nearly 130,000 stores closed in one year! who is to blame for milk tea's fall from grace?
2024-09-25
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heytea fired the first shot in the tea industry’s resistance against “low-price involution”!
recently, heytea issued an internal letter to its business partners titled "creating differentiated brands and products for users", which pointed out that it would reject the inertial homogeneous thinking, not simply engage in low-price internal competition, and not pursue the short-term speed and quantity of store openings.
the "homogeneity", "low price" and "rapid store expansion" pointed out by heytea are topics that cannot be avoided in the current new tea beverage market. under fierce competition, the average customer spending is under pressure and profits are declining. new tea beverages have entered the "era of small profits" and it seems that it is no longer a good business.
1
milk tea has fallen out of favor!
nearly 130,000 stores closed in one year
"overall, fewer people come to buy milk tea than last year." a milk tea shop clerk in kuanhouli, jinan expressed his feelings, "it's okay on holidays, but when there are fewer people on weekdays, basically the whole day is wasted." on september 19, the reporter visited kuanhouli and shimao plaza and saw that chahua lane, luckin coffee, jasmine yogurt, and bawang cha ji are "neighbors" on the first floor of shimao plaza. on the pedestrian street of kuanhouli, there are 4 mixue bingcheng, 3 ice and snow time, as well as cha baidao, a shui big cup tea, shanghai auntie and many other tea shops.
on kuanhouli pedestrian street, ashui big cup tea, gu ming and mixue ice city are only a few meters apart.
on the first floor of shimao plaza, chahua lane, luckin coffee, mo yogurt, and bawang cha ji are neighbors (bawang cha ji is diagonally opposite mo yogurt).
kuanhouli and shimao plaza are well-known commercial districts in jinan. the situation here is a typical microcosm of the current new tea beverage market.
mixue bingcheng achieved great success by relying on low prices, and this model has been regarded as a benchmark by the new tea beverage industry. "low prices", "expanding stores", "going down to lower levels", "overseas"... have become the "main theme" of the new tea beverage industry in recent years. however, as major brands compete with each other, market competition is becoming increasingly fierce.
qichacha data shows that there are 376,000 milk tea-related companies in my country. in terms of regional distribution, guangdong ranks first with 57,400 companies, jiangsu and guangxi have more than 30,000 companies, and hunan, anhui, sichuan and other places have less than 25,000 companies. focusing on the shandong market, there are 18,700 milk tea-related companies, and it is also the only northern province among the top 10 in regional distribution.
source: qichacha
since 2022, many leading new tea brands such as heytea and nayuki's tea have cut prices and continued to "grab land" and "roll" into the sinking market. in august this year, the topic of #milk tea prices collectively dived# became a hot search on weibo. 30 yuan a cup of milk tea is a thing of the past, and "less than 10 yuan" has become the key range for major brands to "roll in".
in fact, the subjective feeling that there are "fewer milk tea shop employees than last year" is true, and it is directly reflected in the financial reports of new tea brands. in the first half of this year, cha baidao's adjusted net profit was 395 million yuan, a year-on-year decrease of about 34%; nayuki's tea had an adjusted net loss of 437 million yuan, compared with a profit of 70.2 million yuan in the same period last year.
the financial report shows that in the first half of this year, the average daily order volume of each naixue's directly-operated store dropped from 363.4 orders in the same period last year to 265.9 orders, and the average price of each order was only 27.5 yuan, compared with 32.4 yuan in the same period last year.
amid the crazy market, some tea shops are leaving the market sadly.
according to the data from zhaimen canyan, as of september 15, the total number of "milk tea beverage" stores has reached 414,000, with 138,700 new stores opened in the past year, a net increase of 12,500 stores in the past year. further calculations show that in the past year, while the "milk tea beverage" store expansion has been rapid, nearly 130,000 stores have closed down and withdrawn from the competition.
source: narrow door canyan
in addition, "too many shuyi shaoxiancao stores closed down and second-hand equipment unsalable" has recently become the most searched topic, and shuyi shaoxiancao is getting further and further away from the goal of "10,000 stores in 1,000 cities". according to phoenix.com, it is not just the shuyi shaoxiancao brand. in the warehouses of second-hand tea recycling companies, the number of cha baidao and guming has also begun to increase significantly this year.
a sign saying “lucky house for rent” was posted on the door of a milk tea shop on the street in anqiu.
2
milk tea shops enter the "micro-profit era"
what’s the hidden story behind “falling out of favor”?
various data show that milk tea does not seem to be as popular as before. what is the reason behind this?
huang jing (pseudonym) is a milk tea lover who drinks a cup of milk tea almost every day. however, since the second half of last year, she has changed from drinking a cup of milk tea to drinking a cup of coffee. in her opinion, "the milk teas of different brands are pretty much the same. even the new drinks are not very innovative, so i gradually lost interest in them. coffee is increasingly priced at 9.9 yuan per cup, so coffee has gradually become a 'cheap substitute'."
it can be seen that the low-price involution of coffee brands has made it difficult for milk tea shops to operate. luckin coffee and kudi coffee have already reduced the price of coffee to 9.9 yuan per cup. among them, the number of luckin stores reached 20,000 in july this year. in the milk tea industry, only mixue bingcheng, which has more than 20,000 stores, can match it in terms of the number of stores.
source: iimedia research
at the same time, compared with the highly concentrated coffee industry, the concentration of the brewed tea industry is relatively low, which also indirectly illustrates the fierce competition in the tea industry. the "2024 china urban coffee development report" shows that as of march 2024, 77% of the stores in the country are occupied by the top ten chain coffee brands. among them, luckin ranks first with 35% of the stores, starbucks accounts for 14%, and kudi coffee accounts for 12%.
zheshang securities pointed out that currently, the top 5 brands of freshly ground coffee in my country (by number of stores) have a market share of about 21%, and the top 10 brands of freshly brewed tea (by number of stores) have a market share of about 20%. the overall brand concentration of freshly brewed tea is relatively low, mainly due to the excessive diversity of tea skus (minimum inventory units), which leads to low consumer brand loyalty.
what huang jing called "not much different" is exactly the phenomenon of milk tea homogenization. as a result, consumers develop aesthetic fatigue, which is also a major pain point in the industry.
iimedia research pointed out that the new tea beverage industry has transitioned from the initial stage of rapid expansion and fierce competition for market share to a new stage of stock competition with a focus on refined operations. the homogeneity of new tea beverage products is prominent, the industry's internal competition is intensifying, and the market space is tending to be relatively saturated. although there are many brands, product innovation is limited, homogeneity is prone to occur, and it is difficult to form a clear competitive advantage.
against this backdrop, new tea beverage brands are looking for a second growth curve.
it can be found that many stores of mixue ice city and ice time have their own brand snacks such as konjac and potato chips, which are mostly sold at 1 yuan or 2 yuan. however, during offline visits, a milk tea shop clerk said, "snacks are not selling well. the store used to buy a box of 2,000 to 3,000 packs of konjac, but now there are still a lot left after half-selling and half-giving away."
some time ago, the joint product "black myth tengyun americano" of luckin coffee and "black myth: wukong" was hot in sales, and related peripheral products were sold out in seconds. the effectiveness of cross-border joint brands in helping brands attract traffic was once again confirmed. in fact, new tea brands are also trying to follow this path. according to red star news, more than ten milk tea brands, including cha baidao, lelecha, shanghai auntie, mixue ice city, and heytea, had more than 200 joint events in 2023.
source: luckin coffee wechat official account
it is worth noting that new tea beverage brands are facing "double disappointment" in both the capital market and the consumer market.
chabaidao, which successfully listed on the hong kong stock market at the end of april this year, did not expect to "peak at the debut". after the listing, the stock price "broke the issue price" and fluctuated and fell all the way. as of the closing price on september 24, it was hk$6.34 per share, which was 63.77% lower than the issue price of hk$17.5 per share. nayuki's tea, the "first stock of new tea drinks", also "peaked at the debut". since its listing in june 2021, the stock price has fluctuated and declined all the way. as of the closing price on september 24, it was hk$1.5 per share, which was more than 90% lower than the issue price of hk$19.8 per share.
in addition, the road to listing for new tea beverage brands that are queuing up for ipo is also a bit bumpy. the official website of the hong kong stock exchange shows that the prospectuses submitted by shanghai auntie, mixue bingcheng and guming have all expired.
looking back at heytea’s statement of “refusing internal competition”, can it win without “competing”? can this trend be stopped just like that?
the measure heytea proposed in the internal letter is to "create differentiated brands and products", which may be a clear way to break the homogeneity, but in the market environment of "volume and death", it is bound to face many difficulties to succeed in this way. however, heytea took the lead in taking this step and tried to break the "internal friction" of tea brands, which has already given a new possibility to this "industry internal competition".
(reporter du yanan of mass news)
