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Podcast transcript #15: The challenging Chinese coffee industry

Find here the China paradigm episode 15. Learn more about Carol Liu’s story in China and find all the details and additional links below.

Full transcript below:

Matthieu David: Hello everyone and welcome in this new episode of China Paradigm, the China business podcast where we interview entrepreneurs in China. Today I am with Carol Liu, the co-founder of Big Sur Coffee shops in China.

So, you created your Coffee shops chain in China a few years ago, and you are managing coffee shops in Shanghai and obviously today actually you are going to talk about it to us. I know you because you used to study at Conde Nast Center of Fashion and Design when I was teaching consumer journey, consumer preferences and during or after your studies, you started with your husband, that’s why I was saying ‘co-founder’, maybe there are more of you a coffee shop chain in China, because you have more than one, and we already talked about your business one year ago on Daxue Consulting’s blog, and it was very interesting.

Actually, the article where we went in-depth in the numbers of managing your business in the coffee industry in China of investment and very detail, very down to earth, it was very useful actually for the audience, and people liked it a lot. So, it was one year ago; it’s good to have some update, and thank you, Carol, for being with us.

Carol Liu: Hello everybody. I am Carol; now I am running Big Sur Coffee shop in China. Now we have three coffee shops in Shanghai; two are in the downtown area. The other in the Pudong area, it’s very close to the office building. Now we are running very stable, but the competition in the coffee industry in China now for the recent one year is very, very fierce. So, we feel a lot of pressure in the running of the Big Sur coffee now actually.

Matthieu David: You told me before one year ago that you have another coffee shop in another city. Was I correct?

Carol Liu: Yes, we closed that shop already

Matthieu David: Okay. Which city was it in?

Carol Liu: It’s in Hefei, Anhui province.

Matthieu David: Okay just to talk about this experience of being in Hefei, did you close because the coffee market was not mature enough? Because, I guess the rent was cheaper, the salaries were cheaper so is it the market reason why you close it, was it difficult to manage?

Carol Liu: Yes, I think on the one hand it is the market reason. The coffee market is not mature there. They cannot appreciate the very good quality coffee. It is mainly the branding that affects their decision. Maybe Starbucks…. they will go to Starbucks to have a cup of coffee, but for the small… independent, this kind of small coffee, they will not try. I think the consumers, the market there is not mature… and for the other reason, I think the location I chose it is not mature as well. So, for both reasons, it is not successful in that shop. So, we closed maybe one year ago.

Matthieu David: Okay. How cheaper was it to manage it by the way? In terms of rent, in terms of salary, is it much cheaper in Shanghai or basically was it similar or it was…

Carol Liu: I’d say in general definitely it’s much cheaper than in Shanghai. The rent is much cheaper and the salary there is cheap as well. So, in general, I think its 30-40% cheaper than in Shanghai.

Matthieu David: Okay, and the prices you were charging the consumers were the same or cheaper?

Carol Liu: Yes, they were the same. Same price.

Matthieu David: Okay, so same prices but lower cost you could imagine to make more profit but basically you cannot make enough sales, so that was the market issue.

Carol Liu: Yes, the sales cannot reach the point to balance.

Matthieu David:  I see. Talking about your coffee shops in Shanghai, so you have three locations, I know one is in Mengzi Lu one is close to People Square and the other one in Pudong. So, all of them are close to offices…?

Carol Liu:  Sorry the other is in Jiashan Road, in the French Concession.

Matthieu David: You said Pudong

Carol Liu: Pudong. One is in Pudong, one is in Jiashan road, and one is on the Mengzi road. Oh yes, we had one in People Square, but we closed as well.

Matthieu David:  I see. How long did you open the one in People Square?

Carol Liu:  Maybe… also around one year ago.

Matthieu David:  One year, okay

Carol Liu: We closed it last October.

Matthieu David: I see. So basically, you get a commitment for one year, and you see if it goes well or not and then you decide to continue or not continue

Carol Liu:  Yes.

Matthieu David: One year it is difficult to see if it goes well or not.

Carol Liu:              Yes, we try to sustain one year, but it depends on the rent. If the rent is very low, maybe we can continue more time to wait and see, but if the rent is too high, we cannot afford, then the time will be shorter.

Matthieu David: In terms of size now, how many customers do you serve…let in one shop on demand for one day or one year? Do you have some metrics on that? How many cups of coffee basically are you delivering?

Carol Liu: For Mengzi Road every day we deliver about 250 on weekday…on weekends it’s about 150-200.

Matthieu David: I see, so not that much of a cycle… you’re still on the same range and Mengzi road, you are very close to offices like Under Armor and some other offices. Is your main clientele business people who go after lunch or during break taking a coffee?

Carol Liu: Peak time is actually it’s in the morning. It’s around 8:30 to 10:30 and that is the peak time. In lunch, it’s okay. In the 1 pm to 2:30, there is also a lot of consumers come in but not as much as in the morning.

Matthieu David: Okay. How do you manage peak hours, because I feel that’s the most difficult aspect of managing restaurants or a coffee shop chain in China is to manage peak hours… morning, after lunch… do you have people coming for part-time? Is it easy to get people coming for part-time? For two hours… during peak hours? How do you work in those peak hours, firstly the management of people and secondly the machine, you have one-two machine, but when so many people come, they have to wait, and people don’t like to wait. Do you pre-order do you… how… what’s your way of working with peak hours.

Carol Liu: We don’t have a part-time job, we only have full time… because in part-time jobs, the workers they don’t recognize your brand, they don’t recognize your service standard, and for teamwork, they might be not very efficient to be a team member. So, we only have a full-time job, a full-time worker. For a full time, worker, we arrange the working schedule for different people. Because the peak time is starting around 8 o’clock so may be the first person comes at 7.30 and the second and third people come at 8 o’clock to serve our consumers.

Matthieu David:  I see.

Carol Liu: Yes, and they work until 2.30, and then they go off, only one people left in the shop after the…

Matthieu David: after 2:30?

Carol Liu: Yes. We use this kind of way to manage it.

Matthieu David:  Three people then?

Carol Liu: No, at peak time we have four actually. Because now we have poured over coffee, it’s kind of you to know… hand whip it’s not machine-based coffee… so we have to arrange other people to be responsible for this pour over coffee.

Matthieu David: Okay, I understand. In terms… yes

Carol Liu: On the other hand, we continue to strengthen the working efficiency on making coffee and especially when there is three or four people work together…  which one to do what… to be very high efficiency in the whole team, so this area… we continue to strengthen on this.

Matthieu David: I see. Have you thought about a way to pre-order for coffee drinkers in China, for your clients? For example, they are in the office, and they can pre-order and come and pick the coffee. Have you thought about… also delivery at offices? Do you offer those services to deliver?

Carol Liu:  Yes, we have. Actually, now you can use our chat…what account to get it delivered. You can pre-order on what, and then you can go to our store to pick up at a certain time. But this technology, we are now using is not very mature now…but already some consumers are using this.

Matthieu David: Okay. We’ll go back on technology later on. You talked about the size of the business; I guess we have a good idea of the business you are managing and to try as well new locations on… as you said, People’s Square and Hefei. I went one time to your coffee shop in Shanghai, actually at Mengzi road and I found out…I think early this year, it was closed for like two or three months… Could you tell us more about what happened and you told me that it was a Chinese business license renewal? Could you tell us what was the reason that it takes so long…first? Secondly, how did you manage it? Do you still need to pay the rent? Do you still need to pay to people? Do you still need to do all this and you had to take off your logo… you had to take off so many things and re-put on it…? Could you explain the context and how you manage it?

Carol Liu: You know it’s a very difficult time for us. Yes, because for Mengzi Road Road actually, we don’t have the business license of drink… of this shop. So, when the government is scrutinizing on this, they will ask us to close the door because we have no proper business license. In this case, when you have to face the government, you have to do whatever they ask you to do. So, we have to close for two to three months… In the meantime, we asked our owner, the shop owner, to help us, to you know to negotiate… to get the business license. I think, fortunately, because the owner has some relationships in the government, so even though it was very difficult, but in the end, he helped us to get the Chinese business license.

Matthieu David: Is it hard to get it?

Carol Liu: Yes, it is very hard if there is no relationship with the government; it is… I think it will take much, much longer to get the Chinese business license or you may not get a license.

Matthieu David: Okay.

Carol Liu: Yes, it’s very sensitive.

Matthieu David:  But how did you… so you created before with not the right Chinese business license? You had a license of a shop selling products, but not shops selling drinks?

Carol Liu: Yes. You have to have a Chinese business license to sell drinks if you actually sell drinks.

Matthieu David: Okay and what did you need to offer to them in terms of proof that you can run it? What do you need to do for them to trust you that you can run such a business and get a license? What do you need to prove?

Carol Liu: You mean proof to…?

Matthieu David: Do you need to invest a certain amount of money to get this Chinese business license? Do you need to show that you have all the certifications? Do you need to pass some exams to get such a license or you just process in time and so on?

Carol Liu: Actually, it’s a very complicated process. Because the process is mainly handled by the shop owners, I am not very involved in this. It’s kind of like you have to… how to say…. I don’t know the details of the process, but I can say that it’s very complicated and it’s very difficult.

Matthieu David: Okay, was it about security as well? Was it about security? Safety? How clean is the place?

Carol Liu: Yes, for that area, you have to prove your drinks and your process to make drinks are very clean. You have to prove to them for this area

Matthieu David: Got it. So, did you have to pay still the people you had employed? Did you still have to pay the rent?

Carol Liu: Yes, sure. During that period, we have to manage, arrange our people to our other shops. Even though our other shops don’t need this manpower, I will still have to arrange them to work and pay salary to them. We cannot just fire them because it’s not fair to them and also when we are back to our business, we still need them to serve our consumers.

Matthieu David: Okay. About the quality control, you talked about the Chinese business license. We’ve seen in other shops, restaurant, coffee shops in China, the smiling face, the face which is not smiling about how clean the place is? How good is the product? Do you see those criteria’s in the restaurant? The face… the…

Carol Liu: Yes, yes….

Matthieu David: Do you have to go through this kind of regulation test.

Carol Liu: Yes, actually we have to.

Matthieu David:  How does it work? I never understood how the counter is working? How do you move from one stand out to another one? What are the criteria?

Carol Liu: Actually, the government people will come to your shop and they will check out the whole shop, the back side and also the kitchen area and then they will decide which face they will give you. I don’t know the actual standard about it; it depends on…our shop gets the smiling face. It’s not key for you; it doesn’t seem to be key for you.

Carol Liu: Yes. Sure.

Matthieu David: It’s not key.

Carol Liu: It’s not key actually. Yes, it’s not very key, but to get a smiling face is very good for us, but I don’t think the consumers perceive this very carefully.

Matthieu David: Okay. So, in terms of…you talked a bit about, a bit about third parties, like some tech’s report you got. Could you tell us more so in terms of how much you use tech into your shop? I went several times to your shop, and in the past, you were using a personal account to invoice in WeChat, and now it seems that you have a device to scan the QR code on WeChat. It seems like you go through the more common way of invoicing people than the personal account in the past. Could you explain to us why it took so much time for you to move from… on WeChat…? Because on Alipay you already ready for a long time I feel… but from WeChat why did you hesitate so long to move from a personal account to actually use a company account, an invoice with the device to scan the QR code? Was it a problem of fees? Was it a problem of regulations?

Carol Liu: Actually, there are a lot of reasons. One reason is that at first, we use Cashersoft company. It’s the provider of the cashier system. That company did not support WeChat, so, for that reason, we continued to use Alipay. But we find that more and more of our consumers are asking to use WeChat account, so we changed the cashier provider to another provider. That provider supported both Alipay and WeChat account.

The other reason is that… actually, this is the main reason for the WeChat. The other reason… now actually WeChat, you have to use the company account and Alipay actually you can use the personal account, or you can use the company account. For us, because our goal is to run this brand to be a very professional, to grow bigger and bigger… we want to run our company and our brand to be a very professional company, so we decided to transfer to the company account, not to a personal account. But you know the tax, the VAT is quite different. We have to pay the tax for the government.

Matthieu David:  What is the VAT tax? Is it 17%?

Carol Liu: No, it’s 6%.

Matthieu David: 6% because you are in the service business. I see.

Carol Liu: Yes.

Matthieu David: Okay, actually we didn’t talk about your other location, Mengzi Road, so it’s the biggest, is it the more successful one? And then you have another one in the French Concession and then Pudong… but totally speaking, every day you are serving like 500 cups every day totally? Like 200- 250 on Mengzi Road and…?

Carol Liu: Yes, around 500 every day.

Matthieu David: About 500 okay. So how do you integrate technology into your business? So, people can pay with WeChat; people can pay with Alipay so with Weixin pay and Zhifubao and do you go further with technology? You have implemented pre-order, you have implemented delivery to people, how do you implement that technology into your shop? Because I guess you don’t have your own people to deliver, you work with third parties. So how do implement those different services? And how do you work with those third parties which deliver your coffee from your coffee shops in Shanghai? How much margin do they take you? What’s the cost of working with them? Do they pay you quickly or do they pay you 30 days after? Could you tell us a bit, some ideas of how to work with them?

Carol Liu: Now for the third parties we cooperate with and Meituan and also, we’re running our own WeChat account to delivery… for and Meituan actually, they charge a lot. They charge around 15 to 18 percent of the charge, that is pretty… very high, so we prefer our consumers to use our own platform to deliver them… to order the products. In that way, in order to encourage them to order through our own platform, every time they consume, they can have points, and the points can be used as some cash.

Matthieu David: Okay, I understand, but how do you deliver then? You have someone from your coffee shop in Shanghai to deliver then…?

Carol Liu: No. We work with a third party called DaDa.

Matthieu David: And the business model is different then? You pay them how much? Is it cheaper, than…?

Carol Liu:  Dada it’s not… it’s different from and Meituan, it’s only a delivery company, not a platform, but and Meituan, is a platform and they can also help you to deliver, but Dada is only a company that provides delivering service so…

Matthieu David: Okay so each one is finding clients for you, we can say finding coffee drinkers in China, but Dada is not finding clients for you. Dada is only providing the service of delivery, and you pay them as pay order you don’t pay them as a commission, right? You pay them to pay the order. Okay, how much do you pay for pay order?

Carol Liu:  Yes. Actually, it’s very low. If it’s raining, yes, it’s raining, it’s high may be for poor order they charge 6UN, 7UN, 8UN, 9UN that is very possible, but in the normal days in the normal condition, it’s around 4 UN to 5 UN per order.

Matthieu David: Okay, so 4UN is like 0.5 Euros for the order to deliver anywhere. Anywhere in Shanghai?

Carol Liu: No. It’s actually around within 2kms.

Matthieu David: Okay. I understood.

Carol Liu:  If beyond 2km actually we don’t suggest our consumer’s order because the coffee taste is not good.

Matthieu David:  Okay, so you say like 4 Renminbi, and your average price should be about 20- 25 Renminbi?

Carol Liu: 20. Yes

Matthieu David: 20…The average! Okay.

Carol Liu:  Yes.

Matthieu David: So, it’s taking more than Meituan isn’t it? 4 Renminbi is taking like 20%.

Carol Liu: Because when consumers order the drinks, normally they will order more than one cup.

Matthieu David: I see. Okay, I understand. So then if you have more than two, it’s beginning to become cheaper… I mean more than one Is becoming cheaper than Meituan, but if you have less than one DADA is going to be more expensive.

Carol Liu: Yes.

Matthieu David:  Since you have less than one.

Carol Liu: You can say that.

Matthieu David: Okay. Do you change then? Do you change… go to Meituan when actually it’s only one and go to Dada if it’s more than one?

Carol Liu: No actually it’s consumers who decide or Meituan or our own platform.

Matthieu David: You cannot use Meituan and say, we sent you a client, you cannot do that, they bring you, clients.

Carol Liu: Yes

Matthieu David:  Okay. So, you are working with, you’re working with Meituan, you’re working with Dada any other thirds parties you work with?

Carol Liu: We used to work with Baidu delivery but Baidu now…less and fewer consumers use Baidu… so now we don’t work with them anymore only and Meituan and our own platform.

Matthieu David: Okay. Talking about Baidu, do you use other services of Baidu like Baidu map? Is it something you try to work on…?

Carol Liu: No.

Matthieu David: You don’t use Baidu maps to drive coffee drinkers in China to your shop, who look for coffee. Is it not something you would want to work on?

Carol Liu: No, because actually, Baidu is a company. I don’t like a lot. So, for this kind of company, we don’t want to cooperate with them.

Matthieu David: Interesting. I get that a lot.

Carol Liu:  Because it’s kind of social responsibility, I think…

Matthieu David: Okay. It’s very strange Baidu has a very different image, and Google has… people trust a lot Google but in China people are very reluctant to trust Baidu results.

Carol Liu: Yes. Because it is not available, Google is not available we have to use Baidu, but actually most of my friends most of my people around me they think Baidu is not a very good company.

Matthieu David: You said that the competition was more and more fierce. And of course, we are talking about…  we are thinking about Luckin, we are thinking about Xicha (Hey Tea), of course, we can think about Starbucks. What were you talking about saying that the competition was fiercer and fiercer?

Carol Liu: Yes, maybe two years ago or one years or maybe two years… I think there is not as much more player as now, because of especially recent two years… I think you have heard about Luckin coffee. I don’t know if you have ordered Luckin coffee, Coffee Bucks these are very important players on the delivery coffee area and there are some other very big, big chain store like… of course Starbucks but there are other local players like Xicha coffee, they have very big chains, and they have the investment to back them up, and they have very good resources to have the good locations, to go into the good shopping malls. In addition to that, there are very small players like us, like the independent small coffee shops and recently we find more and more small coffee shops in Shanghai like us are coming into the coffee market in China. If you go to the French Concession, maybe every 5m..500m you can find very small coffee shops. So, the competition now is very fierce, different types, different models, they are competing to win the consumers.

Matthieu David: I feel that your idea was to have very small coffee shops in China, so people take away like is the one on Mengzi Road is really take away. It’s like 20 sq. meters or 15 sq. meters?

Carol Liu: 25

Matthieu David: 25 sq. meters, so it’s very small I think the kitchen, the storage is doing half of it and then you have half of it which is with like 5 or 6 seats, and with this model I think is best to optimize the cash flow and the sale because people take away and don’t stay. I feel that’s part of your strategy. Am I correct?

Carol Liu: Yes, but this kind of strategy is going very popular now like Manner Coffee I don’t know if you heard about this brand…       Manner coffee. Their space is even smaller than us, and their price is also lower than us, and their coffee quality is good and not bad. So, this kind of strategy this kind of model in Shanghai now is very popular and a lot of players come into this area.

Matthieu David: Okay. Yes, there is one thing I wanted to talk about is how you differentiated from the competition? I felt the first time I went to your coffee shop is that you take care a lot about the product itself. It’s for the first time for me. It was not too hot and not too cold neither. It was the very right temperature for me the coffee, and also the taste was very, very special. It was good; it was different from Starbucks and other players.

A few questions on this, how have you worked on it? To differentiate on the product itself, from a small company… because you are still a small company and secondly what are the feedbacks of the clients? Do you get some feedback about the product itself?

Carol Liu: Yes, referring to how do you differentiate of Big Sur from other small players, we focus on the details like you mentioned the temperature and we focus on the service, we focus on the high quality of the coffee. So, on these three dimensions, good quality coffee, details and the service we hope that we can outstand within our competitors and your next question is what I am sorry?

Matthieu David: The feedback of the client, do you feel that the clients come back to you because of the quality of the product or because more of your location?

Carol Liu: I think both.

Matthieu David: Yes, because let’s take Mengzi Road again and let’s take anywhere basically, like French Concession, you have so many coffee shops in China, so if people come back to you, it’s not because of the location because they just need to do like 20m more or 30m more and they find other coffee shops. So, it’s certainly something with the service and the product, what do they value do you think?

Chinese coffee industry

Carol Liu: I think the location is first and then the good quality. For the white collars, they can’t go a long way to get a cup of coffee. I think convenience is very important for them. So that’s why the location is a key factor for us, and then it’s good quality. If the quality is not good even if you are very convenient, they will not come as well. So, I think the location is first and then good quality.

Matthieu David: So, because we are still talking about the competition, could you tell us a bit more about how you analyze the success of all the competitors besides an investment. How do you analyze the success of Luckin coffee? How do you analyze the success of Xicha or GreyBox? And I guess there are different reasons for each of them. What’s your point of view on the success of those players?

Carol Liu: I think for Luckin Coffee, I think the key factor of their success is their marketing, it’s their advertisement and the marketing and their promotion.

Matthieu David: Promotion you mean discount you mean delivery?

Carol Liu: Yes. The promotion of and their marketing they combine very well because they use the marketing tool to give a discount to their consumers.

Matthieu David: Could you give some examples?

Carol Liu: You know they have their app. Luckin app and they have their WeChat account.

Matthieu David: Application.

Carol Liu: Yes.

Matthieu David: They have their own application, and they have a mini program on WeChat.

Carol Liu: Yes, they have their… I mean the WeChat account, they can publish their add course every week. So, through these tools, they continue to give their discounts through these tools, to accumulate their members… their memberships and to ask their consumers to invite their friends, and continue to invite another friend…it’s like a kind of you know how to say…

Matthieu David: Yeah, a little bit like Pinduoduo.

Carol Liu: Yes, it’s kind of….

Matthieu David: It’s like a network effect.

Carol Liu: Yes, networking marketing tools. So, I think this is their key factor and how they are successful and how so many members now they have.

Matthieu David: What about the other one Xicha and GreyBox?

Carol Liu: For Xicha and GreyBox, I think their key… how to say… I think it’s just their base and the location

Matthieu David: You mean the environment how they design the environment?

Carol Liu: Yes, how they design the environment and the location because the location is if you see GreyBox and Xicha, the location is a very good location on the very hot shopping mall, and the design and space is very modern, it’s very comfortable. It’s very nice to sit there, to have a talk, to work there.

Matthieu David:  Yes, because people stay in their coffee shop. So, have you ever tried to know how many cups of coffee do they sell in the day, because it may not be actually that different sometimes from your results, because you have a lot of takeaways? And they don’t have… people stay, and when people stay, they may not consume like five coffees, they consume one… they just stay for two hours. Have you tried to compare a little bit with the coffee shop which is close to you, Starbucks coffee shop or other coffee shops how many cups of coffee they may sell? And if it is actually much higher than you actually similar, with a bigger space. Did you have this thinking before?

Carol Liu: Yes, I have this kind of thinking. But I actually don’t know the exact figure; you know how many more coffees do they sell because of space. I think there is a Starbucks near the (37:59) road. Actually, I don’t know the exact figure how many cups they sell every day. But I think for at least one (inaudible 38:19) is because of their space.

Matthieu David: Okay. Talking about how to scale, because you said like some coffee shop chains in China like Luckin, Star bucks of course, but Luckin, Xicha, GreyBox, they have a lot of money. In terms of opening a coffee shop, what amount of money do we talk about in terms of initial investment before operating? Could you share it a bit of a range of money you need to?

Carol Liu: You mean like our coffee shop? This kind of small coffee shops in China?

Matthieu David: Yes. Roughly

Carol Liu: At least 500 thousand.

Matthieu David: 500 thousand so 50万RMB

Carol Liu: Yes

Matthieu David: 500 thousand renminbi, which is about nearly 60,000 Euros – 70,000 Euros.

Carol Liu: Yes

Matthieu David: Where does it go this money? It goes in… so do you have to pay upfront, like three months of rent plus deposit? Where does the money go?

Carol Liu: One big part is the coffee machine.

Matthieu David: Oh, yes. How much is it?

Carol Liu: Our coffee machine is La Marzocco it’s a from Italy, it’s very expensive, but it’s a kind of high-end machine brand in the coffee industry in China. It cost around 75,000 RMB. 75,000 RMB for one coffee machine.

Matthieu David: Okay so about 10 thousand Euros nearly. Okay

Carol Liu:  Yes, and that’s not only in the coffee machine, but there is also a grinder to have the coffee powder, the coffee beans to the coffee powder. This grinder also cost around 20,000 RMB.

Matthieu David: I see.

Carol Liu: Normally we have two kinds of grinders because one is for the espresso coffee and the other is for the pour over coffee. So, you have at least two grinders.

Matthieu David: Okay. Then the other part because this is…

Carol Liu: The other part is normally we pay rent. We have to have a three-month deposit.

Matthieu David: Three months deposit and do you need to pay three months in advance as well so six months total when you begin?

Carol Liu: Yes.

Matthieu David:  Six months total when you begin. Right?  Okay, so that’s a big amount.

Carol Liu: But in some occasion, it’s two and two.

Matthieu David: Okay. Talking about the future, how do you think you can scale? How do you think you can move from three coffee shops in China to twenty? To then let’s say, even ten, what do you think could be the drivers for you to scale? What’s your analysis on that?

Carol Liu: Actually, now our strategy is quite different from the strategy of the last two years. Last year we wanted to expand very fast, but we experienced these two failures, the Hefei shop and the shop in the Peoples Square, so now we review our inside management, our qualities, our service, our details. I think that we have to do some… the basic sense, the ground, we want to hunt the ground, very solid, and then we expand. The roots, the ground… we have not built it very well if we planned to expand it will be a failure for us. So now, on the one hand, we strengthen the professionalism of our baristas, and we launched our secret guest project to strengthen our surveys, our…

Matthieu David: Mystery shopping?

Carol Liu: Yes. To strengthen our customer service and the consumer’s experience in our coffee shops in China, and then we focus a lot on the quality of our coffee, of our coffee beans. As I mentioned in the last article, first of all, our strategy is post coffee and tea, but now we think this strategy is not very good because even our coffee is good but the consumer will perceive our coffee is not professional because we have tea. So now we focus more and more on the coffee and reduce the tea products a lot. And also, we focus on the coffee beans; we want to work with the origin of the coffee beans like the South African like the African countries who farm and harvest the cherry, the coffee beans because we think only if we have very good coffee beans, then we can have very good quality coffee.

Matthieu David: Understand.

Carol Liu: So now we focus our more time on this area the good quality coffee beans, the experience, the customer service, the details and the professionalism of our baristas, and when we do very perfect outstanding of all these areas, then we will expand to our… to be bigger.

Matthieu David: I understand, thank you very much for your time Carol, so you are managing the coffee shop chain in China, Big Sur and you are based on three locations in Pudong, Mengzi Road and in French Concession.

Carol Liu: Jiashan Road.

Matthieu David:        Jiashan road, so anyone listening to us in this China marketing podcast episode, tries Big Sur coffee shops on these locations. Thank you very much for being China Paradigm’s guest.

Carol Liu:              Thank you, Matthieu, bye.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.