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China News Service, July 31, titled: Why do time-honored Chinese medicine brands love to sell health tea?

Author: Qu Fang Wanlian Securities Investment Consultant

The summer heat is unbearable. As young people are more and more enthusiastic about health preservation, Chinese herbal health tea is becoming the new favorite in the summer tea market. Not only are tea brand stores such as Hetian Shuipu and Fulingji deployed in this market, but also time-honored Chinese medicine brands such as Tongrentang and Donge Ejiao have also invested in this market.

The reason behind the old brands of traditional Chinese medicine turning to health tea is not hard to find. First of all, the health market is significantly larger than the traditional Chinese medicine market, and the health tea market is closer to young people, and young people are becoming the main force of health consumption. The "Z Generation Nutrition Consumption Trend Report" shows that young consumers aged 18 to 35 account for 83.7% of the health and wellness consumer population. This also supports the continuous expansion of the health tea market. According to iMedia Consulting data, the scale of China's health tea market in 2023 will be 41.16 billion yuan, a year-on-year increase of 27.3%. It is expected that the scale of China's health tea market in 2028 is expected to exceed 100 billion yuan. Secondly, the profit margin of the health market is larger, and the gross profit margin of health tea can even be as high as 80% or more. In 2023, the gross profit margin of Tongrentang Pharmaceutical Industry was 46.97%, which is also very high, but still lower than the health tea market.

From a marketing perspective, health tea has a rich market story, which is more attractive to young people and provides more room for corporate marketing. It is a good new outlet for derivative products of traditional Chinese medicine companies. In fact, in recent years, traditional Chinese medicine companies have been exploring new derivative products, including traditional Chinese medicine bread, traditional Chinese medicine coffee, traditional Chinese medicine ice cream, etc.

In addition, the threshold of the traditional Chinese medicine industry is high, and the review cycle of new products is long. As a beverage, health tea has a short approval cycle and is easier to be marketed. Moreover, compared with the many sales restrictions faced by drug sales, the sales channels of health tea are much freer, which can make its sales form more diversified. The integration of multiple channels such as online e-commerce platforms, offline physical stores, and social media can not only effectively expand the product market, but also help traditional Chinese medicine companies to further expand their brand influence.

However, it should be noted that compared with the traditional Chinese medicine market, the market competition for health tea is more intense. In addition to facing competition from tea brands, traditional Chinese medicine companies entering the traditional Chinese medicine health tea market also have to face competition from hospitals and traditional Chinese medicine chain brands. According to incomplete statistics, in recent years, more than 30 tea brands focusing on traditional Chinese medicine or herbal health have been established across the country, and many brands have even opened hundreds of stores in first- and second-tier cities. Compared with traditional Chinese medicine, health tea also faces more uncertainties in the quality and stability of raw material supply. If there are problems with product quality and safety, it will not only affect the sales of health tea, but also the brand of traditional Chinese medicine companies. In addition, compared with traditional Chinese medicine, which has been passed down and tested for hundreds or even thousands of years, the side effects of traditional Chinese medicine health drinks have yet to be proven, and the taste and functional characteristics of traditional Chinese medicines themselves may be difficult for many people to accept. This requires companies to solve taste problems and concept acceptance problems in product development and market promotion, which may be potential risks for companies. (China News Service APP)

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Editor-in-charge: Song Yafen