Ruixing Coffee’s business model
Editor’s note: This article comes from WeChat public account “Liu Run” (ID: runliu-pub) , author: LIU Run.
Before the market opened today, Lucky Coffee announced that the board of directors has established a special committee to oversee the financial investigation of 2019.
The preliminary investigation revealed that Ruixing Coffee may have a false transaction of RMB 2.2 billion. Affected by this news, Ruixing’s stock price fell more than 80% before the market.
We don’t know more details at this time, and don’t dare to make assertions.
This article is an analysis of Ruixing’s business model.
Perhaps it helps to know what kind of company this is when you are short, or long, or even joke about Ruixing.
I first tried Ruixing Coffee last year, when I often saw its advertisement in the elevator, and said that the first cup was free and guaranteed to be delivered within 30 minutes. The purchase cost of raw beans was 20% more expensive than Starbucks- 30%, hired the world’s top baristas to make it, the price is cheaper than Starbucks, buy two get one free, buy five get five free, give friends free coffee, etc …
Overwhelming publicity and crazy subsidies have attracted the attention of coffee lovers. This coffee brand, which was just a few years old, now has more than 2,500 directly-operated stores across the country.
In 2018, Ruixing Coffee’s total revenue was 763 million, and its sales were about 90 million cups. It looks like the data is very good, but it still has serious losses-it lost about 1.559 billion yuan for the whole year.
Today, I want to talk to you about the business model of Ruixing Coffee in my eyes, its competitiveness and challenges.
— 1 —
Ruixing Coffee has three different types of stores, Type A, Type B and Type C.
A-type shop is like a traditional coffee shop like Starbucks. It caters to people who are relaxed and relaxed. It is located in a business district or community. The area is relatively large, allowing customers to slowly taste coffee in the shop.
The B-type shop is mainly for office workers. It is located on the first floor of the office building and is much smaller than the A-type shop. There are only a few tables. It is mainly for you to buy a cup of coffee and bring it to work.
The C-type store has almost no facade. It is mainly used for take-away business. Let the courier take the coffee and deliver it to the customer’s home.
The three stores of Rising Coffee, especially the C-type store, in my opinion, determine its future and true core competitiveness.
Why?
Because of coffee shops like Ruixing and Starbucks, the cost of raw materials for coffee is actually not high. It may cost only RMB 34 for a cup of coffee.
Its main cost comes from operating costs, including shop rents, staff salaries, and so on.
Ruixing has the opportunity to greatly reduce the cost of this part of the business because it is mainly engaged in takeaway business.
Takeaway business increases transportation costs. If the reduced operating costs can be greater than the increased transportation costs, then this is a more efficient business model.
Once you run through, there is a chance to eat away a large part of Starbucks’ market.
▲ I also clearly felt Rui Xing’s huge ambitions
However, this model is very challenging.
— 2 ——
As an avid coffee lover, my favorite drink is latte. Latte should be delicious. One of the factors is to use a professional coffee machine to extract the fat in coffee beans with high pressure so that it can be distributed. Gives a strong aroma.
The second factor is to make dense milk foam so that it has a dense texture.
I often drink Starbucks latte, but most of them are bought in the store, rarely called takeaway, because the coffee delivered is usually not as good as bought directly in the store.
Why? Because coffee is afraid of shaking. Dangling during transportation, the milk froth is gone, plus the time required for transportation, the temperature of the coffee will change and the taste will be affected.
So the quality of takeaway coffee is a certain challenge, which may be why Starbucks has n’t made takeaway by itself for a long time.
Later, Starbucks also started to take delivery in order to meet Rui Xing ’s challenge, but you will find that its delivery service still does not include cappuccino and other coffee with a lot of milk foam.
Takeaway can lose a lot of taste, which is the first natural challenge for takeaway coffee.
— 3 —
The second challenge is: coffee and coffee takeaway may be two different things.
Once Ruixing started the takeaway coffee business, its real competitors are not just Starbucks.
Its true competitors are all casual drinks that can be delivered.
Why?
A person can consume a certain amount of liquid a day. You wo n’t drink milk tea when you drink coffee, and you wo n’t drink cola if you drink milk tea.
Grinded coffee, you can basically only drink it in the store, take longer to take away, more or less will affect the taste of the coffee.
And once you choose to order takeaway, you don’t necessarily have to order coffee, you can also choose milk tea, juice, drinks and so on.
So, the real competitors of Ruixing Coffee are all casual drinks including Starbucks, Hi Tea, Cola, Yogurt and so on.
It is not a market that is monopolized by the coffee category, but a market that is monopolized by all other leisure drinks.
