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The competition between Luckin Coffee and Bawang Chaji in the tea beverage market is getting more intense. Luckin Coffee challenges the afternoon market with "Qingqing Jasmine", while Bawang Chaji defends its position with "Boya Juexian". Who will have the last laugh in this tea beverage war?

Author | Gao Yuzhe

Editor | Liu Yang

In the just concluded Paris Olympics, domestic tea brands took advantage of the opportunity to launch a fierce competition. Bawang Tea Princess, which bet on the Olympic women's tennis singles champion Zheng Qinwen, undoubtedly became the biggest winner in this battle for traffic. Seeing that Bawang Tea Princess is gaining popularity,Luckin CoffeeNot willing to be left behind, they responded quickly.

On the first day after the Paris Olympics, Luckin Coffee became a hot topic because of an unexpected blunder - its online customer service staff typed Yi Yang Qianxi's name incorrectly in the automatic reply. The "typo" incident attracted the attention of Yi Yang Qianxi's huge fan base and inadvertently brought Luckin Coffee the same popularity as popular athletes.

Luckin Coffee, which is good at marketing, was not satisfied with this unexpected traffic, but took the initiative to launch a series of topic offensives.

As early as June this year, Luckin Coffee launched a co-branded product with the hit TV series "The Story of Rose", successfully verifying the popularity of "Fairy Sister" Liu Yifei. On August 11, Luckin Coffee officially announced Liu Yifei as its global brand spokesperson, and was praised by netizens as "instantly becoming like a luxury product." On August 12, Luckin Coffee launched the "100 million cups of 9.9 yuan afternoon tea" event, inviting consumers across the country to taste its new product "Light Jasmine".

It is worth mentioning that the new product "Qingqing Jasmine" is very similar to a product called "Boya Juexian" by Bawang Chaji. Obviously, the coffee giant Luckin has begun to get involved in the field of tea drinks and is directly targeting Bawang Chaji, a strong competitor in the tea and milk track.

1. Luckin Coffee’s version of “Bai Ya’s Broken Strings”

In the new product poster with Liu Yifei holding a blue cup, Luckin Coffee launched the new slogan of "Morning coffee, afternoon tea". In order to cultivate the user's mind, after 4 pm every day, consumers can buy a cup of "Qingqing Jasmine" with a 9.9 yuan coupon.

The price is far lower than that of most light milk teas on the market. Coupled with Liu Yifei's star effect, it has become a perfect combination for Luckin Coffee to capture the afternoon tea market.When netizens shared their experience of trying new products on social platforms, a screenshot of the Moments of Yang Fei, co-founder and chief growth officer of Luckin Coffee, circulated on the Internet. He declared that "the sales volume of Qingqing Jasmine exceeded 11 million cups in the first week, becoming the best first week for new products this year."

Although the achievements are commendable, it is not difficult to find thatThis new product is highly similar to "Bai Ya Jue Xian" by Ba Wang Cha Ji.

The main ingredients of Qingqing Jasmine are jasmine tea, pure milk, light milk, green coffee liquid and original flavored syrup; while Boya Juexian is made up of jasmine snow buds, milk and ice brown non-hydrogenated base milk. The difference is that Qingqing Jasmine is available in two versions, with or without coffee liquid.

In terms of product selling points, both emphasize health attributes. Qingqing Moli emphasizes the four zero standards on its product page, namely 0 non-dairy creamer, 0 aspartame, 0 trans fatty acids, and 0 hydrogenated vegetable oils. This echoes the "three zero" standards proposed by Bawang Chaji (no artificial flavors added to the tea base, no trans fatty acids in the whole cup, and no creamer in the milk).

The combination of "tea + milk" makes the two drinks have a certain similarity in taste, but judging from consumer feedback, Boya Juexian seems to be more popular. Many users conducted comparative reviews on social media, and some users thought that the two products were very similar, "You can't tell which is which if you close your eyes and drink it." More users pointed out that there are differences in taste and flavor, and thought that Qingqing Jasmine tastes light and more like ordinary milk tea, while Boya Juexian has a stronger tea flavor.

"Boya Juexian" is the signature product of Bawang Chaji. In the competition between new products and competitors' "explosive products", price and preferential strategies are crucial.From the pricing point of view, the original price of Qingqing Jasmine is higher, with the large and extra-large cups costing 26 yuan and 29 yuan respectively, while the price of Boya Juexian is 16 yuan and 20 yuan.

But from the actual payment price, Luckin Coffee offers more discounts during the promotion period. In addition to the 9.9 yuan discount on the official mini program,MeituanThe special price for the extra-large cup is 8.9 yuan, while Douyin has launched a special promotion of 10.9 yuan for eight-choice-one.

In the first week of the new product launch, Luckin also offered additional discounts, but some users encountered problems with redemption when purchasing in stores. Li Fei told Leopard Change that she bought a coupon for Luckin's new product on a social platform for 1.89 yuan, but when she went to the store to pick it up within the specified time, the coupon could not be used. According to the clerk, this situation is not uncommon. In the end, after Li Fei contacted Luckin's manual customer service twice, the coupon was successfully used.

2. Turning losses into profits, but hidden worries remain

The launch of Qingqing Tea Milk marks Luckin's official entry into the tea milk market. At the same time, the competition between Luckin and Bawang Chaji has become public. This move not only reflects the need for tea brands to expand product categories to maintain competitiveness, but also reflects Luckin's confidence in its own strength.

Looking back at the first half of this year, Luckin Coffee's performance in the first quarter made the industry sweat. According to the financial report, after two consecutive years of profitability, Luckin Coffee suffered a net loss of 83.2 million yuan in the first quarter of this year, in stark contrast to the net profit of 564.8 million yuan in the same period last year.

In the face of the performance plunge, Luckin Coffee CEO Guo Jinyi attributed it to "the impact of seasonality and fierce industry competition" in a conference call. The outside world generally believes that this is related to the price war in the tea beverage industry.

Just as the industry was worried that tea brands might be overwhelmed or even backfired by low prices, Luckin Coffee turned losses into profits in the second quarter.According to Luckin Coffee's second quarter financial report, the company's total net income was 8.4026 billion yuan, a year-on-year increase of 35.5%, setting a new record for quarterly revenue. At the same time, Luckin Coffee opened its 20,000th store on July 18 this year.

On June 5 last year, Luckin Coffee surpassed 10,000 stores. This means that Luckin Coffee once took six years to open 10,000 stores, but it doubled the number in just 13 months, which is equivalent to opening nearly 770 new stores every month.

A sufficient number of stores promotes user growth and product sales, and brings scale advantages to cope with price wars.As noted in the latest earnings report, net revenue growth in the second quarter was primarily driven by an increase in the number of products sold, an increase in the number of stores in operation, and an increase in monthly transacting customers.

However, this seemingly growing performance also has hidden concerns. According to US accounting standards (GAAP), Luckin Coffee's operating revenue in the second quarter was RMB 1.0507 billion, and its operating profit margin was 12.5%, a decrease from 18.9% in the same period last year; net profit was RMB 871 million, lower than RMB 998 million in the same period of 2023.

Although the company turned losses into profits in the second quarter, the growth rate has slowed down significantly. In addition, Luckin has actively promoted the franchise model in the past six months, and even launched the "Bring a Store Franchise" model. However, self-operated stores are still its main source of income. According to the latest financial report, Luckin's self-operated store revenue in the second quarter was 6.277 billion yuan, and the revenue of franchised stores was 1.85 billion yuan, which means that more than 70% of the profit came from self-operated stores.

at the same time,Luckin's store expansion is also slowing down.Compared with a net increase of 2,342 stores in the first quarter, the number of new stores in the second quarter was 1,371, a decrease of nearly 1,000. Overall, Luckin returned to profitability in the second quarter, but profitability has not yet returned to the same level as the same period last year.

3. Enter the new tea beverage market

In the eyes of the public, Luckin Coffee's entry into the tea beverage market is a new thing. However, as early as July 2019, Luckin Coffee launched a new product "Xiao Lu Tea" and announced its entry into the new tea beverage market. At the strategic new product launch conference that year, co-founder Guo Jinyi clearly stated that entering the new tea beverage market was the company's established strategy.

In July this year, Luckin Coffee launched new products, classic lemon tea and matcha lemon tea, which do not contain coffee liquid. When the 20,000th store opened, it also launched Dancong Latte based on Guangdong Dancong Oolong tea, laying the foundation for the subsequent launch of more non-coffee beverages.

In order to change consumers' perception that Luckin only makes coffee, Luckin has launched a variety of tea and coffee products since March last year, including Biluo Zhichun Latte, Xinghua Oolong Latte, Steamed Qing Hinata Latte, Lanyun Tieguanyin Latte, Camellia Latte, Huangshan Maofeng Latte, etc.

Until the recent launch of Qingqing Tea Milk, Luckin's intention to follow Bawang Cha Ji and officially enter the tea milk market has become very obvious.

In fact, the boundary between coffee and tea has long been blurred. On the one hand, the consumer groups and consumption scenarios of coffee and tea are highly overlapping. In the past, the main advantage of coffee was to refresh the mind, but now tea milk products such as Bawang Chaji can also play a similar role. On the other hand, in the context of the price war among tea and coffee brands, the prices of coffee and tea have both reached 9.9 yuan. In order to compete for a larger market share, brands need to expand their product lines.

therefore,The fusion of coffee and tea is an irreversible trend.

In this process, Bawang Chaji has become the target of many brands.Tea 100 WaysHowever, judging from the growth rate of brands, Bawang Cha Ji is a force that cannot be ignored.

In May this year, Zhang Junjie, the founder of Bawang Tea Princess, revealed at the "Modern Oriental Tea Innovation Forum" that Bawang Tea Princess' total sales in 2023 will reach 10.8 billion yuan, and the total sales in the first quarter of 2024 alone will exceed 5.8 billion yuan. At the same time, he said that he would "surpass"Starbucks”。

In addition to revenue growth, Bawang Chaji's confidence also comes from the rapid expansion of the number of stores. According to data from Zhaimen Canyan, as of July 14, 2024, Bawang Chaji has 4,714 stores.

Compared with other similar brands, Bawang Chaji's expansion speed is particularly significant. As of July 9, Bawang Chaji plans to open 1,521 new stores in 2024, while Shanghai Auntie, Cha Baidao, and Guming will open 1,178, 1,030, and 525 new stores respectively during the same period.

In addition, Bawang Chaji has hit products such as "Boya Jue Xian" and "Wanli Mulan", and has bet on Zheng Qinwen as the first "Health Ambassador", which has the opportunity to further promote the sales growth of the brand. In the fierce competition in the tea market, Bawang Chaji, as a latecomer brand, has undoubtedly become a strong competitor in the industry.

Before Luckin Coffee launched its Qingqing Jasmine, Bawang Chaji had already become an imitation model for many tea brands. Heytea launched a new light milk tea, Xiao Nai Mo, in January this year, and released the "Four Truths and Seven Zeros" healthy tea standards in July. In August, it upgraded and launched the "Fat-reducing Version" Xiao Nai Mo, striving to occupy the healthy light milk tea market. Guming also launched a low-calorie original leaf fresh milk tea in July, and marked the calories per cup like Bawang Chaji.

Although Bawang Cha Ji is currently on a strong momentum, Luckin’s ability in product marketing and creating hit products should not be underestimated.

In the future, a head-on confrontation between Luckin Coffee and Bawang Chaji seems inevitable. For all tea and coffee brands, the bigger challenge is the price war in the entire industry. As long as the price war continues, the market structure will still be uncertain.