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Our reporter Jiang Zheng reports from Zhengzhou

Heytea at 4 yuan a cup, Gu Ming at 9.9 yuan a cup, and Mixue Bingcheng lemonade at 1 cent a cup, under various subsidies and promotional policies, the price of new tea drinks is not the lowest, but only lower.

According to incomplete statistics from China Business News reporters, almost all mainstream new tea brands on the market have launched various promotional and subsidy policies during the summer vacation. Originally priced in the mid- to high-end or high-end, tea brands have continuously lowered the prices of new products in an attempt to attract the general public and the lower-tier market groups.

According to brand marketing expert Lu Shengzhen, the current price cuts are limited to single products or designated product ranges, which is the early stage of price wars. After the new tea brands reach saturation in the market layout and various 10,000-store plans, all brands will enter the stage of price wars.

Other industry insiders believe that new tea drinks are not just mass consumer goods, so consumers are sensitive to their prices and have very low loyalty. The moats built by many brands are quickly wiped out in the dimension of time. In the future, the market will definitely see products with more accurate positioning and subdivided categories. This will also be a space for the entire industry to break through.

The affordable tea market is crowded

"The event is a short-term preferential benefit for a few main products. The profitability of the brand and stores will not be affected." On July 24, Gu Ming responded to reporters.

Recently, Gu Ming officially announced that "Healthy Original Leaf Fresh Milk Tea has entered the 9.9 yuan era". Specifically, the promotion will last from July 15 to July 31, and the promotion includes Yunling Jasmine White and other best-selling drinks. During this period, consumers can expect to drink Original Leaf Fresh Milk Tea for 1 cent, and invite friends to help and drink it for 9 cents.

Wu Zhiwei, founder of Zhandao Capital, told reporters that this round of price war in the new tea beverage industry has already begun. In the history of the development of new tea beverages, Heytea andNayuki's TeaThere have been similar price wars, where the price of products was lowered to attract more customers. However, this price war focuses on the price range of mass-market tea drinks.

According to the observation of Ye Guanzhao, founder of the Slow Tea brand, this wave of price wars started last year and has become particularly prominent this year. Many brands have been passively involved in this round of competition.

Among all the business wars, price war is one of the most direct means. "The competition on price is an adaptive adjustment based on the current downward trend of macro-consumption. It is also the most direct and instinctive way for enterprises to acquire customers in the context of diminishing marginal benefits in the process of tapping potential in raw material innovation, health innovation and other links," said Lu Shengzhen.

Gu Ming mentioned that the "Gu Ming Wednesday" welfare event has been launched long ago, and there will be discounts on new products or key recommended drinks including original leaf milk tea on regular Wednesdays. However, the current price range of Gu Ming's main products is 10-20 yuan, which has not been significantly adjusted compared with the past.

"The competition among new tea drinks is more channel-driven, that is, store density. In the long run, new tea drinks are mostly made of milk, tea and fruit, with no essential differences, and consumer loyalty is very low. Therefore, price wars are often the most common competition strategy. At the same time, mass consumers who do not have rigid needs are very sensitive to prices." said Wu Zhiwei.

A person in charge of a new tea brand said that for new tea brands that rely on the franchise model for expansion, when the price war comes to an end, both franchisees and brands will be under great pressure. The headquarters needs to burn money, and franchisees will lose part of their profits. After all, it all comes down to profits.

The reporter noticed that previously, various new tea brands had a clear distinction in price range, but in the price war, this distinction is blurring. At the same time, more and more brands are beginning to abandon the high-end and enter the mass price range.

According to Ye Guanzhao, the price range of the products in the store is around 10 yuan. According to his research, new tea brands with products priced over 30 yuan have almost disappeared, while new tea brands with core products priced below 10 yuan are increasing. In the past two years, the number of stores selling this type of tea has almost doubled compared to three years ago. "Currently, the product pricing of many new tea brands is based on competition considerations rather than cost."

Huaan SecuritiesA research report released at the end of May showed that over the past three years, the growth rate of affordable tea drinks has been faster than that of mid-priced and high-priced tea drinks. The proportion of tea drink brands priced below 10 yuan has increased from 7% to 30%, while the proportion of tea drink brands priced above 20 yuan has dropped from 33% to 4%.

Relevant data shows that in the menus of Nayuki's Tea (02150.HK) and Heytea, there are only a handful of products that cost more than 30 yuan. Financial report data shows that in 2023, the average customer order price of Nayuki's Tea fell by 13.70% to 29.6 yuan, while in 2021-2022, its average customer order price was 41.6 yuan and 34.3 yuan respectively.

"In the past, new tea drinks were brought to a certain height in a short period of time by brands such as Heytea and Nayuki's Tea, giving them social attributes. However, now that new tea drinks have become mass consumer products, their social attributes are weakening, and users' health demands are also reducing the addictiveness of new tea drinks, so this category has changed, and will ultimately return to price," said Wu Zhiwei.

Where is the new tea beverage heading?

When the outside world was discussing the price return of new tea drinks, the capital market gave the most direct feedback. On July 23,Tea 100 WaysThe stock price fell by more than 10%. On July 22, Nayuki's Tea's biggest intraday drop was more than 10%, and it finally closed down more than 4%.

At the same time, the Hong Kong Stock Exchange's official website shows that the listing prospectuses of Gu Ming and Mixue Bingcheng have expired, and the IPO process of the two companies has been temporarily stalled. At present, the two companies have not yet resubmitted their listing applications.

Wu Zhiwei told reporters that the capital market is not optimistic about the future of new tea drinks and gives a very low valuation because the competition dimension of new tea drink brands is too low. Many brands do the same thing, including many new tea drink brands that have successively reported materials. If everyone does the same thing, the capital market will think it has no value. In the future, Hong Kong stocks are very likely to no longer allow new tea drink brands to enter the market.

For the new tea beverage market, which is highly homogenized, achieving scale as soon as possible has become the collective appeal of many brands. The cost advantage brought by scale has also become one of the ways for new tea beverage brands to build a moat.

In fact, the current new tea beverage market is still in the stage of staking out new markets, with many brands proposing plans to open 10,000 stores. In terms of the competition for franchisees and store properties, the market has already entered a fierce stage.

Ye Guanzhao mentioned that this year many new tea beverage brands no longer charge franchise fees, and some brands no longer charge periodic management fees. Even the equipment costs can be paid in installments by franchisees.

Several regional brand managers told reporters that for leading enterprises, reaching 10,000 stores is still one of the most important goals. After reaching 10,000 stores, it means that there is enough brand voice and scale, which will form sufficient competitive barriers in terms of cost control and price influence.

At the same time, shaping the supply chain has also become a top priority for many brands to consolidate their moats. According to information provided by Gu Ming, Gu Ming's warehousing infrastructure consists of 21 warehouses, including more than 40,000 cubic meters of cold storage that can support different temperature ranges. More than 75% of the stores are located within 150 kilometers of the warehouse, and a two-day cold chain delivery service can be provided to more than 97% of the stores.

The reporter noticed that almost all new tea brands that submitted prospectuses mentioned the need to strengthen supply chain shaping and store management, which is also an important way for leading brands to reduce costs and improve operational efficiency.

"The moat of new tea beverage brands lies in the fact that they continuously join forces and improve the supply chain, so that their business model of combining high, medium and low products will be healthier. Of course, the most difficult problems to solve are not these problems, but the health issues of the products and the precise positioning of certain products. Brands that can segment the functions of health or certain products for consumers and find their own development rhythm in precise positioning will have an opportunity for leapfrog development." Lu Shengzhen said.

In Ye Guanzhao's view, the value of new tea drinks is reflected in two aspects: one is physical properties, namely taste and other aspects; the other is emotional value, that is, the value brought by its own brand. If a new tea drink brand wants to build its own moat, it needs to provide sufficient value, maintain sufficient determination in development, and seek differentiation on this basis.

"It is difficult to raise the prices of homogeneous products. Unless there is category innovation, such as Chinese health tea drinks, which have both taste and functional attributes. This may become one of the main directions for new tea brands to break through." said Zhang Yi, CEO of iMedia Consulting.