Category: lenS & thoughtS

In the US, as top merchants getting bigger, they are able to drive the adoption of cash-like mobile wallets, internalizing more transaction infrastructure, cutting payment networks’ growth & profitability.

We have already seen the success of Starbucks’s mobile order & pay, launched at the end of 2014. The combination of its mobile app, (gift) cards and cash-like value in the app reduces the overall transactions costs of Starbucks purchases. Other benefits like managing the loyalty program and mobile orders/pick-ups makes it the role model that big merchants (like Walmart) wants to follow.

Currently, some merchants are offering co-branded credit cards at the same time. But I think the long-term goal is to promote the usage of their own mobile app and cash (e.g. Starbucks credit card comes with an annual fee that I think is discouraging people from using the card in the long-term but can be used as a market tool for now). They can reduce (most of) the transaction costs and own the data (e.g. payment networks can only touch the reloading part of Uber Cash, but not the transactions made via Uber Cash – no fees, no data).

Previous post on growth in stores and per store/unit growth.

Now here are some number about the coffee market in the US.

• 64% of American adults consume coffee every day
• An average American drinks 3.1 cups of coffee per day
• Americans drink about 400 million cups of coffee every day
• Americans drink about 146 billion cups of coffee annually
• 65% of US adults drink coffee with their breakfast
• The average price of a cup of coffee in the US is $3.28
• Coffee shops see a 7% annual growth rate on average
• The annual coffee retail sales in the US are about $5.2 billion

In China, first we can find a subset of the 1.4 population by taking the ~60% between age 15-45 and ~60% in urban areas -> 500 million.

Then assuming 20% of the target 500 million customers will visit/purchase in stores like Luckin (-> 100 million) twice a week (100 cups per year) -> 10 billion cups per year.

The current average monthly transacting customers is 9 million.

Using average price of $2 per cup, the estimated market can reach $20 billion easily in 1-2 years.

And given that Luckin is expanding into other categories like cream cheese teas, fruit teas and juices, twice per week is not an overestimate.

An annualized revenue of $2 billion is only 10% of the addressable market.

Previous post on Luckin’s store counts growth.

As Luckin also reported the number of items sold, we could get the average net selling price, which is growing slowly. The discounts on items sold have already been considered in net revenue. (Free items are included in Sales & Marketing expenses).

Given that the menu prices are usually between RMB 21-27, the overall discount is still over 50%.

Another chart tho, is net product revenue per store. The number of store is averaged between the beginning and the end of the quarter. Since more stores are maturing, this figure is growing significantly.

In comparison, Starbucks International has a little bit less than $1 million per store, KFC China has a little bit over $250k per store.

• Starbucks International company-operated per stores revenue $~0.9 million
  counts as of CY2019Q3: 5,860
  revenue as of CY2019Q3: $5,256.2 million
• KFC China company-operated per stores revenue $~0.27 million
  counts as of CY2019Q3: 4,925+863 = 5,788
  revenue as of CY2019Q3: $1,546 million

Luckin Coffe (Nasdaq: LK) released its Q3 quarterly earnings last week.

More than 700 new stores opened in Q3. This might be fastest growing coffee chain in history.

Luckin grew to 3,680 stores from 9 store at the end of 2017.

You can’t even see the number for 2017 Q4 in the chart below.

One year after the legalization of recreational use of cannabis in Canada, and following up on the previous discussion of those public companies gathering partners/supports, ramping up production and declines in ASP, here is an another snapshot as of 2019 Q3.

The number of kilograms sold is soaring.

But ASP keep falling.

And here is the graph for aggregated market cap of cannabis companies as of 11/15.

Paying to become a member of a video platform has gradually become mainstream in China, at least for the younger generations.

Consumer behaviors have been changing from searching for free sources (as there are fewer of them now than before) to paying for high quality and hassle-free subscriptions.

The leading platforms, iQiYi and Tencent Videos, have paying members exceeding 100 million in 2019 Q2 and 2019 Q3 respectively. The paying percentage is around 20% for a 500 million MAU (iQiYi 2018 Q4 MAU 454.5 million).

Alibaba’s Youku is only little behind (numbers are not disclosed).

Similar trends are found in Tencent Music and NetEase Music. While paying percentage is ~4-5%, it is picking up. Tencent Music’s online music paying users grew 42.2% yoy to 35.4 million (5.36% of 661 million MAU).

Emerging platforms like Bilibili are also seeing more paying users percentage.

In the last post, we look at the city coverage by three carriers.

Here is another comparison of the plans they provide, in terms of price and data.

Before looking at the table, another data point is useful – in September 2019, an average user consumed 8.39GB in data, up ~60% from 5.14GB September 2018, which grew ~2.6x from ~2GB in September 2017.

China Mobile’s plan has two version Personal & Family (the latter includes fixed broadband services).

There is not much difference between carriers, except that –

• China Unicom & China Telecom trying to make a sales at 40GB level with China Unicom being more aggressive.
• Consumers can experience higher speed with a smaller data plan for China Unicom & China Telecom
• Initial discount availability is a little different; all provide discounts between 20-30% for the first 6 month
• Additional data usage (outside of the plan) is priced at ¥3/GB, with first 3GB priced at ¥5/GB for China Mobile