Lu Zhengyao and Ruixing meet on a narrow road

Source: Hedgehog Commune

Text | Zhang Zhan

Editor | Li Luxo

After going around, Lu Zhengyao returned to the coffee track.

After leaving Ruixing, Lu Zhengyao has made both noodle shops and pre-made dishes, but they have not caused too much trouble like Ruixing. On October 22, 2022, Lu Zhengyao and former Ruixing Coffee CEO Qian Zhiya announced in the circle of friends that the first store of the new entrepreneurial project “Cotti Coffee” will be located in Fuzhou IFC.

According to Kudi Coffee official, Kudi is headquartered in Beijing, its operation center is located in Tianjin, and it has product research and development bases in Tianjin, Changsha, Chengdu, Xiamen and Shanghai. Tianyancha shows that Qian Zhiya is currently the legal representative of Kudi Coffee (Tianjin) Co., Ltd. and Kudi Coffee (Beijing) Co., Ltd.

Coincidentally, a week later, Ruixing ushered in his fifth birthday. Five years ago, on October 28, the first store of Luckin Coffee started its trial operation in Galaxy SOHO – a legendary business story with ups and downs, and thus began. Luckin has set foot on the top of the mountain and experienced lows, and now it has become one of the largest chain coffee brands in China.

Many signs are proving Ruixing’s rise again:

First, in terms of financial indicators, Luckin has achieved stable growth and comprehensive profitability. According to the financial report for the second quarter of 2022, Ruixing’s total net income increased by 72.4% in the quarter, the same-store sales growth rate of self-operated stores reached 41.2%, and the profit margin at the store level of self-operated stores reached 30.6%.

Second, in terms of product power, Ruixing can continue to create “phenomenal” explosive products. Take the recent raw cheese latte co-branded by Luckin and the well-known IP “JoJo’s Bizarre Adventure: Sea of ​​Stone” as an example. The sales of this product reached 1.31 million cups on the first day of its launch and 6.59 million cups in the first week. It is rare in the entire coffee and tea industry.

Third, in terms of brand power, Luckin has won the support of a large number of consumers. In the “YiMagazine” “Golden Signboard” company brand preference survey, Luckin Coffee’s brand preference ranks first in the chain coffee category.

In this way, although Lu Zhengyao has made indelible contributions to Ruixing’s initial rise, Ruixing who lost him seems to be developing better and better, or more stable.

So, what kind of “new coffee species” did Lu Zhengyao create? Thirty years of Hedong and thirty years of Hexi, what confidence does Kudi Coffee have to compete with Ruixing Coffee?

Three Highlights of Cudi Coffee

It is not so much a “highlight” as it is a place worthy of our attention.

First, there are two store types of Cudi coffee – one is a regular coffee shop, while the other is closer to a light dining complex.

According to the Cudi Coffee brand manual, in the early planning, Cudi Coffee has two types of stores: standard stores with an area of ​​80-200 square meters, and mini stores with an area of ​​less than 50 square meters.

Among them, the mini shop is not much different from the ordinary coffee shop, while the standard shop breaks our imagination of the regular coffee shop – this type of shop focuses on full-time catering services, such as providing users with coffee and Italian speciality Biscotti in the morning, Meals are served at noon, healthy snacks are available in the afternoon, and alcoholic beverages are available in the evening.

That is to say, the standard store of Cudi Coffee is closer to a casual restaurant in terms of product service, rather than just selling coffee. In Cudi’s own words: “From the very beginning, it was destined not to be just another coffee shop, but to represent a pan-caffeinated lifestyle, an extension and extension of the concept of coffee.”

Second, what Kudi Coffee wants to do is not a C-end business, but a B-end business.

According to the promotional materials, the corporate vision of Kudi Coffee is: “Building a business support platform based on Internet technology, integrating advantageous resources of brands, products, supply chain and operation services, helping associates to easily become coffee dreamers, and making the world easy to open. coffee shop.”

Extracting keywords from it, what Cudi Coffee wants to do is actually “build a platform” and “integrate resources”, and finally help the associates to open the coffee shop, that is, adopt the franchise model, and collect the franchise fee and raw material cost from the associates – recently Yang Guofu Malatang and Mi Xue Bingcheng, who are seeking to go public, have made a lot of money through this model.

Third, relying on the resources accumulated by the team earlier, Cudi Coffee was superimposed with “Buff” as soon as it was born.

After the first store was launched, Lu Zhengyao announced in the circle of friends that Cudi Coffee has officially become the sponsor of the Argentine national football team in China in the Qatar World Cup opening on November 21, 2022 – for a company that only opened one store. For a new brand, this is almost unimaginable, but this is the entrepreneurial project of the former Ruixing founding team, and the industry foundation cannot be underestimated.

But the problem is that the identity of the “former Ruixing people” of the senior management team has not only brought huge attention to Kudi, but also caused more pressure, and even the trust problems caused by the taint of past careers may give him financing. The road brought many difficulties.

Four questions to ask Lu Zhengyao

From the design of the business model of Cudi Coffee, it is not difficult to see that Lu Zhengyao hopes to give this project a certain degree of differentiation, so as to win a place in the current highly competitive coffee track. However, judging from the current industry sentiment, the surprise brought by Kudi Coffee is not enough, but it has caused a lot of doubts.

Here, we also want to ask Lu Zhengyao four questions about Kudi.

First, who is the standard store of “coffee + catering” trying to compete with? Are light meals, wine and baking all the rage?

Any catering retail must talk about consumption scenarios and target users. For example, Luckin’s strategy is to target college students and young people just working, so its stores are mainly opened in office buildings and schools, creating consumption convenience for target consumers. At the same time, during the second quarter financial report released by Ruixing in 2022, Guo Jinyi once said at the performance exchange meeting that the company focused and focused on the coffee track more clearly. In other words, Ruixing thought very clearly that it wanted to do the coffee business for young people.

However, when Cudi Coffee designed the store type and products, it added wine, light meals and baked snacks. Although it enriched the product selection, it “stuffed” too many things into a coffee shop and lost its focus. Of course, what we need to admit is that the catering complex format is the general trend – Xiabuxiabu has tea rice tea, KFC has Grandpa Zizai tea, and Haidilao also has cross-border layout of craft beer. However, these formats are often “meals with meals”, and “drinks with meals” are rare.

Another trend that cannot be ignored is the increasing focus on the quality and professionalism of coffee. The data report of CBNData pointed out that nowadays consumers’ demands for the quality of coffee products are gradually escalating, and the proportion of high-quality coffee in online coffee sales is increasing. For this reason, Ruixing and some specialty coffee brands are happy to emphasize the origin of their coffee beans and the professionalism of their brands.

According to the introduction of the Cudi coffee brand, Cudi coffee also uses “professional” as one of the key words of its own brand, and emphasizes its international coffee origin and high-quality roasting technology, but too many categories can easily dilute professionalism. attribute, consumers will fall into the skepticism of “doing a lot, but not doing everything well.”

Similarly, the craft beer that Kudi wants to sell is also a category with a certain professional threshold. There are hundreds of varieties and flavors, and it is not easy to satisfy professional tasters. Although the wind of “day coffee and night wine” has been blowing for a long time, well-known coffee brands such as Starbucks and Seesaw have begun to try, but for now, it has not become a common and widely recognized model.

Finally, it is worth noting that such a “heavy” store type may increase the difficulty of location selection during the expansion process, as well as increase the entry threshold and franchise risk for franchisees. And if franchisees all choose the “mini” store type, then the “well-designed” standard store will lose its usefulness.

Second, since you want to earn money from franchisees, how is the franchise system built? What kind of support can you provide to franchisees?

Since you want to make money through the franchise model, how to attract and help franchisees is the key. All franchisees are afraid of unreliable fast-moving brands. They poured money into it with enthusiasm, but in the end, they were all empty.

In January 2021, Luckin launched a new retail model with 0 franchise fee. Luckin does not charge franchisee franchise fees, but instead focuses its partners’ initial investment on store decoration, equipment, personnel and operating costs. In addition, Luckin will provide support in terms of traffic, risk and digital operations.

Specifically, in terms of traffic, Ruixing can divert traffic through fission customer acquisition, platform sharing, community operations and enterprise API (application programming entry); in terms of risk, Ruixing undertakes new user coupon packages and low discount subsidies , and does not charge fees during periods of unfavorable business operations; in terms of digital operations, Luckin provides fully digital operation management to improve management efficiency and reduce labor costs.

As of the end of the second quarter of 2022, Luckin had a total of 7,195 stores, of which 4,969 were self-operated stores and 2,227 were affiliated stores, accounting for about 31%; the revenue of affiliated stores was 778 million yuan, a year-on-year increase of 178.4%.

According to public reports, this franchise model has been finalized in the “pre-Luckin” era, but it was only disclosed after the financial turmoil passed. It is not difficult to see that Ruixing’s franchise model has made great innovations compared with the traditional franchise model, and is also regarded as “full of sincerity” by the industry, and has been verified in subsequent practice.

Kudi Coffee has not disclosed the franchise mechanism, which is very important for Kudi who wants to “make the world without a coffee shop that is difficult to open”. After the opening of the franchise, how to manage it will become the next big problem.

Third, compared with the new coffee brands emerging in the current market, what is the core competitiveness that Kudi Coffee wants to establish?

Obviously, compared to five years ago, today’s coffee market has “changed the world”.

On the one hand, chain coffee brands are frantically “staking their horses”. Starbucks plans to increase the number of stores in the mainland market to 6,000 by the end of fiscal 2022; Canadian coffee brand Tim Hortons plans to open at least 2,750 profitable stores by the end of 2026; from March 8 to 10, 2022, Manner Coffee will be in 10 Chinese cities, Open 200+ stores at the same time…

On the other hand, new entrants are trying to stir up the Chinese coffee market. In February 2022, Blue Bottle Coffee’s first store in mainland China opened in Shanghai, and China Post also opened its first coffee store; in May, Li Ning announced the launch of the coffee brand “Ning Coffee NING COFFEE”…

Although the prospects of the coffee market are still optimistic about the market, there is no doubt that Kudi is not easy to grab whether it is the stock space or the incremental space – the key reason is that, in addition to the differences in the store itself, but the coffee products come Speaking of which, Cudi has yet to create a clear point of difference.

On the one hand, according to the Kudi Coffee applet, all products of Kudi Coffee are priced between 18-32 yuan, of which the price of American coffee is about 25 yuan, and the price of latte is about 30 yuan. Compared with most coffee chain brands in the current market, such a price design is quite satisfactory, neither as cheap as Lucky Coffee nor as high as a number of boutique coffee shops.

In terms of quality, Kudi said that he has carefully selected two coffee beans that have won the IIAC Gold Award. The coffee origins are located in Ethiopia, Brazil, El Salvador, Yunnan and other internationally renowned coffee origins. He also invited CQI green coffee bean quality taster Martin to discuss the quality of coffee beans. Bean roasting carries out quality control of the whole process. But for coffee brands at the price of 18-32 yuan, the upstream supply chain is not too brilliant.

On the other hand, Cudi Coffee sets the brand tone as “young, fashionable, and professional”, but “coincidentally”, Ruixing’s brand tone also uses these three words, the difference is that Ruixing also added “” Health”, and the order is also different – Ruixing is “professional, young, fashionable, healthy”. This means that from the perspective of brand emotional value, Kudi has not brought freshness to consumers.

Finally, what kind of corporate values ​​does Cudi want to establish?

Having experienced the painful lesson of Ruixing’s financial fraud, I am afraid that both Lu Zhengyao and Qian Zhiya will realize the importance of corporate values.

On the official website, Ruixing stated that its values ​​are “truth-seeking and pragmatism, quality first, continuous innovation, none other than me, mutual trust and win-win”. In fact, in the past year, whether on earnings conference calls or in press releases, Luckin has often emphasized this point.

Values ​​are a very imaginary thing. It is far less intuitive than what products to sell and what store types to design, but it involves the foundation of the enterprise, that is, why do you want to do this business? To solve social pain points? Or seize the industry bonus period to make money quickly? Or is it because of the unwillingness to admit defeat? They are like the seeds of a business that will bear different fruits.

From the current stage, it is not clear what the background color of Cudi is. But Umar Haq pointed out in the book “New Business Civilization” that today’s world is like an ark, and the economic prosperity on the ark is fundamentally about minimizing harm and rebuilding business models. In other words, business for good may be the origin of all problems.

(Disclaimer: This article only represents the author’s point of view and does not represent the position of Sina.com.)

This article is reproduced from: https://finance.sina.com.cn/tech/csj/2022-10-29/doc-imqmmthc2513533.shtml
This site is for inclusion only, and the copyright belongs to the original author.