Lu Zhengyao and Qian Zhiya open a coffee shop again: who pays for the old routine?

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Text / Wang Huiying

Source/Connection Insight (ID: lxinsight)

Lu Zhengyao began to resume his old business, and continued to open a coffee shop with his old subordinate Qian Zhiya.

On October 22, Lu Zhengyao and former Ruixing Coffee CEO Qian Zhiya announced in the Moments at the same time that the first store of COTTI COFFEE opened in Fuzhou IFC.

Although the first store has just been established, Lu Zhengyao does not hide his ambitions at all. “Coffee Dreamer Team Starts Another Journey”. Cudi Coffee also announced that it has become the sponsor of the Argentine National Football Team in China.

While Cudi Coffee is holding up its momentum, it can’t help but remind the outside world of Ruixing Coffee five years ago. At that time, high-profile publicity, crazy subsidies, and rapid financing allowed Luckin Coffee to hit the speed of landing in the capital market in two years.

Today, Cudi coffee wafts out a familiar taste. It only needs 9.9 yuan for coffee, and the high-profile campaign has just opened, which shows that Lu Zhengyao hopes to recreate Ruixing’s ambition.

However, it is not easy for Cudi Coffee to become the second “Luckin”.

You know, today’s coffee market is already very crowded, and it is no longer what Ruixing Coffee looked like when it entered the game. New and old players such as Starbucks, Tims, and Manner are “rolling in”, and the market competition has become fierce.

The old ways of subsidizing, building momentum, and touching porcelain have allowed Ruixing to open up the market during the controversy, and the early expansion was supported by capital.

But after the financial fraud of Ruixing, although Lu Zhengyao is good at operating capital, it is unknown whether it can attract enough financing later. It is difficult for Kudi Coffee to replicate the early Ruixing model.

At the same time, the coffee market has also changed, and product power is more important than low-price subsidies. Referring to the story of Ruixing Coffee’s recovery after a financial storm, creating explosive products is its survival password, and categories such as raw coconut latte and velvet latte helped Ruixing tide over the difficulties.

Whether Lu Zhengyao can produce a cup of good coffee is the key to whether he can break through in the future. In the past few years, Lu Zhengyao’s entrepreneurial road has not been smooth, and there was no splash in the previous fun little noodles and heroes. Today, with a familiar track, the same team, and a similar style of play, can Lu Zhengyao still tell an attractive story?

Copying “Luckin” is easier said than done?

After struggling in the pre-made dishes and noodle restaurant industries, Lu Zhengyao returned to his old business – the coffee track.

As soon as the brand was established, Lu Zhengyao told a story.

According to Kudi Coffee, its brand name comes from the Italian specialty biscuit BIscotti, which is often used as an accompaniment to coffee. From the very beginning, Cotti Coffee was destined to be not just another coffee shop, but a new pan-caffeinated lifestyle.

At present, only one store in Fuzhou International Financial Center is open on the Kudi Coffee applet, and more than 40 products have been launched, mainly including coffee, tea, smoothies, etc., which support self-pickup and take-out business.

There are eight main categories in the menu, including Argentina series, popular latte, classic coffee and oatmeal series. In addition, Ruixing Coffee’s main raw coconut latte, raw cheese latte, Dirty, etc. are among them. The only difference is that the “Sundae series” ice cream products are not available in Luckin.

In terms of price, all products are priced between 18 yuan and 32 yuan. Among coffee products, the price of American coffee is about 25 yuan, and the price of latte is about 30 yuan.

But the pricing is not the final selling price.

Just like the crazy subsidies of Luckin Coffee, Kudi Coffee is also attracting more consumers with low prices. In the applet, the words of low-cost benefits can be seen everywhere.

At present, Cudi Coffee has launched an activity of “adding welfare officers as friends and enjoying 12 optional drink coupons of 8 yuan”, which is the same marketing method as Ruixing’s regular weekly discount benefits. At the same time, during the trial operation period, each cup of coffee only costs 9.9 yuan.

In addition, in order to expand its popularity, Cudi Coffee, which has only one store, has become a sponsor of the Argentine football team. Obviously, Kudi Coffee is interested in the opportunity released by the Qatar World Cup. The combination of “simple meal + bar” will not only attract a large number of fans, but also help to create a “social space” for Cudi Coffee.

As early as the beginning of September, according to Tech Planet, Kudi Coffee is divided into two formats: mini-stores and standard stores. The mini-store area is less than 50 square meters, which is similar to the buy-and-go model of Ruixing Coffee; the standard store area is 80- 200 square meters, intended to create a social space.

Perhaps seeing the fierce competition in the coffee market, Kudi Coffee decided not to put eggs in the same basket. Kudi Coffee mentioned that in the future, coffee, roasting, light meals, and bars are all products operated by Kudi Coffee.

What cannot be ignored is that more categories mean higher research and development, and opening a large store also means higher operating costs. These are all issues that Kudi Coffee needs to consider in the future.

In fact, Lu Zhengyao and his team have high hopes for Kudi Coffee. Previously, according to Tech Planet, many employees who had worked in Shenzhou Car Rental, Ruixing Coffee, and Tongue Technology said that compared with the previous two ventures, Kudi Coffee may be Lu Zhengyao’s closest victory.

According to the official introduction of Kudi Coffee, Kudi Coffee was founded by Ms. Qian Zhiya, the founder of Ruixing Coffee, and the original core team of Ruixing Coffee, with a registered capital of 200 million US dollars. In addition, in the previous brand manual, Kudi Coffee indicated that its core management team came from companies such as Ruixing Coffee, Shenzhou Car Rental, and Shenzhou Special Car.

Still the same group of founding teams and the same set of marketing tactics, Kudi Coffee wants to replicate the second “Luckin Coffee”.

However, today is different from the past. The competition in the coffee market is far greater than in the past. Ruixing can rise to catch up with the good time of the domestic coffee brand vacuum. Now the domestic coffee market is crowded with newly emerging coffee brands. Kudi wants to rely on the old method again. Rising up is very difficult.

Will the capital market still pay for it?

After going around, Lu Zhengyao returned to the coffee industry again. Perhaps rather than worrying about whether consumers will pay, Lu Zhengyao is more worried about whether capital will pay.

Looking back at Lu Zhengyao’s entrepreneurial history, he has always been pursuing a key trump card – capital.

In 2007, Lu Zhengyao founded Shenzhou Car Rental. Under the operation of Lu Zhengyao, in less than half a year, Shenzhou Car Rental has become a leader in the domestic car rental industry. After receiving capital injection, in 2014, Shenzhou Car Rental was successfully listed on the Hong Kong Stock Exchange.

In 2017, Lu Zhengyao plunged into the coffee market and established Luckin Coffee. In just two years, Luckin has received five rounds of financing, with a cumulative amount of nearly $1.4 billion. Two years later, Luckin Coffee successfully listed in the United States, setting a new record for the fastest IPO in the world.

Early-stage rapid financing, cash-burning subsidies in exchange for rapid market expansion, and rapid listing, these two projects are inseparable from the support of capital. However, Luckin’s capital story has changed after Luckin’s caffeine data fraud was shorted.

At that time, less than a year after the listing, the well-known short-selling agency Muddy Waters released an 89-page short-selling report, exposing Ruixing Financial’s fabricated performance indicators. Ruixing encountered the biggest crisis in history, and Lu Zhengyao and the founding team also lost the trust of capital.

In July 2020, due to financial fraud, Lu Zhengyao was first removed from the director of Ruixing, and later lost control of Ruixing Coffee.

More importantly, the capital “iron triangle” formed by Lu Zhengyao, Liu Erhai, founder of Joy Capital, and Li Hui, founder of Dazheng Capital, also fell apart. The former comrade-in-arms became rivals, Dazheng Capital and Joy Capital abandoned Lu Zhengyao, and elected Guo Jinyi, the former director and acting CEO, as the new chairman of Ruixing, and led the team to deal with the mess.

At this time, Lu Zhengyao did not give up “tossing”. While launching infighting, looking for new entrepreneurial projects. He led his old subordinates to create “Fun Small Noodles” and “Bite of the Tongue”, and laid out a noodle restaurant and a pre-made dish track. However, the response of these two projects was not good, and there was not much support from investment institutions.

In the early stage, the subsidy and publicity of the high-level promotion did not exchange for the long-term survival of the project.

Last year, according to Tech Planet, Quxiaomian was looking for 100 million yuan in financing, with a valuation of about 1 billion yuan, but Quxiaomian never disclosed substantial progress, which may indicate that Lu Zhengyao has lost capital trust. In January this year, the first store of “Qu Xiao Nian” in Beijing was suspended, and the public account renamed “Qu Bayu” also showed suspension of service in August.

The same goes for the tongue-in-cheek hero on the other side. The hero who once claimed to have landed in 3,000 stores in five months did not achieve his goal, but instead went to the road of closing. This also means that two rounds of financing of 2.1 billion yuan are not enough to support the rapid expansion of Tongue Hero. Tianyan check shows that the latest financing of Tongue Hero was in March this year.

The two “tip of the tongue” entrepreneurship have become abandoned one after another. On the one hand, it is the lack of team strategy, and on the other hand, it is the neglect of capital. It is worth mentioning that the investor of Tongue Hero is Yingke Capital, and the previous shareholders of Shenzhou Car Rental and Ruixing Coffee did not participate.

Going back to the Cudi Coffee this time, the new project intends to dilute the relationship between the brand and Lu Zhengyao. In Kudi Coffee’s applet, Lu Zhengyao is almost invisible, only the founding team of Ruixing Coffee.

But both Wang Baiyin, the original legal person of Kudi Coffee, and Qian Zhiya, the current legal person, have a close relationship with Lu Zhengyao. Especially Qian Zhiya, who was Lu Zhengyao’s old subordinate in the Shenzhou Department and Ruixing Coffee before, has been speaking in a high-profile way on the way of Ruixing Coffee’s rise.

Today, Kudi Coffee wants to replicate the expansion myth of Luckin Coffee, but it lacks the most important part – capital support. This means that Lu Zhengyao’s team can only find money by themselves.

According to Tech Planet’s previous reports, Cudi did not rule out opening the franchise model. In its promotional materials, it also mentioned that it would help franchisees become coffee dreamers. But today’s Cudi Coffee may not be enough to gain the trust of franchisees. Everything depends on whether Cudi Coffee can break through.

Product is the key to breakthrough

Perhaps no one could have imagined that Ruixing Coffee lived well after the storm.

According to the financial report released by Ruixing earlier, in the second quarter of this year, Ruixing’s revenue was 3.299 billion yuan, a year-on-year increase of 72.4%. In terms of profitability, Ruixing had a net loss of 115 million yuan in the same period last year, while in the second quarter of this year, after stripping off equity incentive fees, reserves and other factors, its net profit was 268 million yuan.

In fact, such achievements are inseparable from Ruixing’s subsequent development strategy.

After turning somersaults in the capital market, Ruixing refocused on the core coffee business and realized the importance of products. The most concerned is Ruixing’s raw coconut latte.

In April last year, Ruixing launched the raw coconut latte. A year later, Ruixing officially announced that the product sold 100 million cups and became Ruixing’s best-selling single product. Consumer investor Huang Hai once said in May this year that the popular single product of raw coconut latte is the key to Luckin’s “escape from death”, which directly promotes the sales of Luckin stores from 3,000 cups per month to 5,000 cups per month. , helped Ruixing cross the profit line.

Previously, specialty coffees like Manner and M Stand were also focusing on the product itself. For example, Manner’s osmanthus series and M Stand’s edible cup-shaped “oatmeal cookie latte” are all popular products.

These phenomena are proving to the market that if the initial expansion can rely on subsidies, then if you want to stand firm in the long term, the product is the core.

Judging from the current Kudi coffee products, its innovation is lackluster. The popular latte series is still the raw coconut latte, raw cheese latte, etc. that replicate Ruixing’s representative products. The snow top latte and brown sugar bobo sundae of the sundae series are very similar to KFC, and the smoothie series is more like Ruixing. A replica of Rena Ice.

The products of Kudi Coffee seem to be all “used”, as if they are following the old road of Ruixing in the early days – only low prices and no explosive products.

Looking back at Ruixing, the orange gold coffee and black gold coffee drinks that were initially launched did not stir up too much water. When Lu Zhengyao was in charge, there were only marketing memory points, and no popular products came out of the circle. It is worth mentioning that when Ruixing took a fancy to the milk tea market, Ruixing also launched “Xiaolu Tea” in a high-profile manner, but it collided with the Hi Tea and Lele tea categories, and eventually became a companion product.

Insufficient product power, low price to make up. At that time, Ruixing had been issuing large coupons in a way of burning money to maintain passenger flow. It was not until the appearance of the raw coconut latte that Ruixing was a real hit, but at this time Ruixing was no longer at the helm of Lu Zhengyao.

In fact, this also proves from the side that Lu Zhengyao, who is good at playing with capital, is not good at developing products.

Taking Qu Xiao Noodles as an example, Lu Zhengyao tried to cut into the catering market with noodles, but there are countless brands of noodle restaurants. Within three months of opening, Qu Xiao Noodles was renamed “Qu Bayu”, adding hot pot pot, maocai, and fast food. and other categories. The end result is that the expansion of the category still makes the fun small noodles tepid, and there is no single product, which has become a hot-selling product that attracts attention.

On the other hand, the 9.9 yuan sweet and sour pork tenderloin and pickled cabbage fish featured by Tongue Hero are also almost the same as the pre-made vegetable brands on the market, and it is naturally difficult to differentiate in the market.

In other words, product strength is the weakness of Lu Zhengyao and his team.

The products of Kudi Coffee are not just selling coffee, but the diversified development of coffee + western food + bar. These sub-categories have fierce competition. If there are not enough products with memory points, it will be difficult for Kudi Coffee to break through.

Today, only Lu Zhengyao himself can pay for Cudi Coffee. The coffee market is changing with each passing day, new players are emerging one after another, and capital and consumers are becoming more and more critical. Lu Zhengyao’s “product class” must be made up.

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