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As the first tea stock in China, Nayuki's Tea undoubtedly has a relatively good influence in the market. However, according to the latest financial report, Nayuki's Tea lost more than 420 million yuan in the first half of the year, and even the development of new stores was obviously hindered. What happened to this first tea stock? How should we view this matter?

1. Nayuki's Tea lost more than 420 million yuan in half a year

According to a report by the Yangtze Business Daily, Nayuki Tea announced that the company expects its operating income in the first half of 2024 to be approximately RMB 2.4 billion to RMB 2.7 billion, and its adjusted net loss (not measured in accordance with International Financial Reporting Standards) to be approximately RMB 420 million to RMB 490 million.

Nayuki believes that there are two reasons for the loss. One is the two-way squeeze of costs and revenues. It is reported that Nayuki's Tea has basically achieved cost optimization at the store end, and there is limited room for optimization and adjustment of costs such as labor, depreciation and amortization in the short term, resulting in greater pressure on store operating profit margins. On the revenue side, consumer demand has not recovered significantly.

Another reason for the loss is that Nayuki's Tea plans to close some stores that perform below expectations and has made provisions for asset impairment. This also means that the company's store opening target planned at the beginning of the year may be difficult to achieve in the future.

On the evening of July 18, the company released its second quarter operating results, in which the company mentioned that it expects the scale of new directly-operated stores opened this year to be lower than in previous years, and will adjust or close some underperforming stores to boost the performance of directly-operated stores.

Data shows that at the end of the first quarter, the company had 1,597 directly-operated stores. In the second quarter, Nayuki added 48 directly-operated stores, but at the same time closed 48 stores. In other words, the number of new directly-operated stores added in the second quarter was zero.

It is understood that in the first quarter of this year, Nayuki's Tea had a net increase of 23 directly-operated stores, which means that the company has only added 23 directly-operated stores in the past six months. In the same period last year, the company had a net increase of 126 stores, and a net increase of 506 stores for the whole year.

2. What happened to the No. 1 tea stock?

In recent years, the new tea market has continued to heat up, with major brands emerging one after another and increasingly fierce competition. As the first Chinese new tea stock, Nayuki's Tea recently released its semi-annual financial report showing that it lost more than 420 million yuan. This figure not only reflects the severe challenges currently faced by Nayuki's Tea, but also reveals the competitive situation of the entire new tea industry. How should we analyze this?

First of all, in today's consumer market, the development of the tea beverage industry is in full swing. With the continuous growth of consumer demand for beverages, various tea beverage brands have sprung up like mushrooms after rain, and market competition is becoming increasingly fierce. As one of the pioneers in the tea beverage industry, Nayuki's Tea has occupied a place in the market with its unique brand positioning and product innovation, but in today's market environment where competition is almost fierce, it is also facing unprecedented challenges.

Many emerging tea brands have emerged, and they have quickly attracted consumers' attention with more flexible and changeable marketing strategies, rich and diverse product categories, and more competitive price advantages. For example, some tea brands that focus on low-price strategies, such as Mixue Bingcheng, have attracted a large number of price-sensitive consumers through large-scale promotional activities and preferential policies. At the same time, brands that emphasize specialty drinks and personalized services, such as Bawang Chaji and Cha Yan Yue Se, have also won a good reputation among specific consumer groups through precise market positioning and differentiated product strategies. New brands continue to emerge, traditional tea brands have also been upgraded, the choices on the market are more abundant, and consumers' brand loyalty has begun to decline, which undoubtedly poses a challenge to Nayuki's Tea.

Secondly, Nayuki's Tea has always insisted on taking the high-end route, and its product prices are relatively high. However, in recent years, the market consumption trend has changed significantly, reverse consumption has prevailed, and consumers have become more cautious and rational when consuming. Against the backdrop of an unstable economic situation and slowing consumer income growth, consumers are increasingly sensitive to prices. They pay more attention to the cost-effectiveness of products and are willing to pay for products of good quality but reasonably priced. The high price positioning of Nayuki's Tea has, to a certain extent, limited the size of its consumer group.

At the same time, consumers' demand for tea drinks is no longer limited to taste and quality, but they pay more attention to the health, environmental protection and cultural connotation of the product. Some tea drink brands with relatively low prices but focusing on health and environmental protection concepts are gradually favored by consumers.

Third, in the face of fierce market competition, Nayuki's Tea seems unable to cope with its expansion strategy. According to the financial report, Nayuki's Tea opened 48 new direct-operated stores in the first half of 2024, but also closed 48 stores, resulting in a net increase of zero direct-operated stores in the second quarter. This data reflects the dilemma of Nayuki's Tea in the process of expansion: on the one hand, the high cost of opening stores and operating pressure make it difficult to expand rapidly; on the other hand, some stores did not perform as expected and had to be closed.

Compared with its competitors, Nayuki's Tea also lags behind in the adjustment of its franchise strategy. Its high franchise store opening budget is much higher than the franchise fee level of brands such as Heytea and Mixue Ice City, which undoubtedly increases its competition difficulty in the franchise market. In addition, Nayuki's Tea also pays more attention to experience and fashion elements in store location and decoration, which further pushes up its operating costs.

Fourth, from a long-term perspective, if Nayuki's Tea wants to remain invincible in the fierce market competition, it must find new growth points and development directions. For Nayuki's Tea, it is particularly important to establish differentiated competitiveness. This includes not only product innovation, such as developing more new products that meet market demand, but also improvements in service experience, brand image, etc. For example, brand loyalty can be enhanced by improving customer experience, or the customer base can be broadened through cross-border cooperation. At the same time, Nayuki's Tea also needs to pay more attention to cost control and improve operational efficiency to cope with the challenges brought about by market changes.