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SATURNBIRD (三顿半咖啡) is caffeinating the espresso growth in China’s boutique instant coffee brand

In 2021, the boutique coffee brand, Saturnbird (Sandunban, 三顿半咖啡), completed a new round of financing in hundreds of millions of yuan, with CITIC Industrial Fund leading the investment, IDG, GGV, and Inward Fund have also participated. The post-investment valuation is now at RMB 4.5 billion (USD 710 million).

During the 2021 Tmall Double Eleven (the annual shopping event on November 11th), Saturnbird has locked in the first sales of the coffee brewing category in its presale stage. According to the data of Magic Mirror Market Intelligence, the top three sales of Tmall Double Eleven coffee category in 2020 were Saturnbird, Nestle, and Starbucks – with total sales exceeding RMB 100 million (USD 15.8 million), RMB 60 million (USD 9.5 million), and RMB 30 million (USD 4.7 million) respectively.

For a long time, instant coffee has dominated the Chinese coffee market. In 2018, the instant coffee market accounted for 71.8% of the overall domestic market. However, with the development of freshly ground and brewed coffee, and the upgrading trend of consumers’ consumption, the growth of the instant coffee market, which was known for its “convenience” and “affordability”, has slowed down.

Source: Prospective Industry Research Institute, Key brands in China’s coffee market 2021, designed by Daxue Consulting

In 1989, Nestle Group launched the “1+2” instant coffee in China, which is considered to be the beginning of the modern Chinese coffee market development. Subsequently, Maxwell House and Japan’s UCC continued to enter the Chinese market.

Differentiation brought by Saturnbird

Saturnbird was founded as a coffee shop and has been in the industry for over 8 years. It began to release coffee products in 2015. It is also a member of the Specialty Coffee Association (SCA).

The slogan given by Saturnbird on its official website is “a new way to enjoy a fresh cup of coffee.” Though cold extraction and drying is not a new technology, Saturnbird has used it to segment the instant coffee market with a niche category as “boutique instant”.

Being prepared for the potential criticism towards the packaging of its instant coffee, Saturnbird has a great emphasis on sustainability. The first characteristic is listed as “100% recyclable”, laying the foundation of a socially responsible brand.

Source: Saturnbird, Sustainable promise is listed first

Founding strategy – “Good coffee goes a long way”

The first-generation product of Saturnbird is the “Pour Over Set 1.0”, which includes 8 bags of hanging drip coffee, a pour-over pot, a filter cup, and other coffee appliances. It aimed to invite beginners to have a quick start in exploring hand-poured coffees.

daxue-consulting-saturn bird-instant-coffee-set2.0
Source: Xiachufang, Pour Over Set 2.0, a minor upgrade version of 1.0

This is a product that comes in between instant and expensive, time-consuming pour-over coffee. Despite the complicated product set, it conveys an essential and clear message – “as long as there is hot water, there is good coffee.”

Saturnbird also cooperated with Kinfolk, a lifestyle guidance platform since 2016. The recognition by Kinfolk has hinted that Saturnbird was on the right track of product development.

Source: Weibo, Lifestyle Guidance Platform Kinfolk advocating Saturnbird
Text: Take photos related to Kinfolk and Saturnbird pour-over pot and post on Weibo to get a chance to win a new coffee item worth RMB 500 (US$ 80).

Soon in 2016, Saturnbird upgraded the “Pour Over Set 1.0” to a hand-pour coffee combo, retaining the pot and filter paper, but replacing the coffee bag with coffee beans and coffee powder, thus adding a sharing pot. The early-day product designs all align with Saturnbird’s vision of “Popularization of Specialty Coffee.”

A leap on product development – Introducing its third-generation product

In May 2018, Saturnbird officially launched its premium super instant coffee, which comes in a mini coffee cup capsule, highlighting the authenticity of its product. It specifically targets people who lack instant access to freshly brewed coffee, from businessmen to travelers.

In September 2018, It became available online on TMall, with the price per capsule ranging from RMB 5-10 (around 80 cents to USD 1.58), depending on the size of the combo.

Source: Saturnbird TMall, A various product line is presented

The characteristics of the Saturnbird third-generation product are fairly clear: the technique of cold extraction and intelligent drying, natural, and premium coffee bean selection (100% Arabica), to be dissolved instantly at any temperature and any liquid (from water to milk, both dairy or non-dairy).

The unique selling point of Saturnbird third-generation products is the flavor diversity illustrated by its number-labeling and colorful packaging. The striking number labeled on the package and a simple introduction on the level of roasting has exemplified a minimalistic design, in addition, has won Saturnbird the Reddot Design Award 2020.

Source: Saturnbird, third-generation products, instruction on level of roasting

The drinking instruction comes along on the transparent package of the combo, featuring the colorful capsules while guiding the consumer on how to properly consume the product.

Source: Saturnbird, the drinking method is presented both on the website and the package

The appealing packaging of Saturnbird naturally leads to user-generated content (UGC) about the taste test and compliments on the design on social media platforms, from WeChat Moments to Xiaohongshu (RED, 小红书). As a result, response and engagement from consumers have effectively achieved the marketing work for Saturnbird and attracted more people to place their first orders to give this rising boutique instant coffee a shot.

In addition to the natural growth impacted by user-generated content (UGC), Saturnbird has relied on a large number of KOCs (key opinion consumers). Even before going online on Tmall, Saturnbird was actively searching for KOLs (key opinion leaders, Chinese influencers) on Xiachufang (下厨房) and Weibo, and constantly sending them products to gather feedback and for improvements. The cooperation not only provided Saturnbird firsthand customer feedback but also encouraged KOCs to create content around their products prior to the launch online.

Saturnbird has always been committed to user involvement, so it has created a mysterious “navigator” role. “Saturnbird Pilots (三顿半领航员)” are individual consumers who are carefully selected by the brand in various channels and can produce high-quality UGC content. Not only did they provide opportunities in infiltrating ordinary consumers for brand promotions, but they also took responsibility for adhering to comments for the brand.

The current “Saturnbird Pilots” group has grown to over 500 people. As long as dozens of them raise the same opinion, the brand will make changes to the product. The process of having user participation to polish products, not only strengthens the communication between brands and fans and cultivates loyalty, but also functions as a small-scale trial-and-error process, which can continuously verify the value of products.

Using creativity to overcome challenges

When the mini capsule package was first introduced in 2018, it triggered criticism of the numerous plastic packaging. To tackle the issue, in October 2019, Saturnbird started to promote package recycling plan “PROJECT RETURN (返航计划)”: Take the empty coffee capsule to the offline “return point” for recycling at a specific time, and you can exchange for new coffees and limited souvenirs.

Source: Saturnbird, The first season of “PROJECT RETURN” in 2019

In the first season of RETURN in 2019, they successfully recycled over 10,000 capsules, with 2,444 consumers participating. In the second season of RETURN in May 2020, the recycling number boosted to over 77,000 and 10,704 participants.

Confronting a niche target market during the first two generation products, Saturnbird actively engaged in the product development and finally released its third-generation product to cover a wider consumer group and encouraged more coffee newcomers to develop the habit of drinking coffee.

Another issue was with the revenue per purchase in the early phase of the third-generation product. Saturnbird creatively came up with combos of 24 and 64 capsules in November 2019, to increase the sales per purchase and allow consumers to try all flavors at once.

Honest reviews from customers

Although compared to traditional instant coffee, Saturnbird has brought the taste to another level, many coffee lovers raise critique on its plain taste considering its price per capsule and the contradicting “instantness” of the coffee – as it takes longer than “3 seconds” as being marketed. There is also the opponent voice about the capsule design despite the brand’s advocation on sustainability, saying it has gone against the compact packaging of instant coffee, and a considerable amount of money consumers pay goes to the cost of design and packaging, not the coffee itself. Even so, Saturnbird is not negatively influenced and has a clear target group that is less price sensitive and requires relatively decent and accessible instant coffee. Both statistics and market response have shown that Saturnbird is performing well.

Source: Saturnbird, The 24-combo package

Key takeaway on Saturnbird

  • Remain the passion to achieve coffee popularization
  • Detect a niche instant coffee market segmentation
  • Created a strong innovative brand image with solid brand concepts on quality accessibility
  • Appeal to a minimalist capsule design (Reddot Award 2020) to emphasize the coffee authenticity and the flavor diversity with colorful number labelling
  • Collect primary consumer feedback with the help of “Saturnbird Pilots” to constantly develop on products
  • Innovate periodically to explore different possibilities
  • Take on the social responsibility to engage in sustainable business practices
  • Resonate with a trending premium lifestyle of Chinese people

Author: Michael Ling

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