated that the high price in the coffee market has hindered the frequency of coffee consumption, and the lack of convenience has suppressed the desire to consume. But what exactly supports the large number of coffee brands that have become "price killers"? In the business world, no one is doing charity. Especially today. Are the rules of the game of early capital expansion, low-price customer acquisition, and later price increases through scale advantages, or product combinations selling high-gross-profit products still applicable? Or is there another mysterious force involved?

1. Get millions of orders from Douyin local life

In just two weeks, Kudi Coffee's 8.8 yuan free-drink coupons for new customers were sold 2 million times on Douyin group buying. And now, the number of orders for Kudi's 8.8 yuan coffee in Douyin's local life group buying is still rising rapidly.

As of March 1, 3.139 million coupons for 8.8 yuan coffee group purchases had been sold at Kudi, 92,000 coupons for 9.9 yuan "choose 1 of 3" group purchases had been sold, and 38,000 and 31,000 coupons for 11.9 yuan respectively. Half a month later, another 1.668 million coupons were sold in the updated link for new Kudi customers to buy 8.8 yuan coffee group purchases.

On March 14, the number of coupon purchases for three products of Lucky Coffee exceeded 100,000, namely the 6.5 yuan iced latte with 168,000 orders sold, the 8.88 yuan coconut latte with 130,000 orders sold, and the 6.9 yuan cheese yogurt latte with 123,000 orders sold.

Norva Coffee, which is positioned as a high-cost-performance store, is also operating Douyin group buying. In its product list, it can be seen that 128,000 orders of the "popular coffee 3 out of 1" priced at 11.9 yuan after the discount have been sold, and 116,000 coupons of the discounted product "semi-ripe cheese latte series 2 out of 1" have been sold. It is worth noting that the explosive orders of these group buying are not just so-called "impulse purchases", but have actually brought business to the stores. "If you participate in Douyin group buying activities, the average number of orders for each store will increase by 10% to 20%.

In other words, the average number of orders will increase by 100 to 200 per day. "This is what the regional development manager of Kudi Coffee said. According to the relevant person in charge of Lucky Coffee, if there is no special event, online channels such as takeaway, Douyin, and Kuaishou can account for 30% of the brand's single-store daily sales.

The head of a low-priced coffee brand told Yibang Power that currently, the brand's sales from Douyin and Kuaishou are around 10,000 cups per day, and this number is still growing. "A Douyin group purchase coupon sold more than 100,000 orders in 3 months, and the redemption rate is nearly 50%. In fact, we have many products with cumulative sales of more than 100,000, but they are no longer available after the product activity ended."

He revealed that the orders of stores that have launched Douyin takeaway are still increasing, and the average daily cup volume of some stores has more than doubled after Douyin promotion. Ebrun Power observed that affordable coffee brands such as Jue Ke Coffee and Sanlifang Coffee have also connected to Douyin group buying.

After tasting the sweetness of Douyin group buying, brands such as Kudi Coffee, Nova Coffee, and Lucky Coffee have already opened Kuaishou group buying services. However, perhaps because Kuaishou's group buying service was only launched in late February, the current sales of coupons are still in the thousands.

2. The myth of opening a store: Selling 800 cups a day, can you make back your investment in 2 months?

"At present, group buying business can bring steady daily sales growth at the lowest cost." said a coffee brand operation manager. A person close to Kudi Coffee told Ebrun that the daily sales volume is crucial for coffee stores and directly determines the length of the store's investment recovery period.

Take the following figure as an example. This is a single-store profit calculation model provided by a coffee brand to franchisees. For example, if store type 1 sells 200 cups a day, the investment recovery period is about 3.7 months; when the daily sales are 400 cups, the investment recovery period is shortened to 1.8 months. For store type 2, the investment recovery period is about 4 months after the daily sales reach 400 cups; if 800 cups are sold every day, the period is about 1.9 months.

An industry insider disassembled the cost structure of a low-priced coffee brand per cup to Yibang Power. According to reports, of the 9.55 yuan cost of a cup of coffee, raw materials accounted for 5.40 yuan, and rent, labor, depreciation and water and electricity costs were 1.25 yuan, 2.00 yuan, 0.60 yuan and 0.30 yuan respectively. The above-mentioned person said that there is little room for cost reduction in this structure. Then, based on the low selling price, merchants need to find more coffee consumers to increase sales, thereby helping stores shorten the payback time.

According to a Kudi Coffee development manager, a store in Beijing has a poor geographical location. If it only relies on offline customer traffic, it can only sell about 100 cups a day. After connecting to the live broadcast group buying and food delivery platform, the daily sales can reach 600 cups. "Group buying and food delivery allow this store to have good sales performance even if the location is not good." But he also emphasized that for new franchisees, the headquarters will not recommend choosing a location similar to the above stores, "It still depends on the coffee crowd near the store."

In the location selection principles of Kudi Coffee stores, the first is the flow of people, and the second is the rent. Previously, the founder of a chain coffee brand told Yibang Power that in order to increase brand awareness, gain users, and reduce costs, the brand chose to focus more on takeaways in the early days of its establishment. "Takeaways can magnify the advantages of the store's location and expand the store's service scope exponentially."

The founder said that with 10 stores, a certain district in a first-tier city can be covered. It is reported that in May last year, 40% of the 600 cups of daily sales of its single store came from food delivery platforms and Douyin platforms.

The new channels have also affected the adjustment of brand advertising strategies after bringing in incremental traffic. "The cost of advertising is indeed tilting towards Douyin and Kuaishou platforms. On Dianping, we rely on store ratings and rankings to obtain traffic; on Douyin and Kuaishou, we need to rely more on advertising." The person in charge of the above-mentioned affordable coffee brand revealed, "From the perspective of single-store costs, the single-store model is getting better, single-store revenue is increasing and may increase by a large proportion, and the cost is also relatively limited after being spread across stores."

3. The new three axes of takeaway, live broadcast and private domain coffee sales

"It's basically incremental, because the local life on the live streaming platform brings mostly unplanned consumption." The person in charge of operations of a tea brand said that since the brand was founded, each store has been using the local life on the live streaming platform to attract traffic, and the recommendation data based on positioning will be very accurate, "orders are increasing very quickly."

The person in charge of Douyin of a coffee brand said that the core purpose of launching the group-buying business is to influence users' recognition of products and brands by providing them with a new consumption scenario and experience, and thus naturally lead to repurchase behavior.

"What we want is not just sales volume, but more importantly, to consolidate these users into the brand's private domain." He added that while the team is actively planning local life traffic, it will also consider how to repeatedly influence user conversions through the optimization of repeat purchase behavior, awakening new products, and long-term brand recognition under the overall user system.

It has been observed that some brands have consciously connected local life orders with private domains. For example, Kudi Coffee’s Douyin group purchase coupons are automatically saved to the Kudi Coffee App or brand mini program after purchase. Users do not need to go to the store to redeem them, and can purchase them online. Such operations directly deposit "unplanned consumer groups" into the brand's private domain.

Another coffee brand e-commerce manager pointed out that compared with food delivery platforms, brands now pay more attention to the impact that platforms such as Douyin and Kuaishou have on their brands. "Food delivery platforms have stronger functional attributes, helping consumers quickly find the categories they need and the brands they like, and making quick decisions. Douyin and Kuaishou have stronger content and social attributes, and are affected by users' usage time and reading habits, so they have a more diverse impact on brands. For example, they can more comprehensively shape the brand image and improve favorability."

The above-mentioned person in charge revealed that the brand would very much welcome service providers with experience in operating Douyin and Kuaishou to join and become partners of the brand. "In the past, whether a store was popular or not was determined when the location was chosen; now, Douyin, Kuaishou, Xiaohongshu and other platforms have become online stores in the hands of users, and they can be used directly to influence consumer behavior."

A brand that is planning to expand its offline store business said, "All major platforms are racing in local life, and we must seize the dividends. Now when you search for a coffee brand name on Douyin, the first result will show you preferential group purchase information of nearby stores."

The race among major platforms in the local life sector is providing fertile ground for the surge in low-priced coffee. In December 2022, Douyin's local life service officially announced that it was testing a group purchase delivery project. Merchants' orders in Douyin's live broadcast room or mini program can be delivered by self-delivery, Dada, SF Express, or third parties such as Flash Express.

Last month, Kuaishou Local Life also began to build its own transaction chain and tested group buying business in cities such as Beijing, Shanghai, Hangzhou, and Chengdu. On the other hand, Ele.me merged its in-store business with AutoNavi and began to integrate different local life scenarios to provide consumers with more accurate services.

Author: Zheng Ya

Source: WeChat public account "Ebrun Power (ID: iebrun)"