Weekly #10: Dirt Cheap coffee ☕️📈, Edible Bird's Nests 😬📉, Duck Necks 🦆📉 | Following the yuan

Apologize for the delay -- I've added two new features on 'what else I'm reading' (re: dogs & Gen-Zs this week) and upcoming company events, let me know your thoughts!

I have a confession to make – I don’t eat any products from the companies I’m going to talk about today that respectively sell birds’ nests, braised duck necks, and dirt-cheap coffee. 

Ok, that’s a lie, I do drink cheap coffee, knowing that I’d still support small coffee shop owners most of the time. But as a consumer, I believe the birds’ nest industry should go poof from the earth because it’s unethical and has little nutritional value; I’ve had duck necks — a famous snack from central city Wuhan — but generally not a fan, not because it’s weird (it is a bit 😬), but it’s just a lot of hassle for so little protein. What’s the point of eating them when you can have better-tasting, more wholesome foods like pre-packaged chicken breasts?

But there are reasons why the market size for edible bird’s nests and braised foods respectively make up a 40 billion yuan (US$5.8 billion) and a 314 billion yuan market, and there are quite a few entities trying to be either public companies or public company wannabes in these spaces. So let’s dig in today.

I’m adding some new features at the end with the aim of helping you expand your media recipe, improve Chinese with the context of timely subjects and keep up with company announcements, let me know if you find them helpful!

Mala Duck necks. Image source: Juewei Food

1. Why is dirt cheap coffee so popular? ☕️

The competitor of the likes of Starbucks, Costa Coffee, and Lavazza in China is not any single brand, I argue, but the shift in consumers' perception of what a cup should cost.

Instead of an average price of 30-40 yuan ($4.4-5.8), domestic trade publication Ka Men reported that now some customers expect a cup of coffee to cost ~5 yuan, thanks to milk tea brand CoCo and other contenders.

Others like me, who currently live in cities like Shanghai that are highly competitive for the food and beverage space, expect an americano to be 10~15 yuan thanks to the OG of affordable coffee Manner. 

The capital market also seems to think start-ups that leverage this price point have potential: Ao Tiger (known for their slogan “10 yuan for a good latte”) and Cubic Coffee both closed their Angel rounds. Cotti Coffee, which is founded by Luckin Coffee’s founder last Oct, already has over 200 shops across China. 

The *insight* about shifting consumer perception probably matters more for overseas brands that are eyeing on Chinese market but are yet to think about pricing: Are you in line with the likes of Starbucks or Manner? 

Audience 🧑‍🤝‍🧑👩‍💼: Bootstrapped white-collar professionals, first-time coffee drinkers including the older generation, college students

Local companies to watch 👀: Ao Tiger, Cubic Coffee, Cotti Coffee, CoCo Fresh Tea & Juice 

From left to right: Ao Tiger, Cubic Coffee and Manner. Image source: Dianping

2. Why don’t people want to eat duck necks anymore? 😬

For a public company to post a negative profit warning is already bad news, what makes it worse is the media and consumers then nod and turn their heads to other peers and say why the products across the board are overpriced. 

Zhou Hei Ya Int'l, a braised foods company listed on the Hong Kong Stock Exchange, issued a profit warning around a week ago saying that the company’s revenue in 2022 is expected to drop by about 20% and net profit by a staggering 94% year-on-year, mostly because of store closures under zero-Covid and increased cost in raw materials. 

Juewei Food and Jiangxi Huangshanghuang, the other two braised foods public companies, forecasted their net profits to plunge by 73.49%-77.57% and 72.33%-79.25%, respectively. 

On Weibo, people are saying “I can’t afford duck necks anymore”, and “I need to reconsider my purchases now that it’s more expensive” under hashtags including #Why can’t duck necks sell anymore. 

Zhou Hei Ya’s stock now hovers at HK$4.0, down by around 10% since issuing the statement. 

Use cases 🦆: students on school trips, mass-market snackers while watching TV/at train stations, bros’ food pairing for white spirits 

Many Zhou Hei Ya franchises can be found near subway/train stations. Image source: Yicai Global

3. Why can’t edible bird’s nests scale meaningfully? 🤔

“Edible Bird’s Nest can improve male sexual performance and help pregnant mothers maintain their health and immunity, especially after the first trimester.” A U.S.-based edible bird’s nest seller 

“Bird's nest can nourish your private parts and lungs, and enhance immunity.” A U.K.-based seller 

When I see these marketing copies, I just want to stab my eyes. Sadly, while people like me believe it’s all made up, others are firm believers of the nutritional benefits of these poor bird's nests and are happy to pay hundreds of US dollars for a box of dry bird’s nests. Recently, Chinese media are closely watching whether Yan Palace could be the first edible bird’s nest stock after three attempts. 

Created by certain kinds of swiftlets, the nests mostly constitute the birds’ saliva. Moreover, there are food safety issues and health concerns including a potentially excessive amount of hormones, and some are made of sugar water. 

I asked Google whether the nests can be raised instead of being harvested in the wild (where unethical harvesters would probably throw away the eggs just to get the nests), but what’s the point? What’s more, big domestic players aren’t bothered to include the sourcing part on their websites. All they say is that the nests are from Indonesia. 

To make it easier to consume, companies have come up with ready-to-eat edible bird’s nests in fancy containers. Experts like Teacher Min, a beauty blogger, and lecturer at Japan’s Nippon Medical School, said that people can eat it as a dessert, but the marketers really shouldn’t deify its effects. 

[imagined] Use case 👅: pregnant ladies in postpartum confinement 坐月子, older women who want to improve their skin, and I guess, guys who want to improve sexual performance

Public company (wannabes 🤔): Yan Palace (filed IPO), Xiao Xian Dun/XXDun (C-round)

IDG Capital-backed Xiao Xian Dun is endorsed by actress ZHANG Ziyi. Image source: xxdun.com

What else I’m reading:

1. How is lipstick King Li Jiaqi recruiting for his new reality show “The Girl friends’ hosts” E-commerce Online, an Alibaba affiliated news platform

2. China’s Gen-Zers don’t want to work in factories Leng Jing, a publication under Tencent News

3. Domestic pet-oriented start-ups invest in R&D in droves Chong Ye Jia, vertical pet market media

What’s coming:

Xiaomi will host a global launch event for Xiaomi 13 model in collaboration with Leica on its website on Feb 26, this Sunday at 4pm in Spain and 11pm in China.

In addition to promotion through its official channels and media, Lu Weibing, Xiaomi’s newly appointed president of its international business department, and general manager of sub brand Redmi, announced on Weibo: