After the Spring Festival, visits to wholesale markets revealed that distributors generally reported a bleak business landscape. New retail channels and direct factory sourcing have taken away a large amount of business, while legacy systems adjusting SKUs and following price with 'bare sourcing' have severely squeezed profit margins. Warehouses are still full of holiday inventory to clear, and brand salespeople are urging reorders... Many veteran distributors are exhausted and planning to liquidate and exit. Those still holding on are also confused about what to do next. Opening stores, developing white-label products, transitioning to B2b—distributors are trying any potential opportunity. Undoubtedly, finding new business opportunities is an urgent need for distributors.
During the visits, we did not come away empty-handed. Feedback from a distributor friend in South China revealed a different opportunity—his investment in NOWWA coffee 'store-in-store' setups within convenience stores has yielded excellent returns in recent months. After learning the details, we finally understood the logic behind the profitability. Market structural adjustments come and go, but with the right major trend, there are still good opportunities to make money!
The Story of a Distributor Choosing to Invest in NOWWA
This distributor's opportunity to invest in NOWWA was not so much a coincidence but rather a result of years of habitually hitting the streets to understand the market, which made him notice the new opportunity. Having served convenience store clients for years, the decline in convenience store business over the past two years made him pay even more attention to convenience store trends. During a market visit in October last year, he happened to see a Jianfu convenience store partnering with NOWWA. While checking product expiration dates and displays, he noticed delivery riders frequently entering the store to pick up orders, indicating strong coffee sales.
Out of curiosity, he asked the store staff and learned that this was not simply a cross-industry partnership to share rent, but rather a 'store-in-store' model. The 'store-in-store' model means that without increasing the convenience store's original costs, the franchisee invests in renovation and equipment, the convenience store staff make the coffee, and the brand manages online and offline traffic to boost coffee sales. The three parties then share profits based on sales. His keen sense for business opportunities led him to research this thoroughly. From his sharing, we also learned his straightforward logic:
- Coffee is a massive market, as evidenced by Luckin Coffee's growth; 2. As a distributor serving convenience stores, this 'store-in-store' model fits perfectly. As long-term partners, he has a good understanding of the convenience store system's operations, and the owner and salespeople frequently visit stores, so coffee operations can be monitored without extra effort; moreover, coffee drives traffic to the convenience store, boosting sales in other categories and his own distributed products; 3. NOWWA is an established coffee brand with influence, not a new brand without a foundation; 4. Compared to the working capital tied up in credit periods, the investment for trial and error is relatively low; compared to directly opening a store, which involves high investment, high risk, and lack of store operation knowledge, the 'store-in-store' managed model is more suitable.
After thinking it through, he proactively contacted NOWWA and quickly decided to invest in a batch of 'store-in-store' setups. After several months of observation and operational data feedback, he calculated his returns. At 50 cups per day, he could fully recoup his investment within a year, and there is no cap on profit sharing per cup. If the partnership lasts 2 years, the annualized return is approximately 20%; if it exceeds 3 years, the annualized return far exceeds 20%. Currently, peak hours at his stores average nearly 200 cups per day. Even at an average of 80 cups per day, the annualized return would be around 50%. This data convinced him that investing in 'store-in-store' was a very correct decision. It also convinced us that this is a business opportunity worth sharing.
Coffee: A Certain Growth Opportunity
Looking at the overall coffee market size, China's average annual growth rate from 2018 to 2023 was as high as 37.1%, with the market reaching 151 billion yuan. It is expected to maintain a rapid growth rate of 20.4% annually over the next five years, with the overall size expected to exceed 300 billion yuan. Despite rapid growth in recent years, per capita coffee consumption in China is only 16.74 cups per year. Compared to mature Western markets with per capita consumption often exceeding 500 cups per year, there is still enormous growth potential. Especially in lower-tier markets, where coffee penetration is less than one-third of that in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, it is a blue ocean. Consumers still need significant market education to adapt to coffee drinking, and the potential has not yet been unleashed. Moreover, according to market forecasts disclosed in Mixue Bingcheng's prospectus, coffee development in second-tier, third-tier, and lower-tier cities will outpace first-tier and new first-tier cities. Even with the emergence of Luckin Coffee with 20,000 chain stores, there are still opportunities in the coffee track.
Convenience Store Coffee: Urgent Transformation and Upgrade
Coffee is a naturally matching consumption scenario for convenience stores. Since the birth of convenience stores as a 'new species' in 1927, they have been selling coffee. However, Chinese convenience stores have long struggled to operate coffee well, with coffee contributing less than 5% of annual revenue. Even Japanese players like FamilyMart and Lawson, which have invested heavily in promoting their coffee sub-brands (Paike and L-cafe), cannot compare to the average daily sales of over 200 cups per store in Japan. The key is that China's coffee market is completely different from abroad: 1. Besides basic Americano and latte, flavored lattes are extremely popular; 2. The proportion of coffee delivery orders is too high. These two points are disadvantages for convenience stores: 1. They do not have dedicated teams for flavor research beyond basic Americano and latte; 2. They are not skilled in online traffic operations. Compared to independent stores like Luckin, convenience store coffee has no compelling reason to attract consumers, whether in product or consumer reach. Moreover, convenience stores are currently facing severe impact from new channels. During the day, discount snack stores and discount supermarkets focus on extreme cost-effectiveness, diverting business from convenience stores' pre-packaged goods; at night, instant retail platforms focus on home delivery within 30 minutes, diverting business during convenience stores' most profitable hours. Under this dual attack, the store model is greatly weakened. Like distributors, convenience stores urgently need to explore new opportunities. NOWWA's 'store-in-store' model precisely helps convenience stores fill the gap in their coffee segment.
NOWWA: A New Choice for Convenience Store Coffee
Because of this, NOWWA's 'store-in-store' model has caused quite a stir in the convenience store circle. In just half a year, it has reached cooperation with multiple convenience store chains, including Meiyijia, and is starting to roll out.
From some cooperation case feedback, compared to before cooperation, the average daily cup sales per store have increased fivefold (or even higher), with the average daily output reaching 80 cups, greatly improving the profit levels of convenience stores.
NOWWA, founded in 2019 as an emerging Chinese internet coffee brand, has been leading the healthy coffee track with its new positioning of 'refusing high calories'. All its products are 'zero sugar, low fat, low calorie' healthy foods, which have won the love of consumers.
To date, it has over 2,000 stores globally, covering more than 170 cities (including Macau), with stores opening in Southeast Asia and Australia, and is among the top 10 global coffee chain brands. The team, having managed a thousand stores, has a very clear management methodology. For the 'store-in-store' model, it adopts a mature three-way win-win model.
For convenience stores, they only need to provide 1 square meter of idle space (next to the cashier or at the entrance), without additional labor costs, reusing convenience store traffic to expand product categories at low cost, and increasing store revenue through both offline traffic and online delivery channels.
For the brand, it provides full-process professional services, from equipment installation, store staff training, supply chain for best-selling products, professional multi-channel operations, and celebrity endorsement traffic, achieving strong terminal control and opening every store well.
For investors, they do not face the problems of high rent, complex labor, and difficult site selection of traditional coffee shops, nor do they need to manage operations personally. They only need to provide capital to open stores at low cost. The brand evaluates and forecasts cooperation plans based on actual store sales and shares sales revenue with investors.
The three parties each play their role, utilizing existing opportunities at the lowest cost and highest efficiency to help convenience stores increase coffee sales. Not only have coffee sales improved, but coffee has also driven traffic to convenience stores, boosting sales in other categories and further strengthening the bond between distributors and convenience stores. As China experiences such intense retail competition, market changes are forcing distributors to try more. The case of NOWWA coffee shared by this distributor undoubtedly inspires us: as long as you help customers solve their problems, there are still business opportunities! For those interested in cooperating with NOWWA, feel free to scan the QR code for more details.