What do the ShiCui coffee store closures mean for the industry?

ShiCui Coffee, a specialty instant coffee brand, has been reported by netizens to have closed more than ten physical stores within a short period. Outlets in Shenzhen, Guangzhou, and Foshan have posted closure notices, phone lines go unanswered, and only the Foshan Lingnan Tiandi store remains open. The company has not issued an official response. E-commerce channels still operate normally.

The brand was founded in May 2019 by Fan Ruoyu, who previously worked at Uber and Didi, and it grew fast on an internet-savvy team and a subscription model. It raised nearly 100 million yuan in 2021 and expanded offline, with a single-store valuation once above 100 million yuan. Unlike the nestle coffee company's retail-heavy model, this financing-driven approach now draws questions about risk resilience.

ShiCui Coffee, once regarded as a key player in the specialty instant coffee sector, has recently been exposed by netizens for the near-simultaneous closure of its offline stores in multiple locations. Founded in 2019, this brand rose rapidly thanks to its internet-savvy team and subscription-based model. After securing nearly 100 million yuan in financing in 2021, it accelerated its offline expansion, with a single-store valuation once exceeding 100 million yuan. However, stores in Shenzhen, Guangzhou, Foshan, and other locations have now posted closure notices, the official phone line goes unanswered, and only the Foshan Lingnan Tiandi store remains open. While its e-commerce channels are still operating normally, does the offline setback mean the brand will retreat to its main online battlefield? Its financing-driven growth model has also prompted the industry to reflect on the risk resilience of emerging coffee brands.

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Recently, a netizen posted on Xiaohongshu claiming that more than ten physical stores of ShiCui Coffee had all ceased operations within an extremely short period.

ShiCui Coffee, which only secured nearly 100 million yuan in strategic financing last year, is now withdrawing from stores on a large scale? It is reported that multiple ShiCui stores, including the Shenzhen Kexing Science Park store, have posted closure notices, with items inside cleared out and only empty storefronts left behind.

Attempts to contact multiple ShiCui Coffee stores found that phone calls went unanswered, service was suspended, or phones were turned off. Tianyancha information shows that Wuxi Xinni Technology Co., Ltd., the company behind ShiCui Coffee, is still in existence, but its contact phone line has also remained busy. As of press time, ShiCui Coffee has not made any official response to the matter.

Similar to Saturnbird and Yongpu, ShiCui Coffee is also an "internet-native" brand in the specialty instant coffee sector that cannot be underestimated. The brand was founded in May 2019 by Fan Ruoyu, who has a rich resume in internet companies, having worked at Uber, Didi, and other enterprises. Not only the founder, but most of its core team also has similar backgrounds.

In its early stage, the brand mainly used a WeChat mini-program subscription model. Simply put, after users activated a subscription, fees were automatically deducted each month, and ShiCui Coffee would deliver products as agreed. At that time, the company focused on affordable specialty drip bag coffee.

After entering Tmall in December 2019, ShiCui launched "donut drip bag coffee" based on traditional drip bag coffee. Different from regular drip bags, this new product adopted a "hemispherical filter bag" structure, and its donut shape successfully attracted the attention of many young consumers. In addition, ShiCui Coffee also successively launched freeze-dried instant coffee, espresso liquid, and other products.

In 2020, ShiCui Coffee opened its first offline store in Shenzhen. After the 2021 Spring Festival, it added 5 more stores within two months. At that time, the brand said it expected the total number of stores to reach 50 by the end of 2021. According to data from Tmall Business Advisor, as of March 2021, ShiCui Coffee ranked first in Tmall sales of domestic drip bag coffee.

Public information shows that over the past three years, ShiCui Coffee completed a total of 5 rounds of financing. These included seed and angel rounds in 2019, and Series A and A+ rounds each in the tens of millions of yuan in 2020. By July 2021, ShiCui Coffee announced the completion of a new round of financing of nearly 100 million yuan, with funds mainly used to accelerate offline store expansion, brand marketing, and continuous R&D of innovative online and offline products.

After obtaining this nearly 100 million yuan financing, ShiCui Coffee clearly accelerated its pace of opening stores from online to offline. In the second half of 2021, ShiCui opened more than ten stores in Shenzhen, Guangzhou, and Foshan. The total number of stores at its peak is not yet clear, but according to data retained in the ShiCui mini-program, Shenzhen, Guangzhou, and Foshan had 8, 3, and 1 stores respectively, totaling 12 stores.

Reports have pointed out that multiple investment institutions valued ShiCui's single stores at more than 100 million yuan. Now that ShiCui has retreated online, its valuation is expected to shrink significantly. If no new financing comes in subsequently, the risk of a broken capital chain will be difficult to avoid.

According to the WeChat mini-program, ShiCui Coffee's offline stores all show as resting. Confirmed by ShiCui's WeChat customer service, only the Foshan Lingnan Tiandi store is still operating.

However, e-commerce channels are still operating normally. From this perspective, ShiCui Coffee seems to be trending toward returning to the new retail track and focusing mainly on online sales.

Observing the financing characteristics of coffee brands in recent years, the financing frequency of new brands is noticeably higher. Brands such as ShiCui and Sumidagawa have all relied on raised funds to open up publicity online, then gradually entered the competition in the coffee market. Emerging coffee brands often need to grow quickly, which means large capital investment. Once subsequent funding stops, they may quickly collapse.

ShiCui is not the only one in trouble. With the shift in investment direction in the coffee sector, the amount and frequency of investment that many coffee brands can obtain are continuously shrinking. For example, the last offline store of FishEye Coffee closed in mid-July this year, fully retreating to online sales.

Tims China, which only listed on Nasdaq on September 30 this year, lost 64% with 100 million behind it. Tims China's valuation also shrank from an initial 1.4 billion to 497 million US dollars.

From this perspective, established companies such as Nestle and Starbucks are still more stable. Although they are not trendy enough, they have accumulated a stable customer base and industry experience, and still have strong resilience when the overall environment is under pressure.

Image source: Internet

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