On June 16, 2021, Manmanner Coffee received an investment from TikTok’s parent company, ByteDance. It is the fourth investment for this Chinese coffee brand in the past six months.
In addition to ByteDance, its shareholder list includes Temasek, the Singapore sovereign wealth fund, and Meituan (Dragon Ball Capital), another well-known Chinese Internet company, Coatue and H Capital.
On the other hand, the stores of Manite Coffee in Shanghai are often crowded with many people queuing to buy some limited Coffee.
It sounds like another “Chinese Coffee miracle” after Luckin Coffee. But we all know that Luckin Coffee’s “miracle” was built on fraudulent accounting.
So today, let’s talk about the story of the new Chinese Coffee unicorn called “Manner Coffee.”
What is Manner Coffee？
Manner Coffee is a boutique Coffee chain brand from China.
Although it is a Chinese coffee brand, it does not have a Chinese name. According to its founder, Han Yulong, in an interview, the name comes from a famous line in Kingsman: “Manner makes man.”
Han explained that the English word for Manner also means “habit.” He wanted coffee to become a manner of customers.
Manner Coffee follows a completely different development path from Luckin Coffee, another well-known Coffee brand in China. Luckin Coffee’s original goal is to become a large-scale chain Coffee brand. Therefore, Luckin Coffee’s business started from venture capital to some extent, and even today we still don’t know for sure whether Luckin Coffee is profitable or not.
But Manner Coffee was originally just a boutique Coffee shop set up by Han Yulong and his wife in Shanghai. Not many of these independent coffee shops can survive in China because, as we describe in this article, the level of coffee consumption in China is very limited even today.
This is even a meme on the Chinese Internet: Many middle class Chinese have tried to start their own coffee business, but soon they will go bankrupt and return to the enterprise as workers.
However, the success of Manner Coffee broke this ‘curse’.
Han majored in veterinary medicine in college, but he likes photography, cycling and coffee. In 2012, he opened his first themed cafe, which sold coffee but also organized photo shoots and dead-flying bikes.
Along the way, Han found himself more and more interested in coffee, so he closed the shop and began to learn more about the coffee industry.
In 2015, Han Yu and his wife opened their first shop on Nanyang Road in Shanghai. The store was only 2 square meters and was actually just a take-out window. In some Chinese media outlets, their first shop was described as a cupcake shop of 2 Broke Sisters.
But in the third month of operation, they were selling hundreds of cups a day. At the time, few coffee shops in China, apart from Starbucks on the high street, could sell more than 300 cups a day.
It means that unlike other Chinese Coffee brands that have been ripened by venture capital, Manner Coffee was already aquite successful before it got its first investment. As a result, they grow very slowly and only open the next store if one is already profitable. In 2017, two years after founding, they had only eight stores. Until ByteDance’s investment in 2021, it had only 136 stores, 122 of them in Shanghai. Others are located in Beijing, Suzhou, Shenzhen and Chengdu.
Like Luckin Coffee, its products are cheap, with a cup of Espresso costing 10 yuan ($1.55). However, it is actually very different from Luckin’s strategy. Manner Coffee almost establishes a complete coffee industry chain to reduce the price and improve the quality of coffee.
Completely different Chinese coffee
At the door of the Shanghai general office of MANNER COFFEE, there is a Slogan: “Good coffee, made in China”.
It’s hard not to be reminded of Luckin Coffee’s previous marketing pitch.
Luckin Coffee gained notoriety in the West in 2020 for accounting fraud, but it is still active in the Chinese Coffee market today. In the first quarter of 2021, they opened 120 new stores.
However, as a Coffee brand in China, Manner Coffee has a completely different positioning.
Luckin also highlights that “Chinese coffee is very good and very cheap”, but what it really means is that China does have good beans. Luckin, like Starbucks, uses fully automatic coffee machines. Aside from flagship stores, Luckin doesn’t care about how the coffee is made.
However, the “good Chinese coffee” as defined by Manner Coffee includes not only good Chinese Coffee beans, but also good Chinese baristas and roasters. This is related to the development path of Manner Coffee mentioned above.
For the first few years, all Coffee beans used by Manner Coffee were hand-picked and roasted by its founder, Han. As soon as the chain expanded, it set up its own baking plant. To this day, Han still goes to the roasting plant three to four times a week to ensure the quality of the coffee.
In addition, Manner Coffee uses semi-automatic Coffee machines in stores instead of full-automatic Coffee machines. This means that the person working in the Manner COFFEE is a real barista, not a “waiter”. In Manner Coffee, a hot latte for 15 yuan (about $2.32) can include latte art.
This is unthinkable for Starbucks and Luckin Coffee in China.
Therefore, Manner Coffee can sell products with more expensive price. For example, the price of “Semi-Carbonic Maceration Brazil Daterra Catuai” is 108 yuan ($16.73), which is about twice the most expensive coffee in Starbucks in China.
If Luckin removes the “Western brand premium” in Coffee beans, Manner COFFEE is trying to remove the “Western brand premium” in barista.
Han said in an interview in 2017:
“I’m not satisfied with the current state of the coffee market. Some industries in China may not be as good as those abroad. But in cities like Beijing and Shanghai, the coffee made by Chinese roasters and baristas is as good as those made abroad, and the raw materials and equipment are world-class. We can make a national brand of coffee in China. So we want the market and the public to realize this truth. This is what Manner is trying to do.”
For this reason, in addition to its own baking plant, Manner also established its own training center for baristas and roasters and coffee lovers club.
The former provides professional training for the company’s employees, while the latter offers coffee related courses for casual coffee lovers and other independent coffee shops.
Advantages of Manner COFFEE
A person close to the investors told Pandayoo that Manner’s advantage is that it uses the same pricing strategy as Luckin, while maintaining coffee’s cultural value as a Western beverage.
Undeniably, the rapid development of Manner Coffee in 2020 cannot be separated from Luckin Coffee.
Before Luckin, there were few freshly ground coffees in the Chinese coffee market that cost less than 10 yuan. But after Luckin, that price has become very common in the Chinese market. Indeed Luckin cheated on its results, it still did expand the number of coffee drinkers in China.
This provides a potential market for boutique coffee chains such as Manner Coffee. But Luckin may not be able to satisfy the customers it has cultivated.
Luckin’s brand was inextricably tied to “cheap” when it first decided to use coupons and subsidies on a massive scale to make consumers realize that “coffee isn’t expensive.”
Luckin satisfies the demand of Chinese white-collar workers for a caffeine boost during the workday, and few people are demanding the taste. It also meant that Luckin was unable to develop the kind of “coffee community culture” that Starbucks has overseas.
No one wants to take a Luckin coffee course, few consumers want to buy a mug or bag with a Luckin logo on it, and of course, few consumers want to buy a Luckin gift card as a gift to a friend.
But for Manner Coffee, everything goes well. People would even line up in front of their stores to get their hands on limited-edition Manner cups.
Although Manner Coffee does not use its stores as a “third space” like Starbucks, it is trying to establish a foothold of local community culture.
To some extent, Starbucks’ “third space” strategy has been successful in China, but only for white-collar workers on weekdays. Many of Starbucks’ Chinese customers use it as temporary office space on weekdays. This seems to differ from the community culture Starbucks has built in Europe and the US. This is because Starbucks, as a foreign brand, has difficulty fitting into the local culture.
As you probably know, Shanghai is the city with the most civic culture in China, but this civic culture is different from the community culture in the West. This gives Manner Coffee the opportunity to become the real “Starbucks of China”.
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