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The Coffee Industry's "Dark Horse"

An outsider who, within five years of entering the industry, connected the online and offline coffee supply chain, creating a diversified professional coffee company that integrates cultivation, fresh fruit processing, primary processing, finished products, and export, known as the coffee industry's "dark horse."

Yunnan's Rich Coffee Heritage

Yunnan coffee has a long history, with its small-grain coffee being rich without bitterness, aromatic without greasiness, and slightly fruity, earning high praise in the industry. Statistics show that Yunnan's current coffee planting area covers about 1.5 million acres, accounting for 99% of the country's total coffee planting area and production, mainly distributed in Pu'er, Dehong, Lincang, and Baoshan. Yunnan coffee has attracted multinational giants like Nestlé and Starbucks, becoming fertile ground for entrepreneurs.

The "Dark Horse" Emerges

This "dark horse" is Xu Zhengxiong from Lujiangba, Baoshan City, a major coffee-producing area, and his Hemei Coffee Company. In 2007, Xu Zhengxiong, who was in the medical device business in Shenzhen, returned to his hometown and invested over 3 million yuan to start a distillery, but the business was lackluster.

A Fortunate Opportunity

"My family always had five or six acres of coffee, but I never really paid attention to coffee until 2010, when a classmate invited me to do coffee business," said Xu Zhengxiong. Later, they found Dehong Hougu Group and decided to start by purchasing coffee beans, borrowing 300,000 yuan from relatives to establish the Shuanghong Agricultural Planting Professional Cooperative.

In 2010, coffee prices rose steadily, reaching over 40 yuan per kilogram at their peak. During the 2010-2011 coffee season, Xu Zhengxiong made a net profit of over 3 million yuan in just three months.

Challenges of Entry

For Xu Zhengxiong, a "latecomer" to the industry, entering agriculture was an unknown variable. With only passion, it was easy to become "cannon fodder." From planting, harvesting, processing, to sales, every aspect was unfamiliar and technically demanding, with the inevitable risks of traditional agriculture.

Looking back now, the high market prices at the time masked Xu Zhengxiong's lack of experience. "Squeezing a handful and smelling it" is a quality-checking action when purchasing coffee cherries, but Xu Zhengxiong admitted that he was just "copying others."

"I had no experience in collecting beans, just imitating others by biting a bit, rubbing a bit, and putting on a show. Actually, everyone was scrambling for beans then, and couldn't care about other things. Fortunately, prices were high, and all the beans we purchased could be sold," Xu Zhengxiong said.

Strategic Development

In January 2012, Xu Zhengxiong established Hemei Coffee Company. Compared to traditional farmers, the internet opened a window for entrepreneurs in the agricultural sector. In the conventional approach, coffee companies typically develop products first, then sell them through e-commerce channels. However, Xu Zhengxiong used an e-commerce strategy to drive company development.

In 2012, Xu Zhengxiong received the "Governor's Entrepreneurship Award." Subsequently, he met three partners interested in e-commerce, and the four decided to join forces in e-commerce, establishing Sizhi Cat Coffee Company specifically responsible for e-commerce operations.

Driven by the e-commerce plan, he immediately began establishing a coffee deep-processing plant in Baoshan. By March 2014, a fresh fruit processing plant with an annual processing capacity of 50,000 tons was completed, along with a coffee bean roasting plant with an annual processing capacity of 1,000 tons and a 2,000-ton three-in-one instant powder plant. In May of that year, three-in-one instant powder products began production, and by August, sales exceeded 10,000 orders, a remarkable speed.

Seamless Integration

To achieve seamless integration between sales and production, Xu Zhengxiong also built a coffee instant powder factory in Kunming, with the e-commerce team directly stationed there, achieving a "front shop, back factory" model. Once coffee instant products were produced, they could be directly packaged and shipped to consumers.

"Agricultural production cycles are long; what matters is execution ability. Meanwhile, internet thinking must align with target consumers' psychology and needs. In our e-commerce company, the average age is 27. Because our coffee buyers are young people, we mostly hire employees born after 1990, whose thinking is closer to consumers' mindset," Xu Zhengxiong said.

From Seed to Cup

"From seed to cup," cultivation management determines coffee quality. After breakthroughs in e-commerce, Xu Zhengxiong expanded toward both planting bases and offline experiences.

Currently, Hemei Coffee owns a 5,000-acre high-altitude coffee planting base in Liuku Town, Lushui County, and controls 20,000 acres of quality coffee base in Mangkuan Township through the Shuanghong Cooperative. Both bases have now passed "International 4C Coffee Certification," and the entire company has also obtained ISO 9001 International Quality System Certification.

O2O Model Expansion

The O2O model is also being gradually tested. In Lijiang City, Xu Zhengxiong has already opened 3 experience stores, featuring an experiential sales model with on-site coffee beverage making and coffee bean roasting. In Baoshan, Xu Zhengxiong created a unique coffee shop decorated primarily with wine bottles, opening the first "wine bottle" coffee shop in Baoshan.

Business Philosophy

Xu Zhengxiong believes that in entrepreneurship, government support is only an auxiliary factor and cannot replace one's own efforts. "From establishment to now, Hemei's total investment is about 50 million yuan, of which government support amounts to about 3 million yuan. Iron forging depends on oneself. If relying solely on government support, one can't grow tall or go far," Xu Zhengxiong said. However, the government should strengthen public services for the industry, organize enterprises to go abroad, and help brands and products establish a foothold.

At the same time, enterprises should achieve win-win outcomes with farmers, avoiding competing with farmers for profits. "For example, when enterprises purchase products from farmers, implementing premium prices for quality products not only motivates farmers but also improves the quality of purchased coffee beans, creating a virtuous cycle and promoting progress. Otherwise, malicious price suppression would create a vicious cycle," Xu Zhengxiong said.

Talent Challenges

The shortage of talent is one of the problems troubling Xu Zhengxiong and many entrepreneurs. "Currently, the problem with Yunnan's agricultural e-commerce is the relative scarcity of talent. I hope the government can invite external experts to train local e-commerce talent," Xu Zhengxiong said.

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