When you click on the KFC ordering mini program, you will find that its homepage is prominently marked with the words "Kenyue Coffee celebrates with 100 stores, every day at 9.9".
According to its official mini program, the "9.9 yuan" promotion period is from March 39th to April 7th, 2024. Consumers can receive a 9.9 yuan coffee coupon every day at designated stores, either by dining in the store or taking it out, for use by all coffee products in the venue.
From the perspective of China's consumption environment, the return to parity and high cost-effectiveness has become mainstream in the past year. In this competition across various industries, the "9.9 yuan" low price strategy launched by Kudi and followed by Luckin has made the coffee industry one of the most "competitive" tracks, while gradually changing consumers' perception of the price of a cup of coffee.
At present, KCOFFEE (hereinafter referred to as "KCOFFEE") has launched a 9.9 event for the entire venue. Although it is a limited time event, with the current public awareness that "a cup of coffee does not exceed 9.9", it may also indicate that KCOFFEE intends to expand its popularity among consumers through this event.
KCOFFEE is a coffee brand under Yum! Brands China, which first appeared at KFC restaurant counters as a beverage around 2014. However, at that time, according to Yum! Brands China's financial report, it was more like "KFC increasing trading volume during breakfast and afternoon tea periods.".
KCOFFEE's further actions began around the second half of last year, when a group of renovated KFC restaurants appeared on the streets of some cities. Their biggest difference from before was the prominent "KCOFFEE" name printed on their storefronts. In addition, KCOFFEE also opened a number of "independent boutique coffee shops".
According to Interface News, although it appears to be an independent store, in reality, these KCOFFEE stores still rely on KFC restaurants for overall property and operation. For example, they are usually located next to existing KFC restaurants, and even the internal space and staff are connected and shared with KFC.
In fact, KCOFFEE products themselves belong to the affordable price range. Its product prices are mostly concentrated below 22 yuan, such as American and latte priced at 15-22 yuan, large cup bubbles priced at 12-18 yuan, hand cranked coffee series, and even SOEs starting at 7 yuan.
In the past, relying on KFC restaurants, the attraction of coffee brought by the restaurants also brought good sales to KCOFFEE. According to Yum! China's latest 2023 financial report, KCOFFEE sold 190 million cups throughout the year, a year-on-year increase of 35%, making it one of the "star items" among the catering brands under the group.
But the current "9.9 in total" may attract a wider customer base for KCOFFEE.
Taking Luckin Coffee as a reference. In terms of customer acquisition effect, last year's low price strategy allowed Luckin to attract many new customers and help it create market volume, attract consumers and franchisees, and expand the brand scale.
From the second quarter to the third quarter of 2023, Luckin Coffee's user base reached a new high of 58.48 million, and its revenue in the third quarter also reached a single season high - this is the period when Luckin Coffee expanded its scope from the first launch of the "9.9 yuan" promotion to the occasion of ten thousand stores.
At the latest financial report conference call, Guo Jinyi, Chairman and CEO of Luckin Coffee, stated that under the dual effects of continuous store layout and product innovation, Luckin Coffee added over 26 million new trading users in the fourth quarter, with a monthly average of over 62 million trading users. In 2023, the total number of new trading users exceeded 95 million, setting a new historical high.
From a pricing perspective, KCOFFEE products may target the same consumer group as Luckin, Kudi, and others, and may even be priced lower.
According to a KCOFFEE store located in Hongkou District, Shanghai, at present, KCOFFEE consumers can see at least three promotional activities. In addition to the current "9.9 per day", consumers can also choose to purchase a monthly card. With this card, each consumer can have three discount opportunities every day: "5 yuan coffee, 7 yuan coffee, and 10 yuan coffee.". In addition, in the KCOFFEE mini program, the interface news also shows that some coffee has a discounted price of 8.8 yuan.
KCOFFEE Product Price List
This combination of pricing strategies has undoubtedly brought KCOFFEE into the "most cost-effective" competitive field.
Horizontal comparison shows that the main low price coffee in the industry is Lucky Coffee, except that Ruixing, Kudi, McAfee, Tims and some tea brands all have coffee products of less than 10 yuan, and Lucky Coffee has a lower unit price. At the end of March, this brand also launched the activity of "capping all coffee products for 7 yuan and 7 yuan" on the Tiktok platform.
Under the trend of chain catering brands sinking one after another, from the perspective of store distribution, the low price strategy can also enable KCOFFEE to gain greater popularity in lower tier cities.
The KCOFFEE mini program shows that its current range of 100 stores covers 23 provinces and municipalities including Anhui, Fujian, Guangdong, Gansu, Guizhou, Hebei, Heilongjiang, Hubei, etc. There are also third tier and below cities in the region, including Wuhu in Anhui, Ningde in Fujian, Maoming in Guangdong, and Jiujiang in Jiangxi.
In fact, for coffee, the 9.9 yuan low price strategy is also a double-edged sword. The basis for achieving this fixed price lies in significant economies of scale and supply chain advantages, as well as comprehensive cost considerations such as rent, labor, and discounts. This will also dilute the brand's profits, as demonstrated in Luckin's Q4 financial report.
But for KCOFFEE, on the one hand, relying on KFC restaurants, it is not difficult to achieve large-scale expansion.
According to the latest financial report of Yum! Brands China, as of the end of 2023, the total number of restaurants and stores under Yum! Brands China has reached 14644, covering over 2000 towns. Among them, KFC had 10296 stores by the end of 2023. CEO Qu Cuirong stated at the financial report meeting that currently more than half of the company's new stores are located in lower tier cities.
On the other hand, KCOFFEE has the supply chain of KFC and even the entire Yum! China as a backing, with advantages in cost control and a certain degree of initiative in price strategy.
However, the current background is that the number of coffee brand stores continues to rise, and the industry's growth rate may slow down in the future. After the entry of affordable coffee by catering giants, how to further innovate products to improve consumer stickiness, balance cup volume with promotional activities, improve brand operation efficiency, and create stable cost-effectiveness advantages will all become further challenges in the industry.