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Dadacai wrote a post · May 28 18:27

Kopi Time

I’m not a regular coffee drinker and I don’t usually spend more than S$2 on a drink but there is no denying cofee is a profitable business. This is evidenced by the large number of cups of hot and cold versions of the beverage being sold every day, be it the humble stalls at hawker centres and Singaporean version of coffeeshops (or what locals call kopitiams), global chains like The Coffee Bean and Tea Leaf, $Starbucks (SBUX.US)$, $McDonald's (MCD.US)$ or trendy themed cafes.
This also means that competition is stiff. To make people pay more than S$1.30-1.60 for a cup of cofee, there must be a compelling proposition to stand out. Often this means a nice decor, a convenient location close to the target market, a good product and great service. Cafes that offer the beverage as a secondary offering to meals have wider appeal but may struggle to stand out due to more competing alternatives. Cafes that focus on making the best coffee have a wider moat in that sense but cater to a more niched market. Loyalty programs can help to increase customer loyalty and frequency and amount of purchase.
In the local context, I would be interested in investing in familiar brands like Toast Box and Ya Kun which do a brisk business in kaya toast and tea/coffee but they are unfortunately not publicly listed.
$Luckin Coffee (LKNCY.US)$ is an up and coming company with many outlets in China and it has recently entered the Singapore market. In its home turf, it is doing better than Starbucks but whether it can expand and do well overseas on a sustainable basis remains to be seen. While location is important, high rental cost can make or break a business and hiring of staff is a constant challenge for the F&B industry.
$Starbucks (SBUX.US)$ is currently in a downtrend due to the Gaza conflict so I would not rush into investing in it.
Kopi Time
Disclaimer: The above is my opinion. It is not and should not be taken as financial advice or a recommendation to sell and/or buy. Please consult a financial advisor and do your due diligence before doing any investment.
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Dadacai
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