Ruisheng’s primary goal is still to expand the market.
The first financial report after Ruixing’s listing shows that it is still expanding its territory.
On the evening of August 14, Ruixun Coffee (NASDAQ: LK) released the 2019 Q2 earnings report before the US stock market. From the core data, Ruisheng’s revenue was 909.1 million yuan, a year-on-year increase of 648.2%, in line with market expectations. From the ring, the revenue growth rate is still very fast, reaching 90%.
A mixed loss is the net loss: the total loss continues to expand, reaching 681.3 million yuan, twice the same period last year; this is a narrowing of losses compared to the growth rate of its revenue.
The emergence of new stores and new categories of goods is a core source of revenue growth. The net income of Q2 products was 870 million yuan, a surge of 689.4% over the same period last year. This is related to the new sales volume brought about by the opening of new stores and new products such as Xiaolu Tea. In addition, sales of light food and other products increased significantly, reaching 210 million yuan, accounting for 24% of product revenue.
From the data given in the financial statements, Ruixing’s product structure is improving and gradually diversifying. The categories other than coffee such as tea and light food are occupying more and more shares. Reinout Schakel, CFO and Chief Strategy Officer of Ruixing, also revealed at the earnings conference call that by the end of this year, Ruisheng’s coffee and other products will account for nearly five to five percent of revenue. Span>, the reason is that tea, light food and other products will become more and more popular.
The proportion and growth rate of Ruixing Coffee’s various products, drawing: The data comes from the prospectus and financial report
Founder and CEO Qian Zhiya also revealed that Q2 users grew more than expected. In the quarter, the number of trading customers of Ruixing Coffee reached 22.8 million, and the number of new trading users was 5.9 million, with an average monthly living of 6.2 million, an increase of 410.6%. He attributed user growth to continued market expansion and the introduction of new products. Another good news is that as the number and variety of products purchased by each user increases, the profit per order is gradually increasing.
The continuous increase in total revenue, improved product structure, and higher-than-expected user growth are good news, but the loss problem that has been plagued by Ruixing since the listing has not been resolved, and it shows a trend of continued expansion. .
The loss will still expand, and the profit will be reduced./h3>
For Ruixing, the first task is still to continuously expand market share. According to data from the third-party agency Euromonitor, even though it has grown into a head coffee brand, Ruisheng Coffee only accounts for only 2.1% of China’s current ground coffee market in 2018, while Starbucks’ share is more than 50%. In 2019, Ruixing’s market share has risen to 4%, but the gap is still not small. In this regard, Rui Xing said that to continue to win customers , will not sacrifice for profit growth. This means that Ruisheng will maintain a state of strategic losses for a long time.
In the staking area, Rui Xing’s solution is still a familiar formula: a large number of new stores, increased marketing costs, and subsidies for products and logistics services for consumers. These have further exacerbated their losses.
As of June 30 this year, the total number of stores in Ruixing Coffee was 2,963. In an interview with the media, Qian Zhiya revealed that Rui Xing’s goal of opening stores in 2019 was to increase 2,500 new stores and the total number of stores exceeded 4,500. Therefore, the number of new stores in the second half of the year must exceed 1,600, and the opening speed will be more than three times that of the first half of the year, and the cash pressure will be very large.
Rui Xing is still constantly challenging himself at the speed of opening a store. At the Ruifu Coffee 2019 Global Partner Conference, it is planned that by the end of 2021, Ruixing Coffee will have more than 10,000 stores, and Ruixing Coffee needs to open nearly 8,000 stores in more than two years, surpassing Starbucks.
The marketing expense rate that was originally effectively controlled also showed a significant rebound in this quarter. In a conference call, Reinout Schakel revealed that substantial marketing expenses in the quarter were not primarily used for purchase flows and subsidies, and the cost of the first customer experience for new customers actually fell. The bulk of the marketing expenses is advertising. In the offline channel of Focus Media, Rui Xing has invested 140 million yuan in advertising costs. This is related to the promotion of new products. The new brand Xiaolu Tea is still in the early stages of development and still needs a lot of market input. In 2019, Q3 Ruixing will continue to make more investment in brand marketing, and marketing expenses will rise.
Changes in marketing expense rates for Ruixing Coffee, as well as marketingCost-acceptance rate, cartography: data from prospectus and earnings report
The good news is that Ruisheng’s operating costs are being controlled by . One of the main reasons is that the continuous expansion of the store has caused the cash pressure, but also brought the scale effect to Ruixing. Q2The proportion of operating expenses in net revenues narrowed to 175.9% from 382.7% in the same period last year. The store operating loss was 55.8 million yuan, down 31.7% from 81.7 million yuan in the same period last year. Self-receiving stores that save on logistics costs also make the cost of getting customers and the cost per cup of coffee falling. The cost per cup of coffee dropped from 28 yuan to 11.1 yuan, and the cost of customers dropped from 55 yuan to 48 yuan.
Ruixing also proposed to achieve break-even at the store level in Q3.
Bet on the shop and Xiaolu tea, continue to compete with Starbucks
In order to save money, Rui Xing is still accelerating the transition from take-away mode to self-raising mode.
A new signal is that the Q2 take-away kitchen store has stagnated and only opened one. In the past year, there have been 147 Ruixing coffee takeaway kitchen shops closed. The number of cache stores Q2 has reached 578, accounting for 97% of new stores. Qian Zhiya has repeatedly said in public that the delivery will not be the main mode of Ruixing Coffee, and Ruixing Coffee hopes to open the store closer to the consumer. This is because the delivery is convenient but costly, and the cost per delivery is about 9 to 10 yuan. At present, Ruixing’s distribution subsidy is about 0.8 yuan per order. It is still reducing the expenditure by optimizing the supply chain and enhancing technical means.
The take-away channel was previously used as a temporary solution to help Ruixing to make up for the inability to lay outlets in certain areas. But now it has a more cost-effective solution: an automatic coffee vending machine. Although the automatic coffee vending machine is still in the testing stage and has not been introduced to the market, Rui Xing admits that in some unsuitable opening stores (such as small office buildings and gas stations), it is actually more suitable to put coffee machines, which will expand the outlets and The return on income is very helpful.
Rui Xun coffee accounts for different types of stores, drawing, data from prospectus and financial statements
Rui Xing’s continuous promotion of self-raising mode is also related to the strategic adjustment of competitors. Starbucks