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Weekly #10: Dirt Cheap coffee โ๏ธ๐, Edible Bird's Nests ๐ฌ๐, Duck Necks ๐ฆ๐ | 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 โ I donโt eat any products from the companies Iโm going to talk about today that respectively sell birdsโ nests, braised duck necks, and dirt-cheap coffee.ย
Ok, thatโs a lie, I do drink cheap coffee, knowing that Iโd still support small coffee shop owners most of the time. But as a consumer, I believe the birdsโ nest industry should go poof from the earth because itโs unethical and has little nutritional value; Iโve had duck necks โ a famous snack from central city Wuhan โ but generally not a fan, not because itโs weird (it is a bit ๐ฌ), but itโs just a lot of hassle for so little protein. Whatโs 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 birdโs nests and braised foods respectively make up aย 40 billion yuanย (US$5.8 billion) andย 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 letโs dig in today.
Iโm 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!
1. Why is dirt cheap coffeeย so popular? โ๏ธ
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 Menย reportedย 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.ย
The capital market also seems to think start-ups that leverage this price point have potential: Ao Tiger (known for their slogan โ10 yuan for a good latteโ) and Cubic Coffee both closed their Angel rounds.ย Cotti Coffee, which is founded by Luckin Coffeeโs founder last Oct, already has over 200 shops across China.ย
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?ย
Audienceย ๐งโ๐คโ๐ง๐ฉโ๐ผ:ย Bootstrapped white-collar professionals, first-time coffee drinkers including the older generation, college students
Local companies to watch ๐:ย Ao Tiger, Cubic Coffee, Cotti Coffee, CoCo Fresh Tea & Juiceย
2. Why donโt people want to eat duck necks anymore? ๐ฌ
For a public company to postย a negative profit warningย 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.ย
Zhou Hei Ya Int'l, a braised foods company listed on the Hong Kong Stock Exchange,ย issuedย a profit warning around a week ago saying that the companyโs 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.ย
Juewei Foodย and Jiangxi Huangshanghuang, the other two braised foods public companies, forecasted their net profits to plunge byย 73.49%-77.57%ย andย 72.33%-79.25%, respectively.ย
On Weibo, people are saying โI canโt afford duck necks anymoreโ, and โI need to reconsider my purchases now that itโs more expensiveโ under hashtags including #Why canโt duck necks sell anymore.ย
Zhou Hei Yaโs stock now hovers at HK$4.0, down by around 10% since issuing the statement.ย
Use cases ๐ฆ:ย students on school trips, mass-market snackers while watching TV/at train stations, brosโ food pairing for white spiritsย
3. Why canโt edible birdโs nests scale meaningfully? ๐ค
โEdible Birdโs Nest can improve male sexual performance and help pregnant mothers maintain their health and immunity, especially after the first trimester.โ A U.S.-based edible birdโs nest sellerย
โBird's nest can nourish your private parts and lungs, and enhance immunity.โ A U.K.-based sellerย
When I see these marketing copies, I just want to stab my eyes. Sadly, while people like me believe itโs 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 birdโs nests. Recently, Chinese media are closely watching whether Yan Palace could be the first edible birdโs nest stock after three attempts.ย
Created by certain kinds of swiftlets, the nests mostly constitute the birdsโ saliva. Moreover, there are food safety issues and health concerns including a potentially excessive amount of hormones, and some are made of sugar water.ย
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 whatโs the point? Whatโs more, big domestic players arenโt bothered to include the sourcing part on their websites. All they say is that the nests are from Indonesia.ย
To make it easier to consume, companies have come up with ready-to-eat edible birdโs nests in fancy containers. Experts likeย Teacher Min, a beauty blogger, and lecturer at Japanโs Nippon Medical School, said that people can eat it as a dessert, but the marketers really shouldnโt deify its effects.ย
[imagined] Use case ๐ :ย pregnant ladies in postpartum confinement ๅๆๅญ, older women who want to improve their skin, and I guess, guys who want to improve sexual performance
Public company (wannabes ๐ค):ย Yan Palace (filed IPO), Xiao Xian Dun/XXDun (C-round)
What else Iโm reading:
How is lipstick King Li Jiaqi recruiting for his new reality show โThe Girl friendsโ hostsโ E-commerce Online, an Alibaba affiliated news platform
Chinaโs Gen-Zers donโt want to work in factories Leng Jing, a publication under Tencent News
Domestic pet-oriented start-ups invest in R&D in droves Chong Ye Jia, vertical pet market media
Whatโs 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, Xiaomiโs newly appointed president of its international business department, and general manager of sub brand Redmi, announced on Weibo:
Weekly #10: Dirt Cheap coffee โ๏ธ๐, Edible Bird's Nests ๐ฌ๐, Duck Necks ๐ฆ๐ | Following the yuan
The Italian government has supported espresso since 1915 as an essential foodstuff. Current price for a single espresso is 1 euro for what is 7gm coffee in a 1oz volume drink. Certainly China could achieve something similar. Coffee cultivation in China is still in its infancy, although the Yunnan beans I've tried roasted by a Seattle cafรฉ are very tasty.
I'm unclear how much robusta coffee is grown in China, but these are much larger and cheaper crops in Vietnam and the Philippines. Blue Bottle has just introduced a "Robusta Blend", signaling the variety's entry into the boutique chains. Really, only in the US has robusta been associated with "dreck" coffee.
If you look at the instant coffee market in Korea, the flavor profile is for Sumatran or Vietnamese filter coffee so: a milky drink with a strong robusta component. Certainly the Chinese will evolve their own styles of coffee, but it might be closer to other Asian countries than a black pour over from Juan Valdez country. No doubt it will be great (and cheap)!