Miss Fresh Is Nowing Serving Coffee: Luckin Real Rival Is Coming
COVID-19 and China
Miss Fresh Is Nowing Serving Coffee: Luckin Real Rival Is Coming. PHOTO: Credit to Karen Cantú Q on Unsplash

March 30, 2019, Miss Fresh launched a new mini program called Xiao hong bei (小红杯) to sell coffee, reported by Jiemian, a Chinese media.

Xiao hong bei literally means little red bottle. As its name suggests, it targets Luckin which is widely known by many Chinese as the little blue bottle. Jiemian cited a comment made by Miss Fresh's employee that Xiao hong bei is trying to challenge Luckin. 

Xiao hong bei came up with the slogan - price coffee for what it really costs by reducing the costs of third places and celebrity representatives.

EqualOcean believes Xiao hong bei and Luckin will be close competitors in terms of similar pricing and growth strategy and targeted users. 

Luckin has significantly reduced the coffee price in China; however, Xiao hong bei is more ambitious and try to drive the price going down even further. For now, it offers 7 types of coffee with price ranging from CNY 7.9-9.9, not much cheaper compared to Luckin's after-coupon price. Here is a quick price comparison of Xiao hong bei (left) and Luckin (right).

Product & Channel 
Product: Xiao hong bei and Luckin both highlight premium factors such as freshly made, good quality imported milk and premium Arabic coffee beans. 

Product design: the name and logo can hardly make it stands out. If research Xiao hong bei (in Chinese) on Red (小红书), one of the most popular product review App in China, the results come out will be Costa Coffee, which also features the color of red.

Unlike Luckin which uses deer as the consistent brand IP, Xiao hong bei printed some Beijing opera photos on the bottle which could be hard to impress customers.

Online: Xiao hong bei will learn from Luckin's delivery but it does not have any plan to open offline stores yet. Coffees will be made on its mini-warehouses and delivered. For now, it only launches in some areas in Beijing and 30 more stores will be coming soon. 

Location: its mini-warehouses are located in residential areas where rents are cheaper than in the commercial areas. 

Referral system: The most fundamental and innovation part for Luckin to achieve viral growth is because of its referral system - invite one get one for free. This growth strategy has been used by many Chinese internet companies and is likely to be used by Xiao hong bei as well. The new customers can get their drinks for free.

Drink Industry 
In the Chinese drink industry, bubble tea and coffee are the two attract the most attention.

According to Essence Sercurities (安信证券), the market size for bubble tea and coffee will be similar reaching CNY 80-90 billion ( USD 12-13 billion) in 2019. Fresh coffee leads the trend in the coffee sector.

There are two main reasons for why Miss Fresh started with fresh coffee as the first attempt in the drink industry. The first is coffee consumers tend to be richer, less price sensitive and more educated. The second is the frequency of coffee purchase is higher, which could increase users stickness and achieve cross sales. Miss Fresh has around 2,000 SKUs, all food-related; thus cross sales and high per order price can be easily achieved.

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