China Food

Can Naixue make money




In 2018 and 2019, Naixue opened a new store almost every two days. By the end of September last year, it had 422 stores. What’s rare is that in the process of rapid expansion, the customer price of Naixue can still grow steadily, reaching 43 yuan, which is close to the customer price of 48 yuan of meituan takeout platform.
Considering that the median monthly per capita income of Chinese households is 1500 yuan, and the top 5% of Chinese households have a monthly per capita income of more than 5000 yuan, the 43 yuan is not even for dinner, but almost for afternoon tea. It can be seen that the consumption power of core users is very strong.
But under the expansion of stores and high unit price, Naixue doesn’t seem to make so much money. In the first three quarters of 2018, 2019 and 2020, the total loss is 130 million.
This paper will answer three questions

1. Is the combat effectiveness of the current tea making feasible?

2. Will Naixue repeat Ruixing’s “tragedy” against Starbucks’ “third space”?

3. If Naixue wants to make a profit, what is the way?

Product: Devil details
When we look at consumer goods companies, financial reports are often secondary, and Research on products is the first priority.
Naixue’s products are divided into two categories, one is ready-made tea, the basic composition is tea + fruit, the other is ready baked bread + cake. If you take it apart, it’s all hell hard products.
There are dozens of famous teas in China. They are not only typical non-standard products, but also have complex sales channels, highly asymmetric information and opaque prices. How many tea drinkers can drink the difference between Shifeng Longjing and hupaolongjing? What’s more, there is a time limit for making tea. After a certain period of time, tea is not good to drink or even can’t drink.
Fruit, too, is not only difficult to grow and taste, but also hard to shell and core.
Bread baking and baking machines not only occupy the store, but also require manpower and time. What’s fatal is that Chinese people basically don’t eat bread as a meal. It seems that bread is dispensable.
Therefore, if you look at it separately, there are no big companies in the tea industry in China, and there are no big chain companies for fruits before the hundred orchards try their best to standardize their tastes. After the companies that bake bread go public, either their financial reports are doubtful or their market value stays at 3 billion yuan forever. As soon as the companies that sell cakes expand, they are prone to quality control problems.
But if these businesses are combined, it will have a wonderful effect.
Tea as a base not only has refreshing and addictive caffeine, but also can give full play to the characteristics of tea itself, making it easy to match with almost any excipients. It not only does not grab the taste, but also makes the residual taste fade faster after drinking, so as to drink more.
That’s great. Almost everything can be added to the tea——
(1) Dessert. Taro, coconut, caramel pudding and so on, make the city beauty, dry rice beauty afternoon life-saving water, not only caffeine, but also a little sweet, even colorful.
(2) Add fruit. Strawberry, coconut, orange and other fruit tea is just a routine, but also can add smoothie.
(3) With ice cream. Cone, popsicle, ice-cream cup, who can think, clearly want to drink tea, how to become eating ice-cream?
(4) Add alcohol. Also used Wuliangye, Erguotou, with fruit, cheese, modulation of alcoholic styles, such as drunk peach, drunk grapes, etc.
(5) With bread. Sandwiches, croissants, toast and even cakes are all drunk. Stop struggling and eat more.
Now tea products with deep development space, once appear in the street, have the potential to sweep the dessert shop, sugar shop, fruit shop. It also laid the foundation for the rapid development of Naixue and Xicha.
However, before the scale was large enough, this kind of combat effectiveness also had the attribute of “killing 1000 enemies and self injuring 800”.
Take Naixue as an example. In the first three quarters of 2020, the three best-selling classic tea drinks, Baqi cheese strawberry, Baqi orange and Baqi cheese grape, together contributed 25.3% of the revenue.
Nowadays, tea making emphasizes hand-made, fresh, and various kinds of milk covers, desserts and fruits. This is a business with complex production process and low degree of automation, which requires a lot of manual participation. For example, the grapes in the three popular brands need to be peeled and seeded manually, and the production speed and labor cost will be increased all at once.
In contrast, Starbucks products are highly standardized and easy to copy. As long as the proportion of espresso, milk and sugar in the machine is adjusted, and the staff move their fingers, the coffee will continue to flow.
If the employees of Starbucks are compared to the workers on the assembly line, and every action is standardized, then the employees of Naixue are more like junior chefs. Although it is easier than cooking, before the emergence of “fruit cutting suppliers”, manual labor is actually very heavy.
In this way, the cost of labor has naturally become the main cost of Naixue. In 2018, 2019 and the first three quarters of 2020, the proportion of staff costs in the revenue is about 30%, which is similar to Haidilao, surpassing Cuihua and Taixing, which are chain tea restaurants, and even surpassing Tang Palace, time-honored Guangzhou Restaurant and other old restaurants which are rated as Michelin star.
store: variety
It’s hard for any company to bypass Starbucks’ demonstration.
It is estimated that more than half of Starbucks’ 10% + net interest rate is due to rent reduction. Many Starbucks stores in China are located in business districts and office buildings, which are not “social space” at all, but “second working space”. This also leads to the fact that coffee consumption in China is concentrated on weekdays.
Tea itself tends to be social and leisure. On weekdays, the consumption peak is in the afternoon tea time; on weekdays, it is on Fridays and weekends.
Naixue, Xicha, etc. started their business with more emphasis on shopping malls. Naixue even set the store at 180-350 square meters to strengthen the consumption scene of “party”, but only the afternoon tea scene is obviously not conducive to the time utilization of the store.
However, due to the above-mentioned “everything can be added” feature of tea, the store categories and product categories of Naixue and Xicha are becoming more and more: Naixue Pro store and Xicha Togo store have reduced the store area and stridden forward to the office area; they have also increased their products to bread, packaged drinks, snacks, alcoholic drinks and even coffee (there are American style and latte for Xicha) Add scenes, from afternoon tea to breakfast, overtime, and even night penetration.
The combination of product depth and store variety has made ready-made tea a highly competitive business——
(1) The gross profit space is higher than that of traditional catering. Although it is difficult to save food materials and rent, compared with cooking, on the one hand, the supply chain of food materials is still much simpler. If there is a supplier of cut fruits, the flexibility will be greater. On the other hand, there is no need to rely on chefs like cooking, which means that the labor cost can be reduced and it is easier to copy and open a shop.
(2) Store compatibility is very strong. Bread, cake, drink, coffee, whatever is easy to sell, diversified store forms also ensure that it can reach more consumers.
(3) There are many scenes. More products and more stores mean that it can be extended from afternoon tea to breakfast and supper to improve Ping efficiency.
Since the products and stores are very effective, why is Naixue still losing money? When will it be profitable?
The future: two fronts
In fact, ready-made tea is much like a restaurant. One dimension of division is whether the gatekeeper takes the high-end or low-end route.
High end companies like Liyuan essentially rely on commercial real estate, the so-called “eating environment”. The low price like fried chicken shop relies on standardized low-cost products.
In terms of Naixue’s situation, with the scale effect brought by sales volume, the supply chain gradually takes shape. At present, it can be said that it is divided into two categories: one is standard stores, the other is pro stores, which is a kind of light stores launched by Naixue in November 2020.
From this kind of store, we can see the route of “standardization”.
First of all, the pro shop adopts the small shop mode, removing the bakery area on site, and focusing more on selling prefabricated baking products, such as cupcakes and cake rolls, which are made by the central kitchen and uniformly distributed to the store.
Secondly, the store location is more flexible and diversified, expanding the Naixue tea shop network from the current basic shopping center to the current low penetration areas, such as office buildings and high-density residential communities.
Third, Pro has set up a new retail area to provide a wide range of hand gifts and retail products, such as freeze-dried yoghurt pieces with fruit flavor, biscuits and chips.
According to the prospectus, pro stores are expected to account for 70% of Naixue’s new stores in the next two years, becoming the main force of its expansion. Compared with the standard store, the total investment of the pro store is less, for example, the single store investment of the standard store is about 1.85 million yuan, while the pro store only needs 1.25 million yuan, which helps to improve the profit margin of the store.
So someone laughs, Naixue pro shop is se to outsiders, pro to insiders.
Tea shops will also encounter a common dilemma in the catering industry, that is, the ceiling after the continuous expansion of stores, and the problem of mutual dilution of passenger flow between stores. To break this bottleneck and avoid going downhill, we need industrialization. We need to find the second growth curve through standardized retail products. This is the reason why Haidilao sells hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning.
Naixue also has a similar attempt. In March 2020, the flagship store of Naixue tmall will go online. Naixue fresh fruit tea and treasure tea series products have corresponding pure tea or tea bag for sale at Naixue tmall flagship store. During the “double 11” period in 2020, more than 150000 boxes of “one week good tea” will be sold online by Naixue. In addition, snacks, tea gift boxes, festival gift boxes and other products are constantly launched.
Although at the beginning, only a few cups of cold brewed tea could be sold a day, Peng Xin still insisted on selling tea retail gift boxes and cold brewed tea in stores. Peng Xin revealed in an interview that the sales of pure tea can now account for more than 10% of Naixue’s tea drinks.
For Naixue and Xicha, selling cold brewed tea and bottled drinks is certainly only a preliminary attempt. After the establishment of the brand and channel, these products with low marginal cost will only emerge in endlessly, helping the company “brush profits”.
Whether it’s making tea or cooking in restaurants, standardization and industrialization are inevitable trends and historical mainstream.
Chinese catering is a super track that has been growing year after year, but the competition is extremely fierce. Public comments once disclosed a set of data, and the iteration rate of catering stores is close to 100% per year. In other words, on average, every catering store will change its boss every year.
Under the background of the ever-changing consumers, the rising rent and the salary, the industrialized and fast iterative catering products can have a future.
Under this historical trend, the in-depth strong products, store changes, iterative speed, high frequency of consumption of ready-made tea shop, is the pioneer of the times.
reference material:
[1] Naixue’s tea prospectus
[2] Naixue’s tea depth report: leading high-end instant tea drinks, creating a Chinese version of “Starbucks, Guosen Securities, Jiang Tian, Zeng Guang”
[3] Check, common sense and logic: research experience of the current beverage industry, Huachuang securities, Wang Weina and Hu qiongfang
[4] Peng Xin, founder of Naixue tea: Naixue is most like Starbucks, 36 krypton in the spiritual core
[5] White paper on new tea drinking in 2020, Naixue’s tea
Author: Dong Xiaowei / Yao Shuheng; Editor: Zhou zhehao; product: consumption group of Yuanchuan Research Institute
Author: Ma Mujie; source: China venture, reprint authorized.
Joining the community: Cherry (wechat: 15240428449);
Business cooperation: Amy (wechat: 13701559246).
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