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the only way to change the status quo is to change expectations. only by reversing market expectations can we break this pessimistic cycle from the root.

written by chen bai

the price of milk tea has really been brought down.

in the past few years, tea drinks that cost 20 or 30 yuan a cup have now started to move towards the 10 yuan range. recently, the news of #milk tea prices collectively diving# and #milk tea returns to below 10 yuan# has become a hot search on multiple platforms.

01

from heytea, nayuki's tea to bawang chaji, these tea brands that once focused on high-end routes are beginning to catch up with mixue bingcheng. as for the players in the coffee market, they have been fighting in the red ocean at the price of 9.9 yuan for almost a year.

it is no exaggeration to say that the myth of consumption upgrade in the tea beverage market in the past few years has been completely shattered this year.

as a popular consumer product among young people in recent years, the price changes in the tea market, including milk tea, tend to attract more attention. but in fact, it is not just milk tea that is experiencing crazy price cuts. recently, almost all major consumer categories have set off a wave of price cuts.

a quick search will reveal that major mainstream catering brands have announced price cuts for their dishes. even some second-tier luxury brands such as burberry have started to cut prices.

judging from the cpi data, the prices of fruits, vegetables, and meat, which are common items on our daily tables, have all fallen. recently, bairuoyuan group even issued a profit warning, predicting that profits in the first half of 2024 may decrease by no more than 70% year-on-year.

if we add the discounted property market, it can be said that price reduction has become the general trend on the supply side.

▲september 2023, nanjing, people queuing to buy milk tea (photo/bingchuan)

for ordinary consumers, price cuts are certainly good news, but behind the surface of price cuts, the underlying changes may not be as good as they seem:is this wave of price cuts a natural result of oversupply or a reflection of the reality of severe demand shortage?

according to market rules, prices will only fall when there is a surplus of consumer goods and no one is buying. if people still queued for an hour to buy a cup of cha yan yue se or hey tea, how could these brands choose to price their products closer to mixue bingcheng?

it is never the consumer goods companies that change. the reason they adjust their pricing strategies is essentially because they find that the market has changed.

02

the tea and coffee category has always been an excellent window for observing changes in consumption trends.

when observing the us economy, the economist magazine invented the big mac index. similarly, when observing the chinese economy, the tea and coffee market may also be an interesting perspective.

i don’t think there is any industry that launches new products faster than the tea and coffee industry. not only do these brands frequently launch new products to attract consumers’ attention, but tea and coffee brands are also active on social media, where they can quickly spread information and collect consumer feedback.

the most typical representative company is luckin coffee. in recent years, it has never missed any big opportunities. before the release of black myth: wukong, luckin coffee's co-branded peripherals have already reaped a large wave of dividends. going back a little further, luckin coffee's cooperation with moutai and gu ailing is enough to fully prove that chinese tea and coffee consumer brands represented by luckin coffee are a track that is very sensitive to market changes.

but precisely because they are sensitive enough, by observing the changes in the tea and coffee market, we can, to a certain extent, get a glimpse into the general trends of the consumer goods market.

by comparing the pricing curve of the tea beverage market and cpi data in recent years, we can find that there are similarities in their trends.

before 2010, domestic milk tea was basically priced below 10 yuan, and 3 yuan for pearl milk tea was a common price. the real change began in 2018.

according to institutional research data, in 2018, the prices of chinese internet-famous milk teas began to show a stratified trend, with heytea and nayuki’s tea starting to offer milk tea products priced between 25 and 35 yuan. however, starting from the end of 2022, milk tea brands that focused on high customer unit prices at that time all launched new products with price cuts.

in 2024, if you open these tea-drinking mini-apps, you will find that 10-15 yuan has become the core price range of the milk tea market.

picture/internet

as for the coffee category in the tea beverage market, it seems that kudi’s 9.9 yuan price war forced luckin coffee to sell.but without the support of real demand, kudi's price war would probably not last so long.

comparing with the consumer price index, we can find that it has basically shown a fluctuating downward trend in the past five years.

picture/internet

in particular, in 2023, china's cpi and ppi continued to be lower than market expectations, triggering heated discussions on "deflation", so much so that both the national bureau of statistics and the central bank had to respond to it. in 2024, cpi began to gradually show a moderate upward trend, and the controversy over "deflation" gradually began to cease.

03

of course, some people also say that some consumer goods in the taki market are also rising in price. in the past two years, the consumer market has indeed been experiencing price polarization.

on the one hand, categories that used to be extremely cheap or even free are now charging fees or even increasing in price. for example, a second-hand e-commerce company recently announced that it would charge service fees, and shared bicycles and shared power banks, which used to focus on cost-effectiveness, have also raised their prices.

on the other hand, categories that used to focus on consumption upgrades have begun to reduce prices. the tea and catering mentioned above are both in this category.

at first glance, it seems that there is a conflict between raising prices and lowering prices, but in fact the underlying logic is the same:the external environment is not good and companies are under tremendous pressure. the most direct way to change the status quo is to change prices.

the recent profit "broken" financial report of baiguoyuan, a chain retail brand that used to focus on high-end fruits, explains a lot of problems. when asked about the reasons for the sharp drop in profits, the company believes that one of the main reasons is that due to the influence of the external environment, consumer power is still weak, resulting in a downward trend in store sales.

picture/tuchong creative

not only pagoda, but also hongjiu fruit products, another listed company known as the "no. 1 fruit stock", has seen its market value drop by 90% since its listing. this year, news of price cuts has been reported for many high-end fruits such as blueberries, durian, and cherries. according to data from the national bureau of statistics, in the first half of the year, the price of fresh fruit in my country dropped significantly, by 7.8%. affected by this, the entire fruit retail industry is facing a wave of price cuts.

from fruits to tea drinks, this is a complete supply chain connecting three industries from agriculture to industry to the service industry, and it is also the base market for consumption among the three major economic drivers. by observing the changes in these industries, we are likely to be able to draw conclusions about the current survival status of enterprises.

04

although the possibility of "deflation" is low, this round of general price reduction wave still deserves our more attention.

the simplest question is,why are the prices of so many products reduced? logically, our sense of happiness should increase, but we still can’t seem to be happy?

recently, from online group chats to offline greetings, "the overall environment is not good" has almost become a catchphrase for many people, and the following sentence of this judgment is often a conservative decision such as "just stay put".

but many people may not realize that the reason why the overall economic temperature is low is probably directly related to price cuts.

this is not a virtuous cycle.

initially, when consumers expect a decrease in future income or an economic recession, they tend to consume less and save more, which may lead to a decrease in aggregate demand.

the decline in demand has forced companies to engage in more aggressive price wars to retain customers, which may in turn lead to a decline in corporate profits and reduced investment, thereby affecting employment, which in turn will further affect consumer income expectations.

picture/tuchong creative

taking the milk tea industry as an example, behind the price war is the increasingly fierce competition in the milk tea industry.the "2023 new tea beverage research report" previously released by the china chain store association shows that the growth rate of china's new tea beverage market size is expected to slow down from 44.3% in 2023 to 12.4% in 2025.

corporate financial reports once again confirmed the downward trend. data showed that in the first half of this year, chabaidao's net profit was expected to drop by no more than 63.03% compared with the same period last year, while nayuki's tea had a net loss of 420 million to 490 million yuan.

milk tea is still okay, but what is worse is the bulk consumer goods.

because prices are expected to fall further, consumers may further postpone their purchase decisions for expensive consumer goods such as houses and cars. this mentality of "waiting for a better deal" will lead to a reduction in current demand, which will further affect the balance of supply and demand. this is why, even though we see various local policies to support the real estate market, the effect is not significant.

the only breakthrough to change the status quo is in expectations.only by reversing market expectations can this pessimistic cycle be broken at its root.

there are many ways to reverse this expectation. for example, after a long winter, the game industry finally had black myth: wukong, which greatly boosted the confidence of the entire market. of course, the recovery of the game industry also has its prerequisites. not long before that, there were policies to rectify the name of this industry.

compared with online games, the recovery of the consumer goods industry is actually easier. for some time, economists have repeatedly suggested that giving money to stimulate consumption would be an effective means of reversing expectations and a common means of dealing with potential deflation risks. this has achieved immediate results in the history of various countries and regions.

however, it is difficult for ordinary people to decide the direction and changes of macroeconomic policies. for consumers, ordering an extra cup of milk tea for 9.9 yuan this fall is also a way to live in the present.