Blue Bottle Coffee's Shanghai Store and the Specialty Coffee Question

Blue Bottle Coffee has confirmed its second mainland China store at Jing'an Kerry Centre in Shanghai, taking the street-level first and second floors. Renovation was delayed by the city's pandemic lockdown, and no opening date has been announced. Its pricing runs above many chain brands, based on fresh beans from its own roasting factory.

During the pandemic's closed-loop production period, that roasting setup helped Blue Bottle gain goodwill in community group buying and home coffee consumption, even as the domestic market entered a price war. The case shows how sourcing and roasting control shape specialty coffee positioning and its wider market prospects.

Blue Bottle Coffee's second store in China has been confirmed to continue locating in Shanghai, at the street-level first and second floors of Jing'an Kerry Centre, and is currently still under renovation. Previously, due to the impact of Shanghai's pandemic lockdown, the preparation progress was once hindered, and many people believed that Blue Bottle's timing for entry was poor. However, during the pandemic's closed-loop production period, Blue Bottle, relying on the advantage of fresh coffee beans from its own roasting factory, instead gained a wave of goodwill in community group buying and home coffee consumption scenarios. This article sorts out Blue Bottle Coffee's pricing logic, brand positioning, and the prospects of the specialty coffee market, and explores whether this expansion is ill-timed or perfectly timed.

"Blue Bottle Coffee's second store is finalized!"

After a period of noise and then a long silence, Blue Bottle Coffee recently revealed to the media that its second store in mainland China will still be located in Shanghai. Unlike the first store, this time Blue Bottle did not choose an old building with historical heritage, but instead entered Jing'an Kerry Centre in Shanghai's core business district, taking the street-facing first and second floors. The interior is still under construction, and the specific opening date has not yet been announced.

In fact, preparations for Blue Bottle Coffee's second mainland store had already begun in early March this year. In early March, some netizens posted that hoarding and construction had begun on the first and second floors of Kerry Centre, but unfortunately, at the end of March, Shanghai entered a months-long pandemic lockdown, disrupting the preparation pace. Many netizens therefore lamented that Blue Bottle Coffee was ill-timed...

On the one hand, the domestic coffee market is falling into a price war, and Blue Bottle's pricing is out of step with mass consumer expectations; on the other hand, pandemic prevention and control has had a direct impact on store sales. From a price perspective alone, Blue Bottle's entry at this time seems unlikely to have much chance of success, but it was precisely this round of lockdown that allowed Blue Bottle to properly demonstrate its strength.

Blue Bottle Coffee is priced higher than many chain brands not only because of brand premium, but also because it provides a unique product experience. There are now quite a few independent specialty coffee shops, but the quality of each shop's output varies, and it is difficult for consumers to consistently drink high-quality specialty coffee over the long term.

Although Blue Bottle positions itself as a chain coffee brand, it insists on using freshly roasted coffee beans and ensures that every cup is consistently made, giving consumers a strong sense of "contrast." Precisely because of this, when people discuss chain coffee and specialty coffee, Blue Bottle is always the first brand that comes to mind. Even though its prices are higher than many chain or independent coffee shops, this does not hinder consumers' trust in the brand, since more people value the brand effect.

And in this round of pandemic prevention and control, precisely because of Blue Bottle's brand persistence, it instead gained a better opportunity to perform, raising many coffee consumers' favorability toward the brand. Before its first store landed, Blue Bottle had already built a roasting factory, striving to maintain the quality of every cup of coffee at its best.

After the government allowed qualifying factories and shops to apply for the first batch of work resumption, Blue Bottle Coffee's Shanghai roasting factory resumed closed-loop production on May 1, and the Yutong store also launched community group buying services on May 3.

Compared with many coffee shops that resumed work during the same period, Blue Bottle has an obvious advantage in fresh coffee bean roasting, and this is also an excellent promotional window. After a round of the pandemic, more consumers are inclined to make coffee at home, and compared with in-store consumption, coffee beans, equipment, and other related products will become the mainstream of future consumption.

Although after Shanghai announced the resumption of dine-in in some areas, Blue Bottle stores were not able to open dine-in immediately, there were still many customers willing to buy takeout outside the store, and it was not until July 1 that the store officially resumed dine-in. Unlike the initial opening period, there are no longer long lines outside the store, and more people coming to consume are there for the coffee itself. Baristas also have more opportunities for face-to-face communication with customers, better conveying the brand value.

It can be seen that Blue Bottle Coffee's choice to enter the mainland at this time may be a kind of luck. At present, domestic consumers' acceptance of coffee culture still has much room for improvement. Many people at this stage begin to encounter coffee through local brands. Once consumers understand coffee further, market demand for specialty coffee will expand.

According to forecasts by the CITIC Securities Research Department, the specialty coffee market space accounts for 25% to 30%, while existing independent specialty coffee shops and specialty coffee brands are not yet sufficient to fill this market. Under this forecast, Blue Bottle Coffee, which focuses on quality, still has the opportunity to gain a firm foothold in the domestic coffee market, and will accelerate the pace of store expansion.

Now that Blue Bottle Coffee's second store has been finalized, it also reflects that more and more young people are pursuing a path of niche simplicity plus specialty quality. Blue Bottle has not joined the "low-price war" of domestic coffee brands, and seems more like it is deliberately avoiding it.

Image source: Internet

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The above content is compiled by CoffeeHunters, a coffee news website.