9.9 yuan monthly subscription, Wallace's coffee gamble

​Zebra Consumer, Chen Xiaojing

After Cotti's 9.9 yuan exit, it's unexpected that Wallace would take over with an 'alternative' approach, once again stirring up the landscape of China's coffee market.

It's also 9.9 yuan, but not the price of a single cup of coffee; it's the monthly subscription price for Americano. Theoretically, users can drink up to 210 cups per month, making the price per cup less than 5 cents.

Has Wallace lost its mind? Is it trying to do charity? If you have even a hint of such a thought, you've already fallen into this meticulously designed 'coffee gamble' of theirs.

Betting on Traffic

When major media outlets started paying attention and internet users actively discussed Wallace's 9.9 yuan monthly coffee subscription topic, Wallace had already won the first round of this gamble.

Wallace's main business is affordable Western fast food, focusing on products like burgers, fries, fried chicken, and cola. Before this, few coffee consumers would actively order coffee at Wallace, and many didn't even know Wallace sold coffee.

The launch of this 9.9 yuan monthly subscription marks Wallace's true entry into China's coffee race. It redirected the funds originally intended for advertising to subsidize targeted users, not only generating long-term social attention but also achieving far greater communication effects than simple advertising.

Currently, Wallace has about 20,000 stores nationwide, with the vast majority located in lower-tier markets. Consumers in these markets are more price-sensitive, and the supply of quality coffee is relatively scarce locally. An extreme low-price strategy allows Wallace to penetrate the market more quickly.

For Wallace to enter the coffee race, it doesn't require high additional investment. It just needs to allocate a small area within existing stores and add a coffee machine. This low-investment, rapid-expansion model also gives Wallace the confidence to push the coffee price down to 5 cents per cup.

Of course, 30 days, 9.9 yuan, 210 cups are only the theoretical maximum benefits. A closer look at the 'game rules' Wallace set reveals that almost no one can actually drink coffee for 5 cents a cup, unless you are extremely fond of their Americano and more dedicated than the store staff, staying in the store during all business hours.

Most users often adopt a 'one cup and I break even' mindset, purchasing the 9.9 yuan monthly subscription card, thereby becoming Wallace users. After all, for any industry, customer acquisition is the hardest part.

Once the monthly card is activated, Wallace is not worried about you drinking too much coffee; on the contrary, it hopes users will frequently open the ordering mini-program and visit the store.

Betting on Store Visits

Wallace stirring the coffee market with a 9.9 yuan monthly subscription is not just about entering a new race; it has deeper considerations of using coffee, an addictive beverage, to drive foot traffic to its offline stores.

For users who purchased the monthly subscription card, Wallace has established a detailed set of ordering rules:

Orders can only be placed via the mini-program within 200 meters of the store; delivery is not supported, meaning users must consume in-store;

One cup can be redeemed every 2 hours; if you want another cup, you need to pay a high time cost;

This benefit only applies to Americano; to drink other categories like latte, an additional fee is required.

During the process of using the coffee benefit card, users can see add-on purchase options at almost every step. Wallace uses various promotional methods to strongly guide users to consume other products in the store while picking up their coffee.

A relevant person in charge of a Wallace store stated frankly that after the launch of the 9.9 yuan monthly coffee subscription, it has indeed effectively boosted the sales of traditional categories like burgers and fried chicken. Over half of the benefit card users add ice cream or burgers when activating the card.

From the perspective of industry insiders, Wallace's 9.9 yuan monthly coffee subscription is not to let users 'achieve coffee freedom' but to use the theoretically 5-cent coffee as bait to exchange for multiple store visits from users.

As long as some users choose to consume other products when picking up their coffee, Wallace can use the profits from its traditional Western fast food business to subsidize its coffee operations, thereby gaining a foothold in the domestic fresh-ground coffee market without a fight, while also rapidly promoting its own coffee business to become a 'ten-thousand-store brand'.

Betting on Repurchase

Over the past decade, China's fresh-ground coffee market has experienced explosive growth, thanks in no small part to affordable coffee brands like Luckin and Cotti. It was their continuous lowering of fresh-ground coffee prices that cultivated a large coffee-consuming population.

Relevant data shows that the number of fresh-ground coffee drinkers in China has grown from 40 million in 2018 to 130 million in 2023, and is expected to further climb to 260 million by 2026.

The surge in the consumer population has propelled fresh-ground coffee to become the fastest-growing category in the freshly made beverage industry. Some institutions predict that China's fresh-ground coffee market size is expected to grow from 1.515 trillion yuan in 2023 to 3.836 trillion yuan in 2028.

Although brands like Luckin, Cotti, and Lucky Cup have successively completed their ten-thousand-store layouts, the vast lower-tier market still holds significant development opportunities. With its advantage in store layout in lower-tier markets, it's not too late for Wallace to enter the coffee race now.

Wallace's 9.9 yuan monthly coffee subscription is only a phased promotional activity, with the core purpose of attracting its first batch of dedicated coffee users through extreme low prices. Once consumers around the stores develop a coffee consumption habit, they are expected to become a stable customer base for Wallace coffee, while also driving sales growth of other Western fast food products in the stores.

However, for Wallace, the most important thing in this coffee race layout is the control of product quality. If it cannot shake off the shadow of the 'Projectile Warrior', the ultimate winner of this meticulously planned coffee gamble remains unknown.