RuiXiang Coffee: Leading China's Coffee Market and Expanding Globally

Furthermore, during this period, the company's operating profit, under the United States Generally Accepted Accounting Principles (GAAP), doubled from 2022. RuiXiang Coffee recently made headlines for achieving an unprecedented milestone in the Chinese coffee market. In 2023, the company's sales revenue in China exceeded that of Starbucks for the first time, making RuiXiang the largest coffee chain in the country. China Chain Store & Franchise Association expert committee member, Lai Yang, emphasized to China Business News reporter that the fundamental reason behind RuiXiang's success is the changing landscape of Chinese coffee consumers. Coffee has evolved from a niche, commercialized product to a mainstream, everyday beverage in China.

Unlike Starbucks, RuiXiang's light-weight store model is better suited to adapt to these new changes in the market. Despite its notable achievements in the Chinese coffee market, RuiXiang Coffee is not without fierce competition. During last year, RuiXiang Coffee successfully ventured into the "10,000-store era." In the whole year, the chain opened 8,034 new branches, representing a 97.8% increase compared to 2022's end. As of 2023 year-end, RuiXiang Coffee had 16,218 stores in mainland China, including 10,598 self-operated stores and 5,620 franchised stores.

Its main competitor, the comparatively younger KouDi Coffee, is closing in fast. According to an announcement made in February, KouDi Coffee now has over 7,000 outlets scattered throughout the nation. The Allegra Group, an international advisory firm, released a report in December 2023 stating that China now has approximately 500,000 coffee shops, making it the country with the most branded coffee shops in the world.

This surpasses the United States. The number "9.9 yuan" has become a defining figure in China's coffee consumption market. In June 2023, RuiXiang Coffee initiated the "9.9 yuan promotion event," which has continued until now.

According to China Business News, during the conference call to discuss the quarterly financial results, RuiXiang's CEO, Guo Jing, mentioned that the slowdown in profit growth in the fourth quarter of 2023 was primarily due to seasonal factors, the "9.9 yuan promotion event," and fierce market competition.

However, this outcome was foreseen. Guo further stated that RuiXiang would continue to implement their current strategies and pricing policies in 2024, aiming to broaden the customer base, increase consumption frequency, and expand market share. An anonymous source close to RuiXiang Coffee revealed to China Business News that the company's pricing strategy remains unchanged, and the "9.9 yuan event" will continue to be carried out.

This move is expected to help RuiXiang Coffee further expand its market share and consolidate its leading position. Wang Peng, a deputy researcher at the Institute of Sociology at the Chinese Academy of Social Sciences, told China Business News, "Currently, moderate competition in the Chinese coffee market is conducive to industry development.

Competition can promote product innovation and service improvements among coffee companies. At the same time, it also accelerates the expansion of China's coffee market and enhances consumer recognition and acceptance of coffee as a beverage. Competition can also contribute to the formation of a more diversified and dynamic coffee market in China." As RuiXiang Coffee focuses its efforts on the lower-tier and overseas markets, its next stage of development is gaining momentum. RuiXiang Coffee's foray into the overseas market is beginning to take shape.

According to the company, it successfully launched in the global market in 2023. Singapore's RuiXiang Coffee outlets reached 30 by the end of the year, a figure noted by CEO Guo Jing during the three-quarterly results conference.

Guo emphasized the company's commitment to continue its global expansion in the future. Tier 3 and Tier 4 markets in China will also become a focus for RuiXiang Coffee in the future. Guo revealed that as competition in the Chinese coffee market rapidly intensifies, RuiXiang Coffee will continue to increase the number of high-end city stores, while simultaneously expanding its reach into lower-tier cities through the franchising model to further grow its market share.

Lai Yang believes that the new direction of development is closely tied to consumer demand. In the long term, lower-tier markets will bring exponential growth to the Chinese coffee market. However, in the short term, the proliferation of coffee shops due to price wars could exacerbate market fragmentation risks. Additionally, lower-tier markets may lack a loyal customer base for some coffee brands, increasing the risk of consumer dispersion as new brands enter the market. Wang Peng concluded that lower-tier markets will provide RuiXiang Coffee with massive market potential and development opportunities.

However, consumer demand and habits in lower-tier markets may differ from those in high-end cities. Therefore, careful market research and accurate positioning are crucial. Furthermore, companies must possess strong financial resources, operational capabilities, and market insights to tackle various battles and risks in these markets.

In summary, the rise of RuiXiang Coffee in the Chinese coffee market has led to a new era in the world of coffee. The success of RuiXiang Coffee signifies the transformation of coffee consumption in China and the changing preferences of Chinese consumers.

With CEO Guo Jing's commitment to further expansion in the lower-tier and overseas markets, the brand is poised to continue its growth trajectory. However, as competition intensifies, companies like RuiXiang Coffee must adapt to changing consumer demands, navigate price wars, and explore new markets to maintain their leading position in the Chinese coffee market. This is only the beginning of a remarkable journey for RuiXiang Coffee.