How can instant coffee upgrade itself? | YiMagazine

A new domestic brand "Santonban", which was founded only four years ago, is catching up with the business of big manufacturers by making instant coffee more convenient, tastier and better looking. How did this happen?

Reporter | Liu Pingting

Editor | Xu Bingqing

Every year’s 618 Tmall Fans Carnival is the busiest time for brand merchants to ship goods, but Wu Jun, the founder and CEO of the coffee brand "San Dun Ban", said that he was "not too busy" and chose that day to accept our interview in Changsha.

When asked about the reason, he was a little embarrassed. "(This promotion) sales exceeded expectations, the factory was short of stock, and the second wave of activities was out of stock in the fifth hour. It will take a few more days to speed up production."

The sold-out product is a "super instant premium coffee" - powdered coffee packed in a mini coffee cup-shaped, colorful capsule, which is said to be "soluble in any liquid within 3 seconds". Although it is also considered "instant coffee", it tastes completely different from the previous generation of "three-in-one" coffee, and you can feel the bitterness, acidity and even aroma of black coffee.

San Dun Ban’s “super instant boutique coffee” claims to be able to “dissolve in any liquid within 3 seconds”.

Thanks to this delicious and fun product, Santonban, which was founded in 2015, ranked first among domestic coffee brands on Taobao during the 2018 Singles’ Day shopping festival, and then ranked second in the world after Nestle during the 2018 Singles’ Day shopping festival. During the 618 shopping festival on Tmall, this super instant premium coffee still became the best-selling coffee product even though it was out of stock and could only be pre-sold.

Many market research data and the development of emerging companies are predicting the speed of the rise of the Chinese coffee market. In 2018, according to data released by the First Financial Business Data Center, the annual growth rate of Chinese coffee consumers was around 15%, and the market sales volume is expected to reach 300 billion yuan in 2020.

However, unlike many European and American countries that have experienced the "three waves of coffee" from instant coffee, commercial chain coffee to boutique coffee, China has been exposed to coffee products and culture for a relatively short time, and is currently in a critical stage where the above three types of coffee products and brands are competing for consumers.

Compared with instant coffee and chain stores, specialty coffee emphasizes more on fine technology and unique service, but not standardization. This also determines that it is difficult for specialty coffee to quickly scale up and replicate stores during the promotion process. It relies more on factors that are difficult to standardize, such as the flavor of coffee beans, the skills and services of baristas, so it is difficult to breed a popular specialty coffee brand.

The blank market also means fertile ground for gold mining. With its innovative products and outstanding sales performance, "Santonban" received a Pre-A round of financing of tens of millions from Frees Capital in January 2019. Tiantu Investment also participated in the subsequent financing, but did not disclose the specific investment amount.

"First, the pricing of Sandunban Coffee is in line with the mass market; second, when everyone is paying attention to takeout and opening stores, purely Internet business is actually a blue ocean; third, the product itself has strong technological innovation and packaging capabilities." After investing in "Santonban" at the end of 2018, Huang Hai, director of Frees Capital, told YiMagazine.

Wu Jun's entrepreneurial story is somewhat atypical, and also has some elements of timing and luck. He has experience in running a coffee shop and has accumulated knowledge in operating e-commerce. "These two experiences laid the foundation for 'San Dun Ban', which is actually coffee plus e-commerce."

Sell ​​more good coffee

Wu Jun is from Changsha. After working in Beijing for 8 years, he returned to his hometown in 2008 and opened a coffee shop called "No. 92" with his old classmates. At that time, Wu Jun, who loves coffee, had not yet come into contact with the concept of boutique coffee. But after running the business for a while, he found that the average price of 38 yuan per cup of coffee could not bring sustainable profits to the store.

"At that time, people only regarded coffee shops as a place to chat. You might have to sit inside for a long time after ordering a cup of coffee, so the efficiency per square meter was too low." In order to balance expenses, Wu Jun began to try selling drinks in coffee shops at night. This "coffee shop during the day, small bar at night" model made the business suddenly better. He realized that "coffee is just one of the carriers of lifestyle. The most important thing is to get the users themselves."

With the idea of ​​"finding an expression of lifestyle", he and his partners started a second business in 2011, opening a Taobao store that provides one-stop baking services for families. As the business grew, consumers continued to ask them for new baking mold research and development needs, and the Taobao store once sold more than 800 types of products.

Wu Jun did not expand his business, but closed his Taobao store in 2015 and refocused on the coffee business. At that time, specialty coffee in the Chinese market had already exposed the problems of high prices and complicated access. He predicted that if these two problems could be solved, specialty coffee would have the potential to become a mass business.

Huang Hai believes that 2018 is the first year that coffee in China officially became a basic consumption. The rapid development of Luckin Coffee and Lian Coffee, which rapidly expanded the market through takeaway channels, is a signal that coffee has become a daily consumer product. Consumers' "social needs" to buy coffee and experience the space at Starbucks have become weak, and instead, coffee-loving and even addicted consumers have made it one of their daily habits.

"In China, coffee is evolving from a social experience to a basic need. Coffee shops as social spaces are not the biggest growth dividend," Huang Hai said. In April 2015, "San Dun Ban" was established, and Wu Jun also took "selling more good coffee" as his starting point for entering the boutique coffee market.

In April 2015, "San Dun Ban" was established and entered the boutique coffee market with coffee products.

Although countless entrepreneurs have discovered the rising trend of specialty coffee, the promotion of specialty coffee has always been at a bottleneck that cannot be broken through.

Within Tiantu Investment, beverages occupy a complete investment theme, and its branches include coffee, tea and dairy products. However, Pan Pan, the managing partner of Tiantu Investment, has observed the industry for several years and communicated with many founders of coffee brands, but he has not found a coffee brand that he particularly wants to invest in.

“It’s not that they don’t want to invest in offline coffee shops, but they haven’t done enough in terms of brand power and innovation. Perhaps some coffee shops will use better beans, but most consumers cannot appreciate the quality difference in coffee beans. The brands that can subvert the boutique coffee market today either have the ultimate convenience or can bring the ultimate experience to consumers,” Pan Pan told YiMagazine.

In order to solve the problem of "convenience" of specialty coffee, many specialty coffee practitioners have tried to seal coffee powder into drip bags that are easy to brew and handle. "San Dun Ban" started with this low-threshold product form. Tu Weicheng, the clerk in charge of the coffee industry at Tmall, also said that after realizing the market opportunities of specialty coffee, Tmall also focused on promoting drip bags for this sub-category in 2015.

Santonban’s specialty coffee products started with drip bags.

But in the face of actual sales, Wu Jun found that the drip coffee was "not selling well". One proof is that in the first few days after the product was launched, the company's only coffee bean roasting machine "did not work much".

“If we ranked the domestic boutique coffee brands that make drip coffee bags in order of first come, Santonban might be ranked in the hundreds. But for consumers, their awareness of drip coffee bags is still in its infancy. This means that there is a huge information asymmetry in the market,” said Wu Jun.

“Earning Simpler” Product Innovation

Faced with the poor sales performance of drip coffee, Wu Jun did not face the challenge head-on, but tried to solve the problem indirectly from a technical perspective.

Specialty coffee has very high requirements in terms of operation. If consumers want to get a cup of specialty coffee with good taste by themselves, they need a complete set of utensils and relatively skilled brewing techniques. But if we abstract it, the whole process is nothing more than "letting the water flow evenly and steadily flush all the coffee powder."

In order to achieve this process, Wu Jun developed a special hand-poured coffee pot based on the milk jug commonly seen in coffee shops. The capacity of the hand-poured coffee pot is just enough to brew a bag of coffee; the diameter of the designed spout is about 4 mm, which forces a uniform and thin water flow. "Users don't need to know how to brew coffee by hand, just buy it and use it a few times and you will understand it."

After that, Santonban packaged the hand-brewed coffee pot and drip coffee bag into a "drip coffee grand slam set" for 139 yuan, gradually opening up the market. However, due to technical barriers, it was soon imitated by other merchants on Taobao, and the team was once again "forced to come up with something new" in 2016.

Three and a half hanging ears grand slam.

In the summer of 2016, Wu Jun drank the cold brew coffee that Starbucks had started to promote for the first time, and he was inspired to innovate again. "After taking the first sip, I knew that the research and development of this product was not difficult. Because every time Starbucks launches a new product, it has to consider the possibility of large-scale commercialization."

In August of that year, Sandunban launched cold brew coffee filter bags. Users only need to put the coffee filter bag, which looks like a tea bag, into a kettle and then put it in the refrigerator for 8 to 10 hours, and they will get a pot of cold brew coffee the next morning. Because the operation is convenient enough, the sales of this original cold brew coffee filter bag quickly reached 2,000 bags per day after it was launched. But soon, the cold brew filter bag also encountered the same problem as the "Grand Slam of Ears", and Wu Jun had to start looking for the next moat product with technical barriers.

What is a more convenient and stable coffee product? The final conclusion of the Santonban team is the same as that of many consumers who have little contact with coffee - instant coffee.

Cold brew instant coffee is one of Sandunban’s moats.

Ordinary instant coffee is made by first extracting the active ingredients in coffee powder into coffee liquid, and then heating and evaporating the water to obtain a dry extract. This processing method will cause a large loss of caffeine and coffee flavor. In addition, in order to control costs, brands often use poor quality coffee beans, which ultimately leads to the product perception that traditional instant coffee is "bad".

To address these issues, Santonban not only used better coffee beans when developing its own instant coffee, but also made improvements to the production process. They adopted the "freeze-drying" technology, which was certified feasible in the 1970s but had a high technical cost. That is, through the rapid freezing and sublimation process, the water in the coffee liquid is removed, and finally a coffee extract with finer particles is formed, which is more soluble in water and can retain more flavor substances.

In order to achieve this technological innovation, Santonban spent two years in the research and development phase. At present, Santonban has launched 6 different flavors of super instant coffee, each of which is provided by 3 types of coffee beans. Since the extraction rate of each coffee bean is different, it is necessary to conduct continuous experiments to calculate the optimal extraction curve and effective ingredient extraction rate of the blended beans, so that its flavor is getting closer and closer to the effect of freshly brewed coffee.

Wu Jun did not disclose specific technical details to YiMagazine, but he said that from green coffee beans to finished products, it takes at least three days and up to a week, depending on the difficulty of extracting the flavor. "We do the previous work more carefully so that users can drink more conveniently."

According to YiMagazine, classic coffee brands represented by Nestle are also actively developing freeze-dried coffee powder. But in Wu Jun's opinion, it will take a long time for large companies to go from research and development to market launch; and from the perspective of product sales space, consumers who are used to a bag of frozen coffee at a price of less than 1 yuan per bag will find it difficult to quickly adapt to a bag of "Nestle" freeze-dried instant coffee at a price of more than 5 yuan.

"But we are also very clear that it is technology that is driving the coffee wave. Super instant coffee is just a driving point for future coffee, and no one knows what will lead the next wave," said Wu Jun.

From "Internet celebrities bringing goods" to "becoming an Internet celebrity bringing goods"

Wu Jun recalled that Santonban, like many other startups, had a hard time finding its target consumers in its early stages. Finally, he turned to loyal consumers from his previous baking Taobao store and solved the problem by sending samples and encouraging creativity.

Interestingly, due to the lack of social e-commerce platforms such as Douyin and Xiaohongshu, the first batch of "KOLs" of Santonban gathered on the vertical community "Xiachufang" App for food. After discovering the new brand Santonban on its own platform, Xiachufang App not only provided traffic support, but also made some suggestions for improving the product flavor.

The promotion speed of KOLs was quite amazing. 500 sets of "Grand Slam Coffee Sets" were sold out in 3 days, which made Wu Jun excited for the first time. While observing the specific promotion process, he also realized that the "high-end feel" of hand-brewed coffee itself and the "appearance" of the equipment were actually the key points to impress consumers.

Later, when Santonban launched its "super instant premium coffee", it also specially designed mini independent packaging for it in a variety of bright colors such as bright yellow, light red, black and gray. The design element also became a "hot spot" for Santonban on social media and e-commerce.

The unique packaging is one of the factors that attracts consumers to Santonban’s “super instant boutique coffee”.

As for why the packaging was designed as a small coffee cup, Wu Jun said that this idea seemed simple, but it actually took nearly half a year to design. Previously, the team had rejected dozens of packaging ideas such as bag packaging and capsule packaging. When the factory was preparing to use a spherical solution to open the mold, he suddenly thought, "The key word is restoration. We should use the shape of the coffee cup itself to help users understand that it is a cup of delicious coffee."

This eye-catching super instant coffee immediately attracted the attention of Tmall’s Xiaoer Tu Weicheng after it was launched in May 2018. According to his understanding of the Taobao market at the time, the average age of consumers who buy coffee online is over 35 years old, and there have been no new products in the instant coffee category for about 6 years. However, Santonban, which has many innovations in product packaging and technology, looks very different.

In July of that year, Santonban Coffee was invited to join Tmall, upgraded from an ordinary Taobao store to a flagship store, and became a top seller that Tmall would provide marketing support to. This means that Santonban can access more personalized advertising resources on the Taobao homepage, which is "one thousand faces for one thousand people", and can also participate in marketing activities such as "Super Category Day" that are very effective in promoting sales.

"The traffic brought by Alibaba helps us tell users that this is a brand that represents future trends and this may be what the future of coffee looks like," said Wu Jun.

He also told YiMagazine that the marketing expenses of Santonban Coffee so far are "not high". "Some users think that since the sales are so hot, a lot of money must have been invested behind it. But we have almost 2,000 notes on Xiaohongshu, 90% of which are not written by us."

After gaining the favor of capital, Santonban plans to invest more money in expanding the supply chain and large-scale transformation, and is also preparing to develop more innovative products. Wu Jun also plans to re-try the offline store business through these products, and has already started testing the waters in Changsha. But he feels that there is still a lot for the Santonban team to learn about offline service, space and experience.

Santonban is testing the waters with its offline store.

"Some brands are born to provide services, some are born to provide channels, and we are born to provide products. Although we want to do all aspects well, we are still very far from opening a store," he said.

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