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Editor’s Note:

After a series of changes in 2023, such as "joint addiction", "10,000 store declaration", "collective overseas expansion", and "shopping price war", the coffee and tea track is still hot in 2024. "Volume" is still the unchanging theme of the industry, but the market structure, competition form, and price war intensity are all changing. Since the beginning of this year, Luckin's 9.9 yuan promotion has quietly shrunk, Starbucks has increased its investment in the sinking market, and Cha Baidao has rushed to become the second stock of new tea drinks... What is certain is that the coffee and tea market still has considerable room for growth, but it is becoming increasingly difficult for companies to take a piece of the incremental cake. In 2024, 21st Century Business Herald will continue to launch a series of articles, focusing on major changes in the coffee and tea track, and analyzing corporate dynamics under the changing situation, in order to bring new observations and new inspirations to the industry.

Recently, Luckin Coffee officially announced Liu Yifei as the global brand spokesperson and chief recommendation officer for tea beverages. This move, to some extent, opened the prelude to Luckin Coffee's expansion into a new product category, light milk tea.

"About a year ago, we discovered that market tastes were shifting from thick milk tea to light milk tea, which also means a more prominent tea flavor," said a relevant person in charge of a tea supplier in an interview with a reporter from 21st Century Business Herald.

Not only the cross-border coffee brand Luckin, but also brands such as Bawang Chaji, Cha Yan Yue Se, and Cha Li Yi Shi, which have always been focusing on light milk tea, continue to accelerate the grabbing of consumers' attention. Brands such as Heytea, Nayuki's Tea, Shanghai Auntie, and Gu Ming have also launched their own light milk tea series. Since the rise of Heytea, the main products were bubble tea and cheese, and the tea base was still simple green tea, oolong tea, and black tea, but now it has been subdivided into jasmine tea, Tieguanyin, Pu'er and other tea bases, and more emphasis has been placed on the concept of "original leaf tea".

"Compared to fruit, the price, transportation, and storage of tea are more stable, the cost is more controllable, and it saves more manpower." The marketing manager of a tea brand pointed out, "Light milk tea also has more profit margins than fruit tea." It can be seen that tea, as a perennial crop, is more stable in production and price than seasonal fruit, making light milk tea with tea as the main raw material a new favorite for tea brands to compete in research and development.

With the rise of light milk tea, many consumers have also begun to complain that "they all taste the same." On Xiaohongshu, many bloggers have evaluated light milk teas that netizens think have similar tastes, among which the most popular are various "Boya Juexian" substitutes. When each brand has its own "Boya Juexian", how to build a moat is the next challenge facing the company.

Image source: Photo by our reporter Liang Yuanhao

Luckin Coffee enters the game

When I woke up, the light milk tea track became crowded again.

Luckin Coffee officially entered the light milk tea industry with its new product "Qingqing Jasmine". However, many customers who are keen on trying new things commented that it was "a substitute for Boya Juexian" and "a mini version of Boya Juexian" after drinking it, and some customers also said on social platforms that it was "too bland".

"Although the taste is similar to Boya Juexian, I feel that the milk and tea flavors are disconnected, and I can't taste it even after adding light coffee." Consumer Xiao Liu said, "Anyway, I won't buy it again." Another new tea shop owner said, "I was quite nervous at first, but now I feel relieved and it feels okay."

Comparing Boya Juexian and Qingqing Jasmine, there is not much difference in ingredients between the two. Qingqing Jasmine has more green coffee liquid and original flavored syrup. Although the two products are not much different in taste perception, it is not difficult to see from the details that Luckin Coffee is secretly competing.

Compared with traditional milk tea and fruit tea, light milk tea reduces the cream and sugar content while maintaining the rich tea aroma and smooth taste. It not only meets the health needs of contemporary consumers, but also allows more tea brands to see new profit growth points. "Compared with fruit, tea has stronger stability in price, transportation, and storage, and its cost is more controllable and saves more manpower." The marketing manager of a tea brand pointed out, "Light milk tea also has more profit margins than fruit tea."

However, even as the light milk tea featuring "original leaves" and "tea fragrance" played a leading role, there were also many voices of doubt. As early as May this year, a blogger said that he had palpitations after drinking Bawang Tea Ji's "Wanli Mulan".

If palpitations are an occasional event, then widespread insomnia is more concerning. "I drank Boya Juexian in the afternoon, and my cerebral cortex was still very excited at 2 or 3 in the middle of the night." There are many comments like this on Xiaohongshu.

At present, there are more than 2.45 million notes on Xiaohongshu about "not being able to sleep after drinking light milk tea". Among them, related products of brands such as Bawang Chaji, Guming, Heytea, and Luckin Coffee, which has just tried light milk tea, have not been spared from such feedback. Some netizens analyzed that the reason for not being able to sleep may be that the tea contains too much tea polyphenols and caffeine.

According to official data from Bawangchaji Mini Program, a medium cup of "Wanli Mulan" contains 292.8 mg of tea polyphenols and 149.5 mg of caffeine. Heytea has also recently disclosed the caffeine content of its freshly brewed drinks, and used the "caffeine traffic light" health logo based on relevant research results on caffeine metabolism in the human body and its possible impact on sleep.

According to the "Chinese Residents' Dietary Caffeine Intake Level and Risk Assessment", caffeine is a common natural compound in tea leaves, coffee beans and other plants, and is also a food additive. By searching and analyzing caffeine toxicity research data, it is determined that the safe intake of caffeine for healthy adults is 5.7 mg/kg BW (400 mg/d).

"Not only coffee, but also tea, some carbonated drinks, functional drinks, cocoa, chocolate and other foods all contain caffeine." Duan Shuli, chief nutrition expert of Yiyao.com and national registered nutritionist, told the 21st Century Business Herald reporter, "It is safe for normal adults to consume no more than 400 mg of caffeine per day. However, consuming a large amount of caffeine can easily lead to a decrease in the body's sensitivity to it, and on the other hand, it can also cause symptoms such as increased heart rate and breathing, insomnia, irritability, headache, and stomach discomfort."

It can be seen that the seemingly healthy "real tea" is not suitable for everyone. When light milk tea emerged from the tea beverage market and was questioned, how can the new tea beverage market compete?

The importance of tea leaves is highlighted

"Freshness" has always been one of the important driving forces for the development of the new tea beverage market. However, in recent years, whether it is fruit tea or light milk tea, the speed of new products launched by various companies has become faster and faster, and the degree of product homogeneity has also become higher and higher.

In order to maintain brand activity and attractiveness, many new tea brands choose to launch new products frequently, with some even launching a new product every month or even every week.

Public information shows that Cha Baidao launched 48 new products in 2023 and completed the upgrade of the formula of 13 classic products; Shanghai Auntie has launched an average of more than 100 new products each year in the past three years; Gu Ming launched 107 new products in the first three quarters of 2023.

From the perspective of light milk tea, the change and innovation of tea is the key to maintaining product competitiveness. "The research and development directions of fruit tea and light milk tea are different. The quality and aroma of tea determine the flavor of light milk tea." The person in charge of the Gu Ming R&D Center introduced, "Fruit tea combines various fruits and emphasizes freshness, so it is necessary to choose a lighter and more universal tea base; while light milk tea focuses on the integration of tea and dairy products, but because dairy products are relatively single, tea is a thing with richer innovation or aroma sources."

As new tea brands are launching new products at a faster pace, and consumers are relatively limited in their ability to try new things, product competition is no longer limited to broad health concepts and the restoration of tea flavors, but has now penetrated into every aspect of tea varieties, craftsmanship, and flavors. Previously, as the foundation of lemon tea, no less than 20 chain brands have launched related drinks on the market. Recently, following coconut, citrus, and lemon, new tea brands have made gardenias popular. According to public reports, edible gardenias are mainly produced in Sichuan. Compared with the early five or six yuan per catty, this year's market price peak of gardenias has climbed to 40 yuan per catty.

"When we make tea drinks, we generally choose teas with highly recognizable and full aromas, such as jasmine and gardenia." The person in charge of the Gu Ming R&D center said, "If the aroma is not full, it will be difficult for it to come out of drinks with added juice or milk." Public data shows that the tea producing areas of domestic new tea brands are mostly Yunnan, Guizhou, Sichuan, Fujian and other places.

Zhu Mingxing, director of the R&D center of Chabaidao, said that in the process of tasting traditional tea, bitter, astringent tastes and some overly strong tea flavors need to be avoided. However, in the new tea industry, these things may be the source of the taste of tea, "because they will produce new flavors when combined with fat and protein."

He further explained, "When making light milk tea, it needs to taste like tea, but when making fruit tea, too much tea flavor will overwhelm the taste of the fruit. So in fruit tea, you only need its aroma, freshness and a little tea taste. Too much tea taste will also affect the smoothness and experience of the whole cup."

Innovation in tea base is not only reflected in the selection of tea leaves, but also in how to skillfully blend them. "At present, the main tea base categories are still jasmine tea and black tea, because these two types of tea base have a good historical foundation in tea making." The head of the Gu Ming R&D Center said frankly, "Other tea types show more seasonal and regional characteristics. China originally had six major tea categories, and on this basis, through modern reprocessing technology or innovative fusion technology, a series of emerging tea products have been spawned."

Xue Huayun, managing director of Cargill Food Solutions North Asia, Australia and Greater China, also pointed out that after determining the popularity of light milk tea, the R&D team will debug the product. Taking flavored syrup as an example, it is necessary to ensure that it blends perfectly with light milk, highlighting the lightness of light milk without covering it up. "We will make some advance predictions, but it is difficult to really lead the trend."

Competition spreads to tea producing areas

Furthermore, the ability of tea to innovate is ultimately related to the uniqueness and stability of the supply chain.

As the new tea beverage market accelerates, new tea beverage brands are competing fiercely. According to a research report by Zheshang Securities, my country's freshly brewed tea beverage market is accelerating its concentration. Currently, there are 380,000 freshly brewed tea beverage stores nationwide, of which more than 3,000 are chain brands. From 2020 to 2022, the proportion of brands with more than 5,000 stores has tripled to 15%.

Cha Baidao purchases more than 2,000 tons of Fujian tea annually; Bawang Cha Ji purchased about 4,916 tons of tea from various production areas in 2023. According to earlier data, Nayuki's Tea purchased about 700 tons of tea in 2021 and nearly 900 tons of tea in 2022.

In this context, while various tea brands are developing the diversity of tea bases, they are also turning their attention to the upstream of the supply chain and actively extending the industrial chain to the source of tea production.

This year, Chabaidao's own original leaf tea production base was put into operation in Fuzhou, Fujian Province. With the official start of production, the tea produced in the base can be supplied to more than 8,000 Chabaidao stores across the country, and the tea varieties cover all beverage tea bases.

"51% of the funds raised from the listing will be used to improve overall operational capabilities and strengthen the supply chain." Gu Jilin, co-founder of Cha Baidao and vice president of the group, pointed out, "This is to further enhance the core competitiveness and moat of the entire Cha Baidao brand, and to support our ability to go overseas as the second growth point of the brand in the future." At present, Cha Baidao has established a complete chain of "production, manufacturing, processing, research and development, and sales" of tea raw materials, which ensures the quality of tea raw materials and the stable production of beverages.

Coincidentally, Gu Ming's digital light food and beverage raw material research and production base in Zhuji, Shaoxing was also officially completed and put into operation this year. According to reports, after the project is fully put into production, it is expected to produce more than 10,000 tons of tea and 50,000 tons of healthy fruit drinks each year, achieving sales revenue of about 2.9 billion yuan.

Not only that, Gu Ming also has its own tea factory in Guangxi. In this regard, the head of Gu Ming's R&D center pointed out that the emergence of hot products has put great pressure on the supply chain. On the one hand, in response to market trends, brands must quickly and diversely develop new products and expand product lines around popular elements such as gardenia. On the other hand, the back end of the supply chain needs to work closely to ensure that every link from the source of raw materials to production can be efficiently coordinated to cope with the surging demand and complex and changing supply environment.

"When consumers get used to the flavor of tea, they will have a continuous demand, or an addiction. Of course, it is not as strong as coffee." Lin Hong, general manager of Fuzhou Qingkou Tea Co., Ltd., further pointed out, "For new tea drink companies, the selected tea base needs to have a stable flavor and can be produced in batches. Therefore, jasmine tea is more suitable for new tea drinks than black tea, because black tea needs to be fermented and cannot have a very stable flavor."