Here are this week’s news and highlights for China:
With Rumoured Series A, Luckin Coffee may Become China’s First Coffee Unicorn: After launching earlier this year, Luckin Coffee is now valued at over one billion dollars. It has opened more than 500 stores in 13 cities – including as much as 40 new stores in a single week in June, serving more than 1.3 million customers 5 million cups of coffee.
My Visit to Luckin Coffee: Starbucks’ First Serious Challenger in China: Jeffrey Towson’s commentary on Luckin Coffee: The coffeehouse which hopes to marry new retail with coffee offers the now-common 30 minute delivery. No cash or cards are accepted, to order a coffee you have to download the app to order and pay by either WeChat or Alipay. Prices are 20% cheaper than Starbucks with lots of promotions. They are changing the rules of retail coffee with technology and trying to expand the market to the vast majority of Chinese who are not yet drinking much coffee. Part 2 covers how Luckin can beat Starbucks and part 3 how Luckin doesn’t need to beat Starbucks to win big in China.
China Embraces Coffee Culture Craze, Thanks to Millennials: Coffee consumption in China has nearly tripled in the past four years, with coffee imports growing 16% a year. Starbucks plans to open 3,000 stores in the next five years to nearly double its current cafe count. There are now more than 6,500 coffee shops in Shanghai.
Australian Wine Producers Need to Adapt to Chinese Market: Geddes: 3-6 min vid: Australian wine exports to China are booming but much work still has to be done about educating on regions outside of the Barossa Valley and using the key touch points Chinese consumers use to research.
Local Consumer Brands Growing Faster in Chinese Market: China’s FMCG market grew by 4.3% last year, up from 3.6% growth in 2016, mostly driven by trading up to premium and healthier products. Chinese brands accounted for 98% of growth in the main FMCG categories including packaged food, beverages, personal care and homecare according to Bain and Kantar Worldpanel. Local brand’s share grew 7.7% versus just 0.4% for foreign brands last year. Chinese brand’s success reflects innovation, a better understanding of the market, and speed. “Local brands have the ability to go to the market and track results, improve, change and launch new products at a speed that multinationals have a hard time to cope with,” according to Bain. The benefits of global scale cannot offset the speed and innovation advantages local companies are displaying. Imported brands can make a comeback by increasing the speed of decision-making, having local research and development and developing customized products for Chinese consumers.
Infographic: High Optimism And High Expectations In The Chinese Market: A survey of consumers and B2B decision makers across China, the UK, the US, Australia, Germany and South Africa found Chinese are the most optimistic and most likely to say that a category is socially beneficial, with the highest average scores across all rational and emotional drivers. Being perceived as an open, honest and authentic brand was likely to raise perceptions of other drivers as well according to We Worldwide.
Chinese and Foreign Players Can Enjoy Benefits from a Bigger Cake: Last Thursday China unveiled a long-anticipated easing of foreign investment curbs on sectors including banking, the automotive, heavy industries, and agriculture, which will take effect on July 28. The number of items on the “negative list” was cut to 48 from 63 in the previous version last year, with widened market access for foreign investment to 22 industries.
China’s Latest Multibillion-Dollar IPO is an App Offering Everything from Hot Pot to Haircuts: Meituan has evolved into China’s largest one-stop-shop for all things to do with services, for which there is no close Silicon Valley equivalent. Last week’s filing to the HK Stock Exchange for an IPO may value the company at $60 billion – twice as much as its October 2017 valuation. Meituan’s revenue soared over 750% between 2015 and 2017 to hit $5.2 billion although it still makes losses in the billions. Meituan will be disappointed by Xiaomi’s IPO last week which feel short of the hype.
The Great Firewall of China: Xi Jinping’s Internet Shutdown: A long but interesting history of China’s Internet censorship. Xi Jinping feels there is no distinction between the virtual world and the real world: both should reflect the same political values, ideals, and standards. He is promoting China’s version of the Internet as a model for other countries. In spring 2015, Beijing launched the Great Cannon which is able to adjust and replace content as it travels around the internet. A 2016 Harvard study estimated that the Chinese government fabricates and posts approximately 448 million comments on social media annually.
Extended Retail Hours Key Motivator For Chinese Tourists: A study into better serving Chinese tourists in Perth, but applicable to many cities, found that extending retailers trading hours would be a key way to have Chinese tourists spend more and have a better stay. Many tourists filled their days with day trips outside Perth and expected to spend the early evening shopping before eating out for dinner.
Local Hits Power Chinese Box Office to Strongest First Six Months Ever: 889 million viewers drove China’s box office takings up 16% in the first half of 2018 compared to the same period last year. 59.6% of the ¥31.6 billion ($4.77 billion) takings were domestic films, which accounted for 18 of the 40 movies that broke ¥100 million ($15 million). China overtook North America as the world’s biggest movie market in the first quarter of 2018 but lost the throne mid-year, with North American box office hitting nearly $6 billion through June.
L’Oreal, Alibaba Boost Efforts to Green Up Packaging in China: L’Oreal China has pledged to switch to certified sustainable paper and zipper paper cartons or paper adhesives for all of its brands. The group also plans to use only 100% recycled boxes by this year’s 11.11 in November. Over 70% of consumers said they were willing to pay a 10% premium for sustainable products that create minimum pollutants and harm to the environment, according to the China Chain Store Association. Alibaba’s logistics company Cainiao has also announced a number of green initiatives. When will Alibaba roll this out its Ele.me food delivery?
How Smog Affects Spending in China: A study by Cornell University economists have found air pollution leads to higher spending at hospitals and pharmacies, but also causes spending at supermarkets to fall as shoppers opt to stay indoors. The study concludes that reducing China’s pollution to WHO recommended levels would knock tens of billions of dollars off health spending based on the correlating figures.
The Future of Luxury: First Comes the App, Then Comes the Store: Despite China’s love of online shopping, e-commerce platforms have discovered that – to meet the needs of modern Chinese consumers – having an online presence is no longer enough. Last month Xiaohongshu joins the likes of Alibaba and JD to launch its first offline store RED Home in Shanghai. The new store incorporates key trends happening in China’s retail market including socialisation and community, technological innovation and experiential with the store designed to be a ‘selfie-lover’s paradise’.