Tencent and Sequoia are coming to invest in coffee to go public

Author | Karong

Edit | Tang Fei

The Chinese coffee market has resurrected.

On August 18, 2022, US time, the US Securities Regulatory Commission disclosed that the Canadian coffee chain brand Tim Hortons (hereinafter referred to as "Tims China") will land on Nasdaq in the form of SPAC.

In the past few years, TIMS China can be said to have re -engraved the speed of "Ruixing".

In February 2019, TIMS opened its first store in the Chinese market in Shanghai. After a lapse of three and a half years, the number of TIMS Chinese stores reached 450. Correspondingly, TIMS China ’s revenue also continued to grow. From 2019 to 2021, its revenue was 57.257 million yuan, 210 million yuan, and 640 million yuan. This is obviously where TIMS China landed on the capital market.

TIMS China can achieve such a fast, on the one hand, thanks to the brand effect brought by the Canadian national coffee "TIMS" brand, on the other hand, because a lot of management is optimistic about the Chinese coffee market, it has added "TIMS China".

Dividends aiming at the Chinese coffee market

Tims China can be described as the darling of capital.

According to the company's investigation, from 2020 to early 2022, TIMS China completed a total of four rounds of financing, and there were many investors behind Tencent Investment, Sequoia China, and Zhong Ding Capital.

Tims China financing process. Photo source: Enterprise Check

According to official information, before listing, Tencent held 14.9%of TIMS China, Sequoia held 11.4%, and Tims Hortons only held 8.6%of the shares.

Many investment institutions not only "send money" to TIMS China, but also spare no effort to allow their main business to empower the latter's coffee business. Taking Tencent as an example, WeChat Mini Program has become an important member of TIMS China. Tencent Music, Tencent Public Welfare Platform, and Tencent E -sports also often link with TIMS China.

Many investors are optimistic about TIMS China, which to a large extent because they have seen the huge "money" in the Chinese coffee market.

The "2022 China Coffee Industry White Paper" released by Hungry Mansion shows that in 2021, the market size of the Chinese coffee industry was 381.7 billion yuan, an increase of 27.2%year -on -year. It is expected that by 2025, the scale of China's coffee market will exceed trillion yuan.

Picture source: Are you hungry?

In this context, many coffee companies have begun to tell the capital market with a closed-loop business story of "the previous penetration rate is low-market is growing-coffee addiction".

In fact, through the financial report of Ruixing Coffee, it can also be seen that China's coffee industry is indeed the same as before. In 2021, the total net income of Ruixing Coffee was 7.965 billion yuan, an increase of 97.5%year -on -year. The Q4 operation loss at non -US accounting standards was 23.6 million yuan. Compared with the loss of 369 million yuan in the same period of 2020, it has improved substantially.

With the promotion of capital, Tims China has embarked on the fast track of development. When entering the Chinese market, TIMS China is very cautious. The target is to "open 1,500 stores in 10 years". In the past two years, TIMS China's goal has become "increased to 2,750 stores in 2026."

While deliberately pursuing high growth, TIMS China has fallen into a strange circle of losses. The prospectus shows that from 2019 to 2021, TIMS China ’s net losses were 87.828 million yuan, 140 million yuan, and 380 million yuan, respectively.

From this point of view, TIMS China may also want to change the scale of Ruixing Coffee in the early stage of losses, and then use refined operations to improve the profit margin.

The Canadian market has been settled first

The reason why TIMS China can attract many investment institutions is because its main brand has surpassed Starbucks in the Canadian market and has become a local "national coffee".

Unlike Starbucks trying to create core competitiveness through the "third space", TIMS focuses on the taste, cost performance, and penetration rate of coffee.

For example, at the beginning of its establishment, TIMS mainly provided workers with cheap coffee, roasting and snacks. Subsequently, TIMS expanded the store to Canada's gas stations and airports such as Canada and airports according to the full -scale franchise model.

In response to the distribution characteristics of TIMS cafe in Canada, Ron Joyce, co -founder of TIMS, said: "If you are driving on the highway in Canada, you will never exceed 30 minutes from each TIMS coffee. Drive ".

With the above -mentioned store construction strategy, TIMS has become the leader of the Canadian coffee market. According to official information, as of the end of 2015, TIMS has 4,413 stores in Canada. In comparison, until 2019, Starbucks only exceeds 1,000 stores in Canada.

The huge influence of the Canadian market has also won a good reputation for TIMS. The "25 Most Valuable Restaurant Brands in the World" released by the British authoritative brand evaluation agency Brand Finance, TIMS has been shortlisted for many years.

Of course, the reason why TIMS can expand rapidly in Canada is inseparable from capital assistance. Although TIMS's founders are Canadians, Tims's controlling shareholders are no longer Canadian companies today.

As early as 1995, US catering giant Wendy ’s acquired Tims for $ 400 million. In 2014, the American Fast Food Giant Burger acquired Tims at a price of $ 11.4 billion. In the Chinese market, TIMS China is almost re -enjoined.

For example, the price of Tims Chinese products is between 15 yuan and 30 yuan, which is lower than the price belt of Starbucks, which is close to "cost-effective". In terms of channels, TIMS China also tried to expand the scale through gas stations.

Photo source: Deloitte Research

In July 2022, TIMS China announced that it will cooperate with Sinopec's Yijie Coffee to open a small TIMS coffee shop in some Yijie coffee stores, and develop jointly drinking coffee to sell it at the Easy Convenience Store.

According to data from the China Chain Operation Association, as of the end of 2021, the number of Sinopec's easy convenience stores was 28,200, which is China's largest chain convenience store institution.

Cooperating with Sinopec Yijie may also copy the rapid expansion of TIMS in Canada, and greatly increase TIMS China's brand voice.

The coffee market has been killed into "Red Sea"

There are rivers and lakes where there are people, and there are competition in the market with room for development.

The huge dividend of the Chinese coffee market not only made Tims Chinese Chinese companies covering three rules, but also attracted many players to enter the game.

Needless to say, Starbucks and Ruixing's two "outs" brands. New brands such as M Stand, Manner,%Arabica, Illy Coffee have also expanded rapidly with the power of capital.

Taking the coffee chain brand M STAND, which focuses on "aesthetics of life", as an example, the company received two rounds of financing in 2021. After the round B financing, M Stand's valuation has reached 4 billion, which is about 6 times more than the A round of financing.

M Stand financing process. Photo source: Enterprise Check

In addition, Tea Yanyue, China Post and even sports brand Li Ning have a certain interest in coffee, and began to try to squeeze into the coffee track. At the end of August, McDonald's Chinese CEO Zhang Jiayin said that in the past two years, the Macao coffee brand has grown rapidly, and the number of stores has expanded from about 800 to nearly 2,500. It is expected that in 2023, Macao will add about 1,000 stores.

From this point of view, a major challenge that TIMS China will face next is how to find the coffee industry that kills the "Red Sea" and find the anchor point at the channel level.

In contrast, TIMS China is currently in a dilemma on the channel.

On the one hand, it wants to make the success of the Canadian market through the layout of the gas station channel, but the situation of the distribution of China's population and the economic characteristics determine that the gas station is not a hot area for consumers consumption; on the other hand, according to TIMS China, China The CEO Lu Yongchen said that TIMS China "mainly attacks the first and second -tier cities, high -traffic shopping centers, office buildings", then the latter needs to compete directly with brands such as Ruixing, Noshihai and Manner.

From the perspective of price dimensions, TIMS China focuses on high cost -effectiveness, avoiding positive competition with Starbucks and Costa Coffee, but in the Chinese market, there are also a lot of cost -effective coffee brands.

The pricing of Ruixing Coffee itself is not high, coupled with various red envelopes and discounts, the price of a single cup is less than 20 yuan; the new brand "Sleepless Sea" has the advantage of convenient bees. The price of the cup is only 8 yuan; the honey snow ice city, which has more than 10,000 stores across the country, began to enter the coffee market in 2020. Its American coffee 5 yuan/cup sold in Beijing, latte 7 yuan/cup.

Honey snow ice coffee products. Picture source: Meituan APP

At present, TIMS China's main "coffee+warm food", of which coffee includes concentrated coffee, latte, etc., warm foods include farmer's rolls, Beiguo, etc. This is exactly TIMS's product strategy in Canada, but this strategy seems to be in China too. Dissatisfied with soil and water.

Judging from the evaluation of Meituan, many consumers are holding a punch -in -check -in TIMS Chinese store, but consumers have a serious evaluation of the latter's "coffee+warm food" product evaluation. It can be said that how to explore enough sticky products in the context of the brand's still topicality is another major challenge facing TIMS China at this stage.

All in all, although it has become a force that cannot be underestimated by the coffee market, whether it is horizontal comparison channels or vertical comparison products, TIMS China lacks a good enough moat. In this context, even if it is successfully logged in to the capital market, TIMS China may be difficult to become the "dark horse" of the coffee track.

*This article is based on public information, which is only used as information exchange, and does not constitute any investment suggestions

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