China’s premier sports brand, Li-Ning, has registered the “宁咖啡 Ning Coffee” trademark, and Ning Coffee became a hot topic amongst the venture capital community.
There is a good reason for brands in the consumer market to be interested in the coffee segment. According to iiMedia, the Chinese coffee market hit 381.7 billion yuan (~USD 57 billion) in 2021 and will expand at an annual growth rate of 27.2%.
Such a huge opportunity has attracted many leading brands, not necessarily from the F&B segment; Li-Ning is one example. Tongrentang (a Chinese pharmaceutical company), and China Postal Express & Logistics are other examples.
Traditional leading brands in any segment have advantages in sales channels, loyal customer base, and brand image. However, the disadvantages cannot be ignored. Be it old coffee brands or new coffee brands, to win consumers’ hearts, high-quality products, and consumer-centered brand concepts are a must, not to mention the mere business positioning and ‘brand identity’.
Why did Li-Ning jump into the coffee segment? One of the brand marketing experts mentioned that jumping to the coffee segment is in line with Li-Ning’s business development strategy. The coffee industry’s core customers are young people, and so are Li-Ning’s core consumers. To use this competitive edge in the fashion industry, Li-Ning wants to establish better positioning among young consumers; this is true, especially when facing difficulties in making breakthroughs and keeping high-quality and sustainable development in the fashion industry; on paper, jumping into a new segment kind of makes sense.
However, the advantages in sales channels, loyal consumers, and brand image Li-Ning has in the fashion industry don’t mean its success is guaranteed in the coffee industry.
The coffee market in China has been dominated by well-established coffee brands, such as Starbucks; the brand image of Li-Ning is not in tune with coffee. Consumers only want a good cup of coffee and would like to trust expert coffee brands rather than new brands that have nothing to do with coffee. To stand firm in the coffee industry, brands like Li-Ning should make efforts to gain consumers’ recognition by making high-quality products and integrating the brand concept into the coffee, maybe even by co-branding with a good coffee maker.
There is nothing wrong with making coffee, but brands from other segments should think about how to make good coffee and gain consumers’ recognition and trust.
