“It’s too hard.” The post-80s Xiaoqiang in Heshan, Guangdong, lamented to the 21 data news laboratory that he set up a new tea shop years ago, but after operating for half a year, he felt more and more far from what he had expected.
on the new tea drinking track, “people in the city want to come out, and people outside the city want to go in”.
Recently, Naixue tea, known as the “first share of tea”, announced that the Group expects a net loss of about 135-165 million yuan in 2021. Naixue had lost more than 300 million in the previous three years.
Not only that, among the tea brands in the head, there was a storm of layoffs in front of Youxi tea, and then Youxi tea was reported to be greatly layoffs. Although the latter immediately clarified, the difficulties of the industry can be seen.
It is understood that many young people’s first choice for entrepreneurship is the new tea, but at the same time, this is also one of the tracks with the highest failure rate. The report shows that the tea shop has failed to support the transfer for more than 6 years, and the service life of the tea shop is the shortest.
However, the enthusiasm of capital has not decreased. according to incomplete statistics of 21 data news laboratory, 59 related financing transactions occurred in the upstream and downstream of the tea industry in 2021, involving more than 15 billion funds. The participants are Temasek, Sequoia China, UBS, Hillhouse and other famous institutions.
what is the charm of the new tea? What are the future trends? What do the new bosses like?
We will answer for you one by one in 5500 words of this article.
the “gene” of new tea
Tea drinking originated from the ancient traditional tea culture. When people added milk to tea soup for the first time, it seemed to open the door of Shanghai New World Co.Ltd(600628) .
It is said that as early as the Song Dynasty, milk tea was one of the beverage stores. In the north, Mongolian, Kazak, Uygur and other ethnic groups like to mix black tea with fresh milk and boil it with salt to make salty milk tea. It is particularly warm to drink a cup in the cold. In the south, sweet milk tea represented by Hong Kong style milk tea and pearl milk tea is popular in most of China.
In the 30 years of rapid development in China, sweet milk tea is a common memory of many people.
Today’s post-80s and post-90s children will have colorful milk tea. After school, go straight to the canteen at the gate of the school and line up, 2 yuan a cup of purple Taro Milk Tea is the most comfortable mode to press the road with your classmates.
Cheap, color and sweet are the characteristics of milk tea in this period, but cost determines that there is no real milk and tea, but a mixture of creamer + pigment + essence + water.
After the millennium, the cup of milk tea, which “sells more than one billion cups a year, and the cups can circle the earth three times” endorsed by a star, once “swiped the screen” everywhere. It has appeared in TV advertisements, advertising music, bus stop signs and even light poles. It is true that cup milk tea has created a category, but it has not changed in essence.
the real qualitative leap in the tea industry is the rise of high-end tea drinks using natural raw materials represented by Emperor tea (the predecessor of Xi tea). At this point, China’s milk tea industry gradually has real tea and milk.
Today’s new tea drinks are constantly combined and innovated on the basis of the original tea. A variety of tea bases and ingredients such as fresh milk, fresh fruit and cheese are added to the pure tea. Due to the improvement of the quality of raw materials, the selling price has also rapidly jumped to double digits, and the commercial value of the tea industry has really entered the vision of capital.
According to the analysis report of China’s new tea industry in 2021 by AI media consulting, the scale of China’s new tea market in 2020 is 184.03 billion yuan. It is expected that the scale of China’s new tea market will reach 279.59 billion yuan in 2021 and exceed 300 billion yuan by 2022.
industry pattern: “three parts of the world”
Around 2015, new tea drinks represented by Naixue’s tea and Xi tea rose, which quickly caused a wave in the market because of their unique taste and “beauty”.
many people’s memory of the new tea drink began in the cheese milk cover of emperor tea (the predecessor of Xi tea). It has a completely different taste from the past and quickly captured a large number of fans. Tiktok, WeChat, Xiao Hong, jitter and other new media were developing vigorously. The new tea drinking was accompanied by the red net of the new red shop. Daily attendance at the shop was constantly in flux.
The popularity of the new track is inseparable from the blessing of capital. In particular, after Huang tea was renamed Xi tea, it became popular among young people again, attracted 100 million yuan investment from IDG capital and angel investor he Boquan (founder of today’s investment), which really kicked off the capital story of China’s new tea.
A few days ago, 21 data news laboratory launched the “new domestic products and trendy brands in the 21st century – new tea brands in 2021”, which measures the “trendy” index of a new tea brand from the five dimensions of network popularity, market power, innovation, reputation and ESG (negative index). Finally, Xi tea and Naixue tea ranked the top two with a large difference.
From the list, we can also see the “layering” of the new tea track. In fact, with the blessing of capital in recent years, the track of new tea drinks has grown rapidly, the head brands have gradually distanced themselves, and the industry stratification has gradually become clear.
According to the average price of products, the market can be roughly divided into three grades:
high end tea (more than 20 yuan): Xi tea and Naixue tea market share are far ahead, showing a duopoly pattern. Although Lele tea and other brands are priced in this range, their scale is far less than the first two.
High end tea has formed relatively clear barriers to entry, mainly in three aspects:
1. Product quality remains stable: generally, it adopts direct marketing mode and has mature management mechanism;
2. Maintain a high level of passenger flow: the site is usually located in the core business district, and the store investment is large;
3. Short product innovation cycle: in order to meet customers’ psychology of “liking the new and hating the old”, there is a mature innovation mechanism. According to Naixue’s tea prospectus, a new product will be launched every week on average.
middle end tea (between 10-20 yuan): such as coco, a little, books also burn fairy grass, tea Yan Yuese, ancient tea, tea Baidao, aunt Hushang, seven percent sweet, etc. This price range is the most acceptable range for consumers. The market scale accounts for more than half of the tea track, so the competition is also the most intense.
Middle end brands often focus on Franchise mode, relying on franchisees to quickly open up the scale and seize the market. The supply chain capability and brand reputation of the brand side are its core competitiveness, the main source of income is the collection of franchise fees and the provision of materials.
Source: Ping An Securities Research Report
low end tea (3-10 yuan): honey snow ice city is almost dominated by one company. This price range is easy to meet the psychological expectations of sinking users. With a large user base, it is its biggest feature to fight “cost” with scale.
Through intensive store expansion + improving the supply chain logistics and storage system, constantly reduce costs and form competitive barriers, so as to win customers with the ultimate cost performance. In order to quickly seize the market, the franchise system is also used, but the cost is lower than that of middle-end brands. In particular, the franchise fee has an obvious advantage, so as to attract a large number of franchisees. at present, there are more than 20000 stores in miyue ice city . According to a report of Citic Securities Company Limited(600030) , these stores are often located in communities, streets and towns, and implement the business philosophy of “the best drink at the same price and the cheapest near the taste”.
Source: Official Website of snow ice city
direct marketing or joining?
For tea investors or entrepreneurs, the first thing they need to face is the choice of tea mode – direct or franchise?
direct operation mode is a mode of direct investment and operation by the enterprise headquarters, brand oriented and standardized operation and management. Due to the high investment cost, only a few brands such as Xi tea, Naixue tea, Lele tea and tea Yan Yuese can run out now.
The franchise model is that the enterprise headquarters use its own trademarks, patents, technologies and business model to franchisees in the form of franchise chain. This operation mode has low operation cost and fast return of enterprise funds. It is the most used mode in the market at present.
With the help of capital, tea stores have expanded rapidly in recent years, which can be seen everywhere. According to the consulting report of burning knowledge, in 2020, there will be more than 340000 existing tea shops, more than 250 million consumers, and the per capita consumption will be 6.2 cups, about three times that of freshly ground coffee.
With the help of capital, tea brands have accelerated horse racing enclosure. At the time of Naixue’s tea listing, it is planned to use about 70% of the HK $4.8 billion raised to expand tea shops. As of December 31, 2021, the company has operated 817 Naixue’s tea shops, with a net increase of 149 in the fourth quarter; The number of hi tea stores increased by nearly 200 compared with a year ago. Franchised brands are even worse. The annual growth rate of the number of stores such as aunt Hushang is more than 1000, and the number of stores in honey snow ice city has exceeded 20000.
As for the advantages and disadvantages of the two models, each has its own merits. 21 the data news laboratory measures the market power index of tea brands by the number of offline stores, the number of cities covered, the number of active users (the number of users evaluated by offline stores) and other indicators.
From the results, thanks to the rapid expansion, franchise brands ranked among the top in the market power index, and honey Snow Ice City, shuyishaoxiancao, coco Duke, yihetang and chabaidao ranked among the top five. among the direct brands, top 5 Xi tea, Naixue tea, seven bus, Lele tea and tea Yan Yuese are not at the top of the overall list.
6 Cheng tea transfer store has not lasted for one year
However, even with a mature business model, tea shops are still one of the entrepreneurial choices that are easy to fail.
According to a report released by the big data Research Institute of the catering industry, tea shops account for 21.7% of the catering stores publicly transferred at present; Bakeries account for 4.4%; Coffee shop transfer is relatively small, only 1.6%. In terms of store life, coffee shop life > bakery life > tea shop life.
Among them, tea shops have the shortest life, with an average life of only 13.63 months, half of that of coffee shops. Nearly 20% of tea transfer stores survived for less than 3 months; 64.7% of tea transfer stores failed to survive for one year ; The average life expectancy of tea shops is 13.63 months.
There are three main reasons for this phenomenon:
(1) serious product homogenization. This is the threshold that the tea industry can’t get around. Due to the low content of production technology, the product formula is easy to imitate, and even the formula and production technology of well-known brands can be obtained on the Internet at a very low cost. the production processes of each family are also similar. The new products can be quickly copied by other families, with little difference in taste. even high-end brands are very similar in categories.
Source: Ping An Securities Research Report
(2) the supply chain is missing. as the existing tea does not need cooking links, the innovation is mostly based on raw materials, and the most is seasonal fruit tea. High quality, stable and low-cost raw material suppliers are particularly important, but this is what single stores lack. Joining a brand with a mature supply chain is the preferred choice of most people. But similarly, once the supply chain is unstable, the lack of quality control is very easy to overturn the crisis.
(3) innovation is urgently needed. since there is no conversion cost for consumers, the user stickiness is low. If the brand wants to maintain the repurchase rate of users, it needs high-frequency new product launch. As mentioned in the above data, the new frequency of head tea brand can reach one new product every 1-1.5 weeks. Once the new rhythm can’t keep up, the loss of users can’t be estimated.
These reasons make it very difficult for individuals or small groups to start a business on the tea track.
What does capital value?
Although the success rate is very low from the perspective of single store or start-up brand, there is a wide space from the logic of the new tea industry.
First of all, new tea drinks have the basis of mild addiction. the tea ingredients in tea include theophylline, caffeine and theobromine, among which caffeine is the familiar caffeine. It has the effects of inspiring spirit and eliminating fatigue, but also has a certain addiction.
Different from the general impression, many milk tea and green tea products even contain more caffeine than coffee.
Secondly, the combination of “caffeine + sugar + fat” in tea can easily make consumers feel happy. especially after the “self pleasing” psychology has been expanded on the Internet, the advantages of tea have become more and more obvious among young people.
During the covid-19 pneumonia epidemic in 2020, the number of online orders in the catering industry surged, of which the online growth of the current tea industry was the fastest, about 744.0%. At the same time, the market scale of the new tea industry has maintained a rapid growth of more than 20%.
thirdly, compared with the coffee market, tea has a higher acceptance and mental status in the hearts of Chinese consumers. according to the data of iResearch, in 2020, the whole tea market, including ready-made tea, tea / tea bag / tea powder and instant tea, accounted for 33.3% of the non-alcoholic beverage market, about 6.3 times the size of the coffee market in the same period.
In terms of segmentation, from 2018 to 2019, the market scale of existing tea is about 6.5 times that of freshly ground coffee, and the gap will expand to 10.9 times by 2020-2021. it shows that tea is the fastest growing addictive beverage track, including tea and coffee.
More interestingly, the new tea can meet the social needs of consumers in the upgrading of consumption. With the development of we media and short videos, modern young people have more desire to express themselves, unique taste, exquisite packaging, big brand joint names, store decoration and the attribute of “online Red” can become the nodes of network communication.
Of course, in the face of profit seeking capital, the most important thing is liquidity.
In 2021, a milestone in the new tea industry was the birth of the first “cash rush” investment project.
Naixue’s tea was listed on the Hong Kong Stock Exchange on June 30, 2021, becoming “the first share of tea in the world”.
According to the prospectus, the largest capital investor is Tiantu capital, which holds 190 million shares of Naixue tea, accounting for 11.18% of the total shares. If calculated according to HK $17.54 at the opening, the market value of the shares reaches HK $3.335 billion. Tiantu capital had previously participated in three rounds of investment, with a total investment of 381 million yuan (equivalent to 460 million Hong Kong dollars). The average book income of Tiantu capital was nearly 9 times.
However, after Naixue’s tea (02150) briefly rose to HK $18.98 per share on the first day of opening, its share price fell all the way. As of February 9 this year, its share price had fallen by more than 60%.
K-line map of tea day in Naixue
However, the decline of Naixue’s share price does not seem to affect the pace of capital.
According to the statistics of red meal brand research institute, as of November 25, 2021, there were 32 financing cases in the new tea industry in 2021, with a total disclosed amount of more than 14 billion yuan. The number of financing events and the disclosed financing amount have been higher than the whole year of 2020, reached the peak in recent 10 years.
Moreover, it is reported that in October last year, Henan Securities Regulatory Bureau revealed that mixue ice city planned to be listed on A-Shares and is receiving Gf Securities Co.Ltd(000776) counseling. Looking ahead, in January last year, the first round of financing of more than 2 billion was completed by meituan Longzhu and Gaoling, followed by CPE Yuanfeng and other institutions. It is reported that the post investment valuation of honey snow ice city has reached 20 billion yuan.
In fact, at the end of 2020, many investors have predicted that the wave of new tea listing is coming. Behind Naixue’s tea and honey Snow Ice City, many new tea giants are said to have “listing plans”.
According to Bloomberg report, the list of potential companies to be listed in the new tea industry includes Xi tea, chabaidao, Lele tea and other brands .
new opportunities
Who can “catch” generation Z, who will win the next era.
The “Z generation”, mainly the post-95 and Post-00 young groups, has become the main consumers of tea. In the past three years after 1995, the consumption of drinks has increased year by year, while the proportion of the post-90s and post-85s has been compressed. Take people born in 1995 as an example. Now they are about 26-27 years old and have worked for 3-4 years, which is the period of the strongest consumption desire.
21 the reference book of the data news laboratory, generation Z marketing by Jeff fromanji Reid, summarizes the characteristics of several “generation Z”:
1. He is a heavy mobile device user . He has been using mobile devices since he was a student and is very familiar with digital life.
2, the aboriginal of the “social era”, is more willing to spread their favorite content because of the growth of tiktok, micro-blog, Bilibili, WeChat and other social tools.
3. It is a follower of “visual worship” . Here, it not only refers to people’s appearance, but should be a wider range of artistic expression.
4. They are independent and eager to identify . They pursue individuality and uniqueness, but also hope to be supported and understood in the group.
5. It is an emotional “vulnerable” body . They may “take off” because of a small matter of the brand, and also pay 10 points of enthusiasm because of the feelings of the brand.
The next step can be seen from the characteristics of these tea consumption groups:
Digital Construction:
During the epidemic, due to the limited offline consumption channels, consumers were forced to shift from offline to online, forcing tea enterprises to accelerate the online digital transformation.
According to the “2021 tea consumption insight” report released by meituan, after the epidemic in 2020, beverage consumption recovered rapidly in 2021, with a year-on-year increase of 150%. The important reason for is that the tea shop quickly opened the remote order business and maintained normal operation.
But this is only the infrastructure of digital construction. If this is tea digitization 1.0, it is now in need of deeper digitization 2.0. In the 2.0 period, the focus of construction was not on facilities, but on the empowerment of digital brands.
Source: Naixue’s tea official website
On December 7, 2021, Naixue’s 6th Birthday season, in the name of the brand-new ambassador, Nayuki (virtual character), released the benefits of charging 100 with a stored value card for 150, gained gmv1 in 72 hours through the diversified marketing approach of “live + blind box + trendy play + Digital collection” 900 million yuan, of which official channels (official small program, tiktok live room, offline store) sales accounted for 97%.
However, at present, from the trading situation on the second-hand platform, the attention of Nayuki trendy play is not high, and there is less discussion among young people.
social properties:
As mentioned earlier, “generation Z” is the aborigines of the “social era”. They grow up in the company of major social software and have a natural sensitivity to social networking. Among them, tea is a good link to close the relationship. Meituan data show that 46% of those who drink milk tea after 95 are in order to contact their friends, including office colleagues, afternoon tea, couple dating and so on.
In order to strengthen this social attribute, major brands have new actions. For example, Xicha is making a new attempt to broadcast live content. Recently, two programs, tea party and night of inspiration, have been broadcast.
Different from the traditional live selling, in these two programs, Xi tea emphasizes the shaping of the brand , and introduces the R & D ideas behind the products, the connotation of store design, the story behind the products, etc. you can feel that the organizers hope to give the brand temperature and achieve “Empathy” with consumers.
It can be seen that whether it is Naixue or Xi tea, the head tea brand has consciously made a new attempt to upgrade the brand for “generation Z”.
The competition of new tea has passed the stage of barbaric development, the market pattern will continue to tend to be concentrated, the industry threshold has been raised, and the space for newcomers to start a business has become smaller and smaller.
In the future, it is expected that the business focus of the leaders of new tea drinks will shift from marketing, products and store expansion to store operation, brand construction and more difficult supply chain management, so as to expand popularity and performance and further obtain capital recognition.
