China Food

For three years, new tea is still a game of unlimited scale

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Can China’s new tea drink PK Starbucks in ten years?

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The young people in Changsha are not happy because the business of “drinking tea for tea” is about to come to an end.


In May this year, Changsha’s local Chinese style new tea brand tea Yan Yuese officially announced that it was about to leave Changsha and land in Wuhan in 2021.


You may not have had a cup of tea, but you must have seen the “orchid latte” punch out photos of young girls in Changsha from the microblog and circle of friends. “Orchid latte” is one of the most popular milk teas.


The picture comes from the Internet


Since its establishment in 2013, this new milk tea brand with Chinese style as its brand characteristics, focusing on tea base + Cream (milk bubble) + broken nut milk tea, with product price concentrated at 12-18 yuan, has occupied a large amount of voice in the new tea drinking track with online celebrities such as Xicha and Naixue. In addition to the milk tea products with good taste and high appearance value, people also enjoy the “permanent claim right” (consumers can ask the clerk to make a cup of milk tea for free whenever they feel that the taste of the milk tea is not right), half price in rainy days, and small medicine box service.


However, since its establishment seven years ago, chayan Yuese has never gone out of Changsha. For this reason, there are even some related topics on microblog, such as “one person’s blood letter asking chayan to open Changsha” and other related topics. On the Internet, some people have opened up a special service for drinking.


Compared with other brands in different parts of the country, tea Yan Yuese has always adopted the method of opening stores in Changsha. According to the official account of tea yam Yue, it has opened 238 Direct stores and 8 concept experience shops in Changsha alone, and even opened 10 meters in Changsha.


With the official propaganda in Wuhan, tea Yan Yuese finally took the first step towards the whole country. However, the new tea market has been surging in cities where tea has never been involved in these years.

  


Where is the new tea


The development of China’s tea industry has roughly gone through three different stages: powder era (1990-1995), Street Era (1995-2015) and new tea age (2015-present). The first two stages are now collectively referred to as the traditional tea chain period.


As early as 2000, milk tea shops on the street appeared in mainland China. At that time, there were all kinds of milk tea shops around the streets and schools. If you rent a booth around the school and search for a formula on the Internet, you can scoop two or three spoons of powder, one flush of boiling water and one seal of mouth, which will attract a large number of students to line up to buy.


This extensive prosperity began to decline with the appearance and expansion of coco Duke and happy lemon. In 2006, happy lemon was founded in Shanghai. In 2007, coco, the originator of online black milk tea, which has been popular in Taiwan for 10 years, has also set up shop in the mainland. In the era of only knowing pearl milk tea, happy lemon and Duke began to make articles on fresh fruits. From then on, the street era of milk tea was opened.


Just as happy lemon and dukemen have successfully developed the habit of drinking ready-made milk tea in the country through the franchise mode, a milk tea shop in Jiangmen, Guangdong Province, China, has made its name in Jiangmen for its original cheese instant tea made from cheese and seasonal fruits. At that time, no one could have imagined that this small shop would usher in a new “new tea drinking era”.


Compared with traditional tea, where is the “new” of new tea?


After studying the development history and product evolution of the new tea, the consumer research institute distinguishes the new tea brand from the traditional tea brand from the four aspects of raw materials, brand building, channel innovation and marketing mode.


Compared with the traditional tea, the new tea has been upgraded in raw materials and production methods. In terms of raw materials, the new tea drinks have abandoned the traditional milk powder, saccharin, pearl, coconut, etc., and replaced them with excellent tea base, fresh milk, fresh fruit, imported cream / cheese, etc. in taste, the original tea + milk is expanded to fresh elements such as raw tea, tea + milk, tea + fruit, tea + cheese. In terms of production methods, new food processing technology is added to the new tea, and more manual processing is used instead of machine mixing. The production process is more complicated, but the taste is greatly improved.


In terms of brand building, new tea brands create differentiated brand and personnel settings through all aspects of details. From product packaging to store decoration, they all pay more attention to the sense of design and brand trend, high-end and product positioning. For example, Naixue tea targets its audience at female white-collar workers aged 20-35. For this reason, Peng Xin, the founder of Naixue tea, designs a “Naixue Cup” that conforms to women’s slender and easy to hold hands by proofing the grip size of her own hand. The groove on the cup cover has also been specially tested, so that girls can avoid lipstick sticking to the cup.


Not only that, the store is decorated with high-end atmosphere, and its taste is highly praised. Its appearance is exquisite and attractive. It is popular and difficult to queue up. The new milk tea, which integrates these four characteristics, arouses consumers’ desire to share in minutes. Therefore, milk tea “clocking” has become the most popular content in the circle of friends. Clock in line, new taste, new store Dressed in the guise of “Internet red”, the new tea brands have become the favorite of social networks, and become the “social currency” for young people to talk, express their views and bask in their superiority.



In terms of channel innovation, the rise of new tea just stepped on the east wind of mobile social networking and grasped the online channel.


In 2009, microblog was established. In 2011, wechat was born, and it quickly captured 100 million users 14 months later. In 2012, wechat circle of friends went online and became a private place for users to share and display their personal lives. In 2013, the official account of WeChat was launched.


“Double micro” has become a powerful tool for brands to conduct online marketing and connect with users. Micro-blog has 725 thousand users, and 360 thousand users have a snow. The official account number of 2019’s Hei tea is 990 thousand +. And through online marketing and cross-border experience, to constantly bring brand-new and experience to users is the marketing method of new tea drinks.


In addition, in terms of sales channels, different from the traditional tea with offline stores + take out platform, the new tea industry also built its own app, small programs, etc., to obtain customers and sell services from multiple channels. For example, tea’s wechat app “Xicha go”, Naixue’s “Naixue order list”, Cha Yan Yuese has also launched its own wechat app.


Being good at online marketing is also a prominent feature of new tea and traditional tea. In the early years, traditional tea brands mostly focused on stores and promoted through traditional advertising; while the new tea drinks represented by Xicha Naixue enjoyed the bonus of mobile social networking at the beginning of its birth, especially good at online marketing and cross-border marketing, jointly branded export red goods, canvas bags, mugs, mobile phone cases, clothing, food Only you can’t think of, no new tea drinks can’t be co branded. Xicha launched more than 240 new products last year, most of which are co branded or peripheral products. For this reason, some people even regard Xicha as a marketing driven company.


In this way, we can find that, up to now, China’s tea industry has formed two camps: one is shopping in the first and second tier cities, represented by Xicha, Naixue and LeLe tea Mall, the stores all adopt the new tea brand of self-management mode; on the other hand, they are the traditional tea brands, which are represented by coco Duke, Yidian and mixue Bingcheng, which adopt the mode of franchise or self operation + franchise, and widely open stores in the country. We will focus on the new tea brand below, and talk about the market which is booming at the speed of light.



How did the new tea come into being


Xicha was born in 2012 in Jiangmen, Guangdong Province, in an alley called jiangbianli, which was also called “Huangcha”. Half a year after the store opened, it became the local “wanghong” milk tea shop because it abandoned the traditional milk powder and pearls and used cheese and seasonal fruit as raw materials for tea making.


Since 2013, Xicha began to expand gradually in Dongguan, Zhongshan, Foshan, Huizhou, Guangzhou and other places in Guangdong. At the end of 2015, the first store in Shenzhen, coastal city store, opened. In 2016, because the original name of royal tea, royal tea, could not be registered as a trademark, it was officially renamed heytea, and received more than 100 million yuan of investment from IDG and today’s investment (a consumption fund founded by he Boquan, the founder of LeBlanc).


With the gradual expansion of Xicha in Guangdong Province, Naixue tea was established in Shenzhen in 2015.


Different from the small shop model of only 20 square meters in the early days of Xi Cha, what Nai Xue Cha wants is to continue the playing method of the third space of Starbucks and create a kind of leisure and social space. So from the beginning of its establishment, Naixue insisted on opening a 200 + square meter store. “We should make a space for people to relax and relax and talk loudly.” Peng Xin, the founder of Naixue tea, once expressed her original intention in an interview with 36 krypton.


Naixue insists on opening a 200 + square meter store, photo source @ Naixue official website


But the idea wasn’t good at first. At that time, almost all mall owners thought that it would be very low to put a brand of milk tea next to Starbucks. In order to talk about shop space, Peng Xin and her husband Zhao Lin spent almost a year. In November 2015, the first shop of Naixue tea in Shenzhen (excellence century store) was finally opened, which was just one month earlier than the first store of tea in Shenzhen.


Naixue’s main product is fresh fruit tea, and its “tea + soft European package” double category model is its first, which directly drives the customer price of Naixue to more than 40 yuan. Compared with the relatively neutral brand positioning of Xi Cha, the intimate details and differentiated social space experience make Naixue really gain the love of many young women. By 2017, Naixue, which was founded less than two years ago, has opened 28 stores in benchmark shopping centers in Guangzhou, Shenzhen and Dongguan.


At the same time, in December 2016, a new tea brand, lelecha la la la la tea, which also focuses on “tea + soft European package”, opened its first direct store in Wanda store in Wujiaochang, Shanghai. In June 2017, Lele tea, with a popular soft European package product – “dirty bag”, successfully came out of the circle and ranked third in the new tea brand.


Lele tea · dirty bag & the picture is from the Internet


Of course, in addition to the head of the industry, it is also essential to boost the popularity of the industry. Since Xi Cha and Nai Xue started to queue up in Guangdong, capital has been paying attention to this track.


According to tmtbase, the primary market database of titanium media, CSI summarized the financing situation of new tea industry since 2016

Data from Tianyan and public information


In 2016, the top brands of new tea drinks, such as Xicha and Naixue, obtained financing one after another, opening the road of store expansion. By 2017, Xi tea has opened more than 50 stores in Guangdong, sounding the clarion call of marching into the whole country, and entered Shanghai in February 2017.


Due to the good reputation accumulated in Guangdong Province before, Raffles store, the first shop of Xi tea in Shanghai, attracted 100 people to gather. On the opening day, nearly 4000 cups of tea were sold every day in a single shop in Shanghai, with a daily turnover of more than 80000 yuan. People queuing up to buy milk tea lined up six long snake shaped lines, and some even had to wait six hours to arrive. Yellow cattle also heard the wind, a cup of more than 20 pieces of tea was fried to hundreds.


After being reported by the media, this phenomenon instantly exploded on the Internet. In the speculation and query of “hiring people to queue up” and “inviting people to post posts”, tea became popular. And behind the new milk tea industry, also with the popularity of tea into the eyes of ordinary people.


By 2020, as the two leading brands in the new tea industry, Xicha and Naixue have respectively ushered in the 8th and 5th year after their establishment, while the new tea industry has been booming for at least three years since 2017, when the new tea industry was booming, brands and products were frequent.



The new tea market is now a “scale game”


In the beginning of 2020, the new tea industry will usher in a new crown epidemic.


According to the survey on the living conditions of tea shops during the epidemic period, more than 90% of tea shops were closed from January 25 to February 9 alone. 65.56% of the stores were closed. However, in the case of not operating, 65.86% of the stores had almost zero revenue compared with the same period last year, and 19.34% of the stores decreased by 50% – 80%.


Novel coronavirus pneumonia and fierce competition, the overall growth of the new tea drinking industry began to slow down. According to pan pan pan, partner of Tiantu investment management, in the next three years, the whole industry is likely to enter the stage of stock competition.


However, for the head brand of new tea drinks, the impact of the epidemic seems to be very limited. In March before the outbreak, 90% of Naixue stores across the country have resumed business. Peng Xin, the founder of the epidemic, said that although the profits caused by the epidemic were greatly affected, the planning and long-term investment in the next three years would not slow down.


Xicha completed the c-round financing jointly led by hillhood capital and coatue in March. After the post investment valuation exceeded 16 billion yuan, Xicha opened a rapid store model. In April, may and June, Xicha has opened 38 new stores in several cities, and launched 2 types of coffee, 7 European bags, 6 new tea drinks, as well as several co branded and peripheral products.


It can be seen that the sudden attack of the epidemic is also a process of reshuffle for the new tea industry. A number of small-scale tea shops with poor profitability have been impacted or even closed down due to the sharp decrease of offline people flow and paralysis of cash flow. But for the head brand with excellent capital ability, the situation of the strong is becoming more and more prominent.


In an interview with consumer research institute, Pan Pan Pan, partner of Tiantu investment management, also thinks so. In his opinion, with the growth rate of the whole industry stagnating after the epidemic, the top brand of new tea drinks not only rebounded faster than other industries, but also opened stores faster. Part of this growth is due to the occupation of new markets, and the other part is due to the “eating” of the stock market left by the closure of small and medium-sized brands.


Lian Jiaxing, the former co-founder of laibei coffee, told the consumer research institute that new tea beverage is essentially a “chain retail” business. If this business is to be done well, grow and last for a long time, the large-scale replication ability of stores is the core.


Since this year, new tea drinkers have indeed accelerated the process of store expansion. According to the official website of Xicha, 510 Direct stores have been opened in 49 cities and regions, and they have entered Hong Kong, Macao and Singapore. Xicha announced in January this year that it would open 800 stores this year.


In December 2017, Naixue tea also began to go out of Guangdong Province and launch the “national urban development plan”. As of February 2020, Naixue’s tea has spread over more than 50 cities in China, with a total of 349 stores. In terms of internationalization, the first Japanese shop of Naixue tea will open in July this year, and its first store in the United States is also under planning.


As the third place of new tea drinks, Lele tea has a big gap in the number of stores compared with Xi Cha and Naixue. However, it has opened 54 Direct stores in Beijing, Shanghai, Guangzhou, Hangzhou, Xi’an, Nanjing, Suzhou, Wuhan, Chengdu, Wuxi and Chongqing.


But this is not enough for new tea brands. Although the self operated mode is conducive to strengthening quality control, it also greatly limits the speed of opening new tea drinks. Compared with the current size of more than 300 and 400 stores of Xicha Naixue, the number of stores in China has exceeded 2000 by relying on the mode of self support and franchise, while mixue ice city, the king of milk tea, has opened 10000 stores in the mainland of China with its franchise model.


The new tea industry is still in the high investment stage: “there are 20000 shopping malls in China, even if only 1 / 10 stores are opened, there are 2000. Now we are still in the early stage of high investment. ” Pan pan, partner of Tiantu investment management, told the consumer research institute.


At the same time, while the first and second tier cities continue to expand, new tea brands have also launched sub brands, aiming at a broader market. Xicha has launched a sub brand “xixiaocha”, positioning its product as “a drink that is good to drink, inexpensive and with qualified materials”, and still adopts the direct marketing mode.


Xixiaocha’s first shop was opened in Huaqiangbei, Shenzhen. The decoration and store design are accompanied by a strong industrial retro style. The beverage raw materials are changed from the traditional style of Xicha. The traditional burnt Xiancao, taro and red beans are used, and the price is about 8-16 yuan. Xixiaocha’s second brand, xixiaocha bottling factory, has also launched two kinds of bottled fresh juice (peach flavor and mangmangmang flavor) with a price of 19 yuan. One bottle can be bought at a new price, and can be purchased through Xicha go small program.


Xixiaocha Beverage Factory


Although some time ago, the official of Xicha said that Xiaocha was not aimed at sinking the market, it was just trying to explore another way for new tea drinks. However, the price of milk tea with price of 8-16 yuan and bottled fresh juice of less than 20 yuan were aimed at young white-collar workers in the first and second tier cities before, which was obviously different in consumer groups and consumption scenarios.


At present, xixiaocha has not gone out of Shenzhen, and has not directly faced the “more than your shop and cheaper than you” of the miyue ice city, a little bit, and cocos. However, in the face of these brands that have been in the third, fourth and fifth tier cities for more than 10 years, it is obviously far from enough to rely on limited product upgrading and tea like aura.



High gross profit means high competition: looking for moat


In the eyes of the outside world, new tea is an industry with a gross profit margin of 50%, but in fact, the net profit of this industry is less than 10%.


The biggest part of the new tea brand is labor cost. New tea needs to be produced manually on site. In order to ensure the production efficiency, 15 employees are busy working at the same time when they like tea most in a 20-30 square meter counter. However, Starbucks usually only has 3-5 employees in the same area.


Peng Xin, the founder of Naixue, once told the media that there are 13000 employees in naixueguang, of which 12000 are distributed in stores, which makes the labor cost occupy more than 20 points.


What is higher than the labor cost is the cost of food materials for new tea, which can basically account for 40%.


China Merchants Securities has analyzed the profit model of a single store of new tea drinks in the “2019 new tea drinks depth report”. It is found that if the number of customers is 800, the unit price is 40, and the gross profit rate is 50%, the annual sales revenue of new tea drinks is about 10 million, the net profit is about 1 million, and the net interest rate is 11%.


However, this is based on long-term stable sales and long life cycle, which requires new tea brands to be able to continuously attract consumers and meet the diversified needs of consumers. What tests the enterprises’ ability of new product development and brand operation.  


Gan Tiantian, the founder of sevenbus, also revealed in an interview with Carmen that the current tea drinks generally have 40% raw material cost, 20% rent cost, 15% labor cost, 15% commission from shopping malls, and deduction points for takeout. “Only those brands that have bargaining power in shopping malls and supply chain can make profits 10%,” he said


However, first finance and economics calculated in the book “whether Xicha is worth 6 billion or not”, the net interest rate of Xicha in round C financing is 6.56% and that in round B + is 8.97%; meanwhile, it is estimated that the net interest rate of Xicha may drop to about 5% with the increase of marketing expense rate.


This is roughly consistent with the data that Tiantu investment Pan Pan told the Institute. In Pan Pan’s view, the new tea industry in the establishment of scale effect, profit is not too difficult. In the case of mature development, the net profit of the industry is about the same as that of the highly mature coffee industry, ranging from 10% to 15%. But at present, the new tea brands are still in the high investment stage of accelerating the expansion, and the profit margin is far from high.


So, in the increasingly fierce new tea brand competition, what will be the moat of enterprises?


In fact, the threshold of the new tea industry is not high, the types of products provided are mostly similar, and there is no absolute moat between enterprises. Nie Yunchen, founder of Xi Cha, once expressed such a view: consumers do not need to be loyal to the brand. It is the same all over the world, and consumers are just voters. He even believes that “consumers are constantly changing, this market will progress, and the operation of an enterprise itself should struggle to death.”


Lian Jiaxing, the former co-founder of laibei coffee, also believed that the competition in the new tea industry has entered the Red Sea stage in the first and second tier cities. The next step is the quality and brand competition between new tea brands.


These two points depend on the supply chain management ability of new tea drinkers and the connection ability between brands and users to see who can win the customers’ hearts through a whole set of operation methods.


In order to ensure the lasting and stable quality of drinks, the control of raw materials and supply chain is the core. For example, Starbucks has a leading and stable supply chain in the world, which is also an important reason why it has been able to dominate the coffee industry for decades, making it hard for countless latecomers to catch up with it.


For this reason, the top brands of new tea drinks, such as Xicha and Naixue, have also explored raw materials and supply chain enterprises, and established their own tea gardens and exclusive suppliers of fresh fruits. Xicha launched ERP system in April 2017 to conduct digital management of supply chain and improve business efficiency.


Favorite tea in private tea garden in Guizhou, Fan Jing mountain. The official picture is from the official account of the tea.


With the supply chain management, the new tea brands in the head are able to maintain the product innovation on the basis of quality control. Xicha launched 48 kinds of drinks and more than 100 kinds of surrounding products in 2018, and this number has been greatly increased in 2019 – Xicha has launched more than 240 new products in 2019, including tea drinks, hot wheat bread, tea food laboratory and other series, with an average of 20 new products per month; Naixue also increased the update speed of 2-4 new products per month from the previous new tea drinks twice in January, and pushed at the same time Many peripheral products.


In order to gain the brand power of users’ hearts, new tea drinkers also make great efforts.


The first is digital marketing. The transformation of intelligent stores can not only effectively solve the queuing problem, but also accumulate massive user portraits and consumption data for new tea brands, so as to lay a data foundation for product innovation and marketing. With these accurate consumption data, the new tea brand can find out the changes of consumers’ preferences, so as to obtain consumers’ recognition, and then occupy users’ minds through precision marketing, so as to improve the stickiness and repurchase rate of users.


To this end, new tea brands have launched their own online channels including app, wechat app, etc. Xicha officially launched the wechat app “Xicha go” in June 2018. Two years later, according to official data of Xicha, there were more than 26 million registered users, with a repurchase rate of more than 300%, and more than 80% of online orders in stores came from the app. According to pan pan pan, the investor of Naixue Tiantu, Naixue’s wechat app, now has more than 20 million members. Meanwhile, chayan Yuese has already launched the order ordering app.


The cross-border co branding, expansion of SKU to provide users with more fresh experience, and user operation to enhance user connection are important ways for new tea brands to “absorb powder” and “solid powder”. For example, the small white shoes of milk tea jointly launched by Naixue tea and Chanel designers last month, and the artificial meat hamburger “future meat cheeseburger” launched by Xicha last month have triggered a heated discussion on social networks.


Consumer Research Institute has collated a consumer brand of Xicha that has been co branded and cooperated with so far (incomplete version).


The data are from official and public information of Xi Cha, as of June 2020


For the new tea brands, it is the vision of many new tea brands to become a beverage brand with a truly popular feeling and a lifestyle and attitude like Starbucks. But obviously, compared with Starbucks, which has more than 20000 global stores and more than 4400 stores in China since its establishment nearly 50 years ago, even the top brands such as Xi Cha and Naixue are still far from enough.


“In another 10 years, we may be able to see who can become China’s Starbucks.” Lian Jiaxing said.


Before that, the new tea drink brand’s horse race enclosure and the red sea war will continue.


[for more information on new consumption trends, pay attention to the Consumer Research Institute (ID: trendmakers)]




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