Middle Eastern white-collar workers are drinking Cotti, and Chinese coffee brands are making their way to the world.
Author | Ye Danxuan
Editor | Yuan Silai
The domestic battles are not over yet, but Chinese coffee brands, always in a state of anxiety, have ignited greater ambitions.
In September this year, the chain coffee brand NOWWA Coffee disclosed in an interview with 36Kr that it will accelerate the market layout in the overseas market within the next month. In addition to the popular Southeast Asian destinations for going overseas, NOWWA Coffee even aims at the North American and European markets for its overseas expansion.
In addition to NOWWA Coffee, the overseas layout of other Chinese coffee brands has also entered a white-hot stage.
In April 2023, Luckin Coffee opened its first overseas store in Singapore. Its strong competitor, Cotti Coffee, chose Seoul, South Korea as the first stop for its overseas layout.
Cotti Coffee's pace overseas is apparently faster than that of Luckin Coffee. Since the opening of its store in Seoul in August 2023, Cotti Coffee has rapidly expanded its store network in various Southeast Asian countries. At the same time, stores in Japan and Canada have also been opened one after another.
It is worth noting that the Middle East has appeared in Cotti Coffee's overseas territory. According to Hardcore statistics, as of now, Cotti has opened 3 and 4 coffee stores in Doha and Dubai of Qatar respectively.
In fact, for the Chinese tea and coffee brands that are flocking to go overseas, the Southeast Asian market is no longer novel. Currently, as both Chinese people and capital are flowing to the Middle East, coffee brands seem to intend to take this as a new battlefield.
The Next Stop, the Middle East
In March 2024, Cotti Coffee opened its first store in the Middle East, located in the Business Village business district in the Deira area of Dubai.
Unlike the stereotypical "extravagant and luxurious" image of the Middle East, the Deira area is an older urban area in Dubai. The Business Village business district where Cotti Coffee's first store is located is also an area where Southeast Asian and Chinese white-collar workers and traders gather.
In July this year, Cotti Coffee opened a new store in the Knowledge Park in the Dubai Internet City.
The Dubai Knowledge Park is a free zone established by the United Arab Emirates in 2003. All enterprises operating within its premises are not subject to traditional tax laws, and enterprises have full foreign ownership. Not only are various tariffs and taxes exempted, but 100% of profits and capital are also returned.
Therefore, the Dubai Knowledge Park has attracted a large number of well-known overseas enterprises to settle in. At the same time, several of the most famous universities in Dubai are also located in this neighborhood. The consumer groups in the neighborhood are also relatively unified, mainly students and white-collar workers.
It is not difficult to see that Cotti Coffee's layout and customer acquisition strategy in the Middle East are still distinct: Even in Dubai, it always targets the most familiar customer groups and insists on opening the market with the advantage of cost performance.
As the first Chinese coffee brand to go to the Middle East, Cotti Coffee's cost performance advantage has obviously quickly captured the hearts of the target customer groups.
According to Hardcore's understanding, in central cities such as Doha and Dubai, the price of freshly brewed coffee from global chain coffee brands such as Starbucks and local coffee brands is about 40 yuan per cup.
Rainey, who works for a Chinese trading company in Doha, said that Cotti Coffee has a very obvious pricing advantage among the many coffee shops in Doha. "(The coffee pricing of Cotti Coffee) is between 10 Qatari riyals and 15 Qatari riyals (about 20 - 30 yuan), which is very cost-effective considering the high prices in Qatar."
With 7 stores opened within half a year, Cotti Coffee has quickly emerged in the Middle East.
However, it was actually Luckin Coffee, which is in a close competition with Cotti Coffee, that had the idea of laying out the Middle East first. As early as 2019, Luckin Coffee announced a cooperation with Americana Group, a food manufacturing and sales company headquartered in Kuwait, to establish a coffee retail business in the Middle East and India. At that time, Luckin Coffee tried to compete with Starbucks and attempted to divide Starbucks' strong market in the Middle East and India.
Subsequently, due to changes in Luckin Coffee's management and financial turmoil, its overseas expansion plan was blocked, and its layout in the Middle East was also suspended accordingly. It was not until March 2023 that Luckin Coffee resumed its overseas actions, setting its first stop in Singapore, without showing any ambition to return to the Middle East.
An investor close to the coffee industry told Hardcore that due to historical reasons, there is often a situation of "mutual circulation" of internal information between the teams of Luckin Coffee and Cotti Coffee. Perhaps Cotti Coffee chose to go overseas in the Middle East in order to seize the opportunity.
The Road of Coffee Brands Going Overseas to the Middle East
Another reason for coffee brands to choose the Middle East may be the booming of domestic tea drinks going overseas in the Middle East.
As early as 2018, the then booming milk tea brand Happy Lemon announced its entry into the Dubai market and opened five stores. Subsequently, milk tea brands such as KOI, Yi Fang, Tiger Sugar, and Latea have all expanded their layouts in the Middle East.
In the past two years, as the growth rate of the domestic freshly brewed tea drink industry has generally slowed down, the number of milk tea brands going overseas to the Middle East has continued to increase. In January 2024, Gong Cha signed a franchise agreement with the Saudi Shahia Food Group, claiming to be the "largest in the brand's history", planning to open 300 stores in the Middle East. Currently, the partnership application in the United Arab Emirates on the Heytea Business Partnership Assistant WeChat mini-program shows an open status.
Compared to milk tea, the consumption habit of coffee among Middle Eastern people is actually more firmly established. As early as the 13th century, Ethiopians brought coffee to the Arab region, and drinking coffee gradually became a daily habit of Arabs.
In recent years, the coffee consumption market in the Middle East has also continued to be booming.
Chen Xing, a Chinese in Saudi Arabia, told Hardcore that because alcohol is prohibited in Saudi Arabia, coffee is the locals' main beverage for entertainment, and 24-hour coffee shops are the mainstream in the local area.
The Saudi Food and Drug Administration (SFDA) once reminded consumers to moderate their coffee consumption after the end of the daily fasting after the start of Ramadan in March 2023. For healthy adults, it is recommended that the daily caffeine intake should not exceed 400 milligrams, or about 15 cups of 50-milliliter Saudi coffee.
According to a public report in the UAE's Albayan newspaper, it is expected that the coffee market in the UAE will grow at an annual rate of 8.4% between 2023 and 2029, and the per capita coffee consumption in the UAE is expected to increase to about 1.36 kilograms in 2023.
The mature coffee consumption habit reduces the market education cost for coffee brands when they enter the Middle East, but at the same time it also means that local brands are relatively strong. It will be relatively difficult for Chinese coffee brands to establish their own consumer mindset in the brand.
Chen Xing told Hardcore that the coffee consumption habit in Saudi Arabia has a very strong regional attribute. Not only is there a religious regulation prohibiting alcohol consumption, but also there are local innovations in the coffee flavor, and a large amount of local spices will be added to enrich the flavor of the coffee.
Famous Irish coffee uses whiskey and coffee as the main raw materials, and Luckin Coffee's once popular "Maotai-flavored" coffee also contains alcohol. Similar coffee categories are prohibited from being sold in the Middle East.
Although Li Yingbo, the Chief Operating Officer of Cotti Coffee, said in an interview that Cotti Coffee will make product adjustments according to the needs of each country, such as the roasting degree of coffee beans and the sweetness of coffee. However, according to Hardcore's observation, the menu of Cotti Coffee in the Middle East market has not made many adjustments for the tastes of the Middle East region, and it still mainly focuses on the "milk coffee" category that is popular in China.
It is worth noting that among the product adjustments mentioned by Cotti Coffee for the overseas market, the adjustments in sweetness and the roasting degree of coffee beans are relatively minor. To meet the special needs of the Middle East market, the requirements for new product research and development are higher, and the attempt to increase special SKUs will also put higher demands on the overseas supply chain.
It may be more difficult than imagined to "dig for gold" in the Middle East filled with the aroma of coffee by relying on low prices and a down-to-earth approach.
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