Produced/Tea Coffee Observation
Author/Meng Jiayi
Editor/Muyu
Recently, Cha Ka Observation exclusively learned that the Shanghai Auntie has stopped joining the independent coffee brand "Shanghai Ka", and the original coffee business has gradually been integrated into the main brand Shanghai Auntie.
Another person familiar with the matter revealed that in mid-September, the Shanghai aunt may officially announce relevant business adjustments to the public. This business adjustment includes: Aunt Shanghai started selling coffee products, stores use coffee beans and coffee machines of the same specifications as Luckin, and are the first to upgrade their coffee product lines in some regional stores.
Public information shows that Shanghai Cafe was established in March 2023 and is mainly presented in the form of a store-in-store. Compared with the main brand, Aunt Shanghai, although there is no independent decoration or door head, it uses a different ordering system from Aunt Shanghai. If consumers want to drink coffee, they have to enter through the ordering system of Shanghai Coffee. The cups, straws and other materials used are also a separate set, forming a special form of "physical symbiosis and operational separation".
In September 2024, Shanghai Cafe tried to accelerate its expansion, open single-store franchise nationwide, and set a clear entry threshold: the applicant must be between 25 and 40 years old, and must be a store manager, and at least personally participate in the store leadership for more than one year, with a fund budget of more than 200,000 yuan, and it is clearly required to operate separately and not accept partners.
However, this expansion plan died in less than one year. The company has made it clear that it will no longer open to the new franchise of Shanghai Casino. The Shanghai Casino WeChat official account will also stop being updated from October 2024, and the original business will begin to be integrated into the main brand.
At present, the upgrade of the coffee business is still in the regional pilot stage. There are still many stores that can order orders on the Shanghai Ca mini program. A Hangzhou franchisee said that the Shanghai cafe business of its stores has been merged into the main brand, but the coffee machine and coffee beans have not been upgraded. Another Harbin franchisee reported that its store has been upgraded, Shanghai cafe business has been removed from the shelves, and the equipment has been replaced with a Franka coffee machine of the same model as Luckin Coffee with a value of about 80,000 yuan. The coffee bean is also an Arabica bean at the IIAC gold award level.
The product level also showed obvious differentiation. The unupgraded stores only provide 8 coffees, classified as "Coffee·Fresh Collection", with a price ranging from 15-23 yuan; while the upgraded stores will be marked as "Freshly Grinded Coffee Selected Store" in the mini program, with a richer product line, with 13 coffee drinks, including raw coconut latte and velvet latte, classified as "Golden Bean·Coffee", and highlight the quality of the raw materials, but the price has fallen to the 9-21 yuan range.
A franchisees revealed that the current equipment upgrade is mainly stores in Harbin and Shenzhen, and is still in the internal testing stage. There is no mandatory requirement for stores across the country. However, most people predict that when the coffee business is fully promoted in the future, equipment upgrades will become a hard standard.
So, why did the aunt in Shanghai make such adjustments?
First, the performance of Shanghai Cafe did not meet expectations. Although Shanghai Cafe tried to be independent of Shanghai aunts last year, from the market information, it did not cause much splash. It has neither independent storefronts nor relies on the space and customer flow of the parent store, and has fallen into an embarrassing situation of "not independent enough, not integrated enough".
The two ordering systems and two sets of material systems have increased operational complexity and cost, but have not brought corresponding brand awareness improvement and performance returns. The prospectus of the Shanghai Auntie shows that Shanghai Cafe achieved a GMV of 40 million yuan in 2024, an increase of 16.28% year-on-year, but the average daily GMV of a single store has dropped from 307 yuan in 2022 to 116 yuan in 2024, while the average customer price of Shanghai Cafe is between 10-15 yuan. Based on this calculation, the store may not be able to sell 10 cups of coffee a day.
This inefficiency directly hinders the franchise expansion of Shanghai Cafe. For franchisees, the additional investment of 200,000 yuan has to face the reality of "not selling 10 cups of coffee per day", which is obviously unattractive; for the aunt in Shanghai, if they forcibly promote franchise, it will not only be difficult to recruit new franchisees, but may also cause dissatisfaction with the original tea drink franchisees due to losses in the coffee business.
Therefore, stopping Shanghai Cafe franchise and merged into the main brand is to stop losses in a timely manner, avoid continuously wasting investment resources and operational energy in an inefficient model, and refocusing financial and material resources on a more potential direction.
Secondly, the growth dividend of the new tea beverage industry has reached its peak, and the aunts in Shanghai have to find new performance breakthroughs. iMedia Consulting data shows that the market size of China's new-style tea drinks is expected to reach 354.7 billion yuan in 2024, and is expected to exceed the 400 billion mark in 2028, but the industry's average annual compound growth rate has dropped from 25.2% in 2018-2023 to 19.7% in the next five years.
As the store density continues to increase, the competition for high-quality franchisees and locations is becoming increasingly fierce. At the same time, single-store revenue has continued to be diluted. The average daily revenue of single-store in Shanghai has dropped from 4,109 yuan in 2022 to 3,833 yuan in 2024.
Looking at the six new tea listed companies, Mixue Group, with the highest market value, continued to firmly hold the position of the industry's number one leader with a revenue scale of 14.875 billion yuan in the first half of this year. It is also the only company to achieve revenue exceeding 10 billion yuan in the first half of this year, and its stock price has also soared. In fact, what really attracts capital to Mixue Bingcheng is no longer just the tea drink itself, but also the powerful supply chain system behind it.
In this context, as a listed company, Shanghai Aunt needs to tell new and more potential and sustainable stories to the capital market. Expanding the coffee business is an attempt. Naixue launched light food, Bawang Tea Ji's involvement in department stores, Gu Ming layout coffee, and Cha Yan Yuese's snacks are all based on the same logic.
In particular, Gu Ming launched a coffee product line as early as 2023. In June this year, it was announced that the current coffee has covered 7,600 stores across the country. At the same time, Gu Ming founder Wang Yunan revealed that the average daily sales of coffee in a single store are 60 to 80 cups, a significant increase over the second half of last year.
Gu Ming's success confirms the feasibility of the "main brand + coffee category" model. This is also the core logic of the adjustment of Shanghai Auntie this time, abandoning the brand increment of Shanghai Cafe and turning to the category increment of main brand, and entering the coffee track with lower cost and higher efficiency.
In addition, the competition in the coffee track has long been fierce.One end is Luckin and Kudy occupy the mass market with high cost performance, and on the other end is Starbucks, Manner and other mid-to-high-end markets focusing on quality and third space. If an aunt in Shanghai wants to get a piece of the pie, she must solve the core problem of how to compete with professional players.
Fujian Huace Brand Positioning Consulting founder Zhan Junhao pointed out that in the context of mature players having established scale and cognitive barriers, there is little chance of weak new brands breaking through. Aunt Shanghai chose to return to the main brand and upgrade its quality. Relying on Aunt Shanghai's brand awareness, consumers are willing to try their coffee products; then, through the quality labels of gold medal beans and professional equipment, they retain users who have requirements for the taste of coffee, so as to find their own living space.
However, the success of the strategy still faces challenges: Are franchisees willing to bear the cost of equipment upgrades? Can the new product line really win consumer recognition? In markets such as Luckin and Luckin Casino, which have already occupied the cost-effectiveness and quality awareness, how should aunts in Shanghai make differentiation?
The answers to these questions will determine whether the Shanghai aunt can truly gain a foothold in the coffee track and provide reference samples for other tea brands' cross-border coffee.
