People say that coffee is not profitable, but this brand sells 30 million in a year

There has always been a saying in the domestic coffee industry that "7 losses, 2 draws, and 1 win."

But there is a brand that chose the more niche instant and drip coffee products in the coffee market and focused on online e-commerce platforms. Not only did it sell 30 million in a year, with a gross profit of nearly 60%, it also received a tens-million-level Pre-A round of financing at the beginning of the year.

What did Santonban do right to make money from the niche market? I talked to its founder.

Selling coffee on Taobao, with a turnover of 30 million per year

“Three Meals a Day is the material life of consumers, while Sandunban hopes to create the spiritual world beyond material life.” With some romanticism, Wu Jun started his another coffee project.

In 2008, Wu Jun and his friends opened a No. 92 coffee shop in Changsha. After running the coffee shop for 7 years, he still has a myth about coffee shops.

" On the one hand, customers feel that a cup of coffee at more than 30 yuan is quite expensive, and coffee shops have high profits; on the other hand, coffee shop owners feel it is unfair because they do not make any money. This is something that is increasingly difficult for us to understand, " said Wu Jun.

Myths between consumers and coffee business

In order to find a way out while running the cafe, Wu Jun launched a baking e-commerce project called Food Aesthetics in 2011. "This baking e-commerce brand has achieved an annual sales volume of tens of millions on Taobao, but there are too many SKUs, more than 800, which is very tiring," Wu Jun recalled.

Therefore, with eight years of experience in coffee shop management and five years of experience in e-commerce, Wu Jun came up with the idea of ​​doing coffee e-commerce, selling products that are delicious, more convenient, cheaper, and have a lower threshold. "Will this help break through the coffee dilemma?" he thought.

In 2015, Santonban was registered and entered Taobao, and entered Tmall in September 2018. "Santonban ranked first in the domestic coffee category on Singles' Day in 2018. The number of Taobao users has reached 200,000, and the turnover in 2018 reached 30 million," Wu Jun introduced.

Nowadays, with its special shape and beautifully shot pictures, Santonban’s products have become a kind of internet celebrity. Even if many people have never tasted it, they should have seen it on various social platforms.

The product photos taken are very pleasing

However, there are many coffee shops that have tried e-commerce. How did Santonban carve out its own path? Is this a model that can survive in the long run? Let's dissect this brand.

Find barriers and make a product that is difficult to copy

In 2015, the mainstream products on Taobao were still instant coffee products. There were also some businesses selling coffee beans and coffee utensils, but they were all very niche.

Sandunban wants to sell coffee on e-commerce platforms, but what kind of coffee should it sell? Wu Jun understands that the next Bill Gates will not develop an operating system, and the next Zuckerberg will not create a social network.

Trying to find innovation

If you copy what others do, you are not learning from them.

"We analyzed the market. Instant coffee is cheap but not tasty. Hand brewing is professional but time-consuming and expensive, which is somewhere in between. I think it is a more real and valuable demand point to make it cost-effective and convenient while still tasting good, " said Wu Jun.

At the end of 2015, the first generation of products: drip coffee grand slam was launched. This is a set, mini hand brewing pot + mug + 8 bags of drip coffee, 139 yuan. The concept of the promotion is that as long as there is hot water, you can make a cup of good coffee.

Selling coffee sets

According to Wu Jun, the backend data quickly provided feedback on this product: 3,000 units were sold within one month of its launch, with a gross profit of nearly 60%.

Wu Jun looked at the sales data and understood: user demand is clearly there, the key lies in how you satisfy it and whether you can do it to the extreme. If you can do it, it is right .

But unexpectedly, the growth trend slowed down in the summer of 2016 because everyone wanted to drink iced drinks. This change gave them the opportunity to find their second hit: cold brew filter coffee.

According to Wu Jun's recollection, the concept of selling cold brew coffee bags did not exist in the industry at that time. They got inspiration from the popular cold brew coffee at the time and found a supplier to develop this product.

"After this product comes out, we can achieve no peak or off-peak season throughout the year. We sell drip coffee in winter and cold brew bags in summer." Wu Jun said.

After two experiences, in early 2017, the second-generation hand-brewed coffee grand slam set was launched, consisting of a hand-brewed pot + sharing pot + filter cup + filter paper + coffee beans/powder, and the whole set was priced at more than 200 yuan.

Cultivating advanced coffee consumers

"This is an upgraded version for users of the first generation of products. After a few months of hand-brewed coffee, they will have advanced needs. We responded to this demand and launched a hand-brew set to make hand-brewed coffee within reach," said Wu Jun.

In addition, according to Wu Jun, the "Grand Slam" is an innovation. Before Santonban, it was not sold in this way in the market. The equipment, utensils, and drip ears were all sold separately, and the hand-brewed kettles and filter cups were mainly international brands, which were very expensive.

Wu Jun was both happy and worried about the benefits of innovative thinking. First, the number of users was not growing fast. The operation of coffee equipment was too niche and the frequency was not high, with a repurchase rate of less than 20%.

Second, the speed of innovation is far behind the speed of copycatting and plagiarism. How to develop a product with a wide audience, high repurchase rate and barriers is the top priority for the brand.

Product barriers + repurchase rate are pain points

In 2018, Santonban launched its cold brew instant coffee, which took two years to develop. According to Wu Jun, this product is an upgraded version of freeze-dried instant coffee, which can be dissolved in any liquid at any temperature (hot water, cold water, milk, etc.) in 3 seconds, and retains the coffee flavor to the greatest extent. To put it simply, it is a bit like "boutique instant coffee".

Another innovation is the packaging. Instead of using traditional non-woven fabrics or plastic bags, the products are packaged in mini cups, which look very cool.

Image source: Santonban

Wu Jun said: "In addition to the technical moat of this product, the outer packaging also has certain technical barriers, which to a certain extent suppresses the threshold for plagiarism."

How to ensure an 80% success rate before officially launching?

Find a large number of consumers to give their opinions

In the outside world’s impression, Santonban has strong product development capabilities and is good at finding user needs. But few people know that behind these popular products are “smart people’s hard work” -

Starting from the first generation of products, each Santonban product undergoes a test in four aspects before it is launched on the market.

Find different consumer channels to test

1. Send the products to food influencers on Xiachufang and Weibo for sample testing.

For example, which of the 10 packs do you like best? Which ones are problematic? What is the overall brewing ratio? What is the packaging? Will you give it as a gift or drink it yourself?

2. Professional institutions , such as the taste research laboratory of Xiachufang.

According to Wu Jun, the first generation of products was rejected and redone three times before being launched on the offline kitchen platform.

3. Exhibition.

At the 2018 cold brew instant coffee exhibition in Shanghai Spring, their team conducted 2,000 sample tastings and received more than 1,000 questionnaires.

4. Third-party institutions.

Every year, Sandunban looks for a third-party agency to recruit 300 old users to conduct actual surveys and interviews.

This workload is quite large and extremely tedious, but the launch of each new product is based on the opinions of food experts, professional organizations, old users, and third-party organizations, ensuring the possibility of success.

After consumer survey, ensure the success rate

Dr. Ma Shengxue, who was in charge of product development at Starbucks, once talked about a system theory of R&D. He said that products that have been tested by consumers many times will make people feel confident when they are released, and will basically make 80% to 90% of consumers like them.

Perhaps having tasted the sweetness of this method, Santonban will open a new store called Coffee Research Room on Jiefang West Road in Changsha next month. The main function of this store is to test new products. Customers can drink a cup of latte for about 20 yuan, but they must put forward their own opinions and suggestions, or fill out questionnaires.

Fission through seed users

As a coffee e-commerce brand, according to Wu Jun, their promotion method refers to Xiaomi and Lechun Yogurt, finding seed users and then fissioning through them.

“For example, before launching on Taobao, we looked for food experts on Xiachufang and Weibo as seed users, continuously sent them products, and made revisions based on their opinions. This made them feel that the brand was being taken seriously, and that they had participated in the brand’s development, witnessed the iteration of the product from 0 to 1, and that they had grown up with Santonban.

Find users who have a say and give them a sense of participation

Therefore, they are willing to share on their own accounts and support Sandunban.

After the product was polished through seed users, it was not directly launched on Taobao, but first on online platforms such as Xiachufang, Liangcang, and City Pictorial. After meeting real users on these platforms, the product was further polished to enhance brand potential, and finally launched on Taobao, so the cost of trial and error was very low. "

The Enlightenment of Three and a Half

Talking about the future plans of Sandunban, Wu Jun said that we should be grateful for this good era.

“People born in the 1970s and 1980s admire and respect Starbucks, but those born in the 1990s and 2000s have been around since they were born. In their eyes, Starbucks is just a form of coffee, and they already have some knowledge of coffee.

What we need to do is to create conditions for young people, be more open and active in terms of channels, products, flavors, etc., make our products more diverse and rich, and let more people rely on coffee flavors as deeply as milk tea, and we will succeed. "

Image source: Santonban

It is said that few people drink coffee and the domestic environment is not good, but there will always be profitable brands. The key lies in whether you can find the truly valuable demand point.

For Santonban, the current priority is to transition from product innovation to business model innovation, linking online and offline to find an innovative business model.

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Coordinator: Sister Fei | Editor: Zheng Yu | Visual: JIRFEI

The article is original by Kamen and any reproduction without permission is strictly prohibited.