New tea drinks are crazy for "24 hours"

In the fast-changing retail industry, new tea brands are reshaping the market in their own unique way. The article explores in depth how new tea brands seek breakthroughs in the fierce market competition and compete for more market share by opening 24-hour stores and entering the campus market. As the industry growth slows down, new tea brands face multiple challenges such as losses, store closures and going overseas.

The retail industry has an "impossible triangle" of price, efficiency and service. Costco, which is known as the "king of suburban counties" for its large and inexpensive stores, reduces costs by acquiring land and building its own stores in remote suburbs. The 24-hour 711 convenience store downstairs is convenient, but consumers need to pay a higher unit price to pay for the service premium.

Competition among new tea drinks is making this impossible triangle concrete. It is reported that many new tea drink brands, including Cha Baidao, Guming, Jasmine Milk White, and Mixue Ice City, have opened 24-hour stores, of which Cha Baidao has more than 100 24-hour stores. As long as you place an order at the corresponding store through the mini program, you can drink milk tea at any time of the day. Before this, the players of new tea drinks had already fought the price war to the familiar 9.9.

It is not just about gaining growth in time, but also in space. Recently, Bawang Chaji opened a store in the Minhang neighborhood of Shanghai Jiaotong University, and its competitors such as Heytea were even faster than it.

In the past, new tea drinks have experienced a transformation from brewing tea to blending with creamer powder and then to freshly brewed tea drinks, writing a new story about Chinese tea drinks. But now, the industry has ended its overall rapid expansion period, and the best way to make money in the industry is to make money from franchisees.

Internal competition is upgrading and clearance is accelerating.

1. 24-hour stores and campus stores

Whether it is a 24-hour store or a campus store, there is certainly demand.

24-hour stores target the busy crowds of people who treat night as day, as well as the working class who use night as day. Therefore, the 24-hour tea shops you can see are either located in the core of the business district or under the office building.

The night orders of 24-hour stores may be more than we think. According to Vista Hydrogen Business, although the night orders of Heytea 24-hour store near Beijing University Town are not as many as those during the day, there are about ten orders per hour from midnight to 3 a.m., and orders will continue to come in after 5 a.m. Even the store employees usually order a cup of milk tea after get off work in the morning.

The rent cost of a milk tea shop is fixed, and the rent in some popular locations can even account for 30% of the cost. Since there are a certain number of orders at night, the water, electricity and labor costs brought about by increasing business hours are not a big problem.

If 24-hour milk tea shops are about time, then opening stores on campus is about finding possibilities in space. As early as 2023, two new tea brands opened campus stores. This year, this trend is strengthening. According to incomplete statistics from Cha Ka Observation, tea brands have opened 7 stores in seven campuses of four universities: Shanghai Jiao Tong University, Fudan University, Tongji University, and Shanghai University of Finance and Economics.

Similar to 24-hour stores, campus stores target college students who have both spending power and consumption needs. College students are willing to spend money on milk tea and are willing to explore new brands. According to the "2024 China College Student Consumption Behavior Survey Research Report" released by iMedia Research, the annual consumption scale of Chinese college students in 2024 is expected to be about 850 billion yuan.

However, both 24-hour stores and campus stores are special formats that cannot be promoted on a large scale and have obvious shortcomings. The former is obviously only suitable for some busy business districts and is not suitable for large-scale promotion. At the same time, night riders are more expensive and the platform's commission is higher. The latter has more obvious shortcomings. Colleges and universities usually have a sharp drop in traffic during winter and summer vacations, which means one quarter less normal business hours a year. The competition for the operating rights of on-campus catering is also very fierce, and they also have to face competition from coffee brands.

After all, both are new tea brands exploring niche scenarios, which may improve local operations but are unlikely to affect the overall competitive situation.

2. Losses, store closures and overseas expansion

An important competitive dimension for offline consumer brands is stores. Larger stores often mean wider reach, better consumer education and higher revenue. Mixue Ice City and Luckin Coffee, two rivals, are not only setting new records in the number of stores in their respective industries, but are also leading the industry into the 10,000-store era. Since last year, many new tea brands have officially announced their 10,000-store goals: Shanghai Auntie, Cha Baidao, and Guming.

A chain store of tens of thousands of stores usually means that the brand itself is an industry textbook, but when the entire industry has tens of thousands of stores in batches, it is more important to avoid blind expansion and tighten the pace of development.

Rapid expansion and the outbreak of price wars have quickly transmitted pressure from the business end. On the one hand, new tea drink players have slowed down the pace of opening stores. According to the data from Zhaimen Canyan, as of now, the number of new stores opened by Gu Ming, Shanghai Auntie, and Cha Baidao in 2024 are 909, 1,631, and 1,301 respectively, which are all significantly reduced compared with the same period last year.

On the other hand, the industry is facing a wave of store closures. According to data from Zhaimen Canyan, as of October 15, 2024, the total number of stores in the "milk tea beverage" industry is 394,392, with 122,080 new stores opened in the past year, and a net increase of "-16,843" in the past year. Not only small and medium-sized tea brands are facing bankruptcy, but Shuyi Shaoxiancao, which was founded in 2007 and was once the second largest in the industry with the second largest number of stores after Mixue Bingcheng, has also been on the hot search due to store closures. According to the brand monitoring data of the chain store monitoring platform Jiuhai, in the past 90 days, the number of new stores opened by Shuyi Shaoxiancao was 496, and the number of closed stores reached 1,605.

The financial data of Nayuki's Tea and Cha Baidao, the only two listed companies in the industry, can also reflect the current situation of the industry to a certain extent. In 2024, Nayuki's Tea's losses in the first half of the year alone reached 438 million yuan. From 2020 to 2023, Nayuki's Tea closed less than 50 stores, but in 2024, before the fourth quarter, 157 stores were closed.

The situation of Chabaidao, which makes money from franchisees, is similar. In the first half of 2024, Chabaidao's net profit fell 63% compared with the same period. At the same time, according to the brand monitoring data of Jiuhai, as of August 13, Chabaidao opened 614 new stores in the past 90 days, but closed 905 new stores.

Under pressure, industry players not only work upstream and reduce costs by investing in the supply chain, but also choose to go overseas. At the end of September, Bawang Cha Ji and Cha Baidao opened their first stores in Hong Kong. Due to the difference in consumption levels between Hong Kong and the mainland, even with a price of around HK$30, mainland tea brands still have a certain cost-effectiveness advantage. Take Mixue Bingcheng as an example. Products such as pearl milk tea, which are generally priced under 10 yuan, are priced at 10-20 Hong Kong dollars in Hong Kong. However, brands also have to accept higher operating costs and the test of localized operations.

Zhu Danpeng, a Chinese food industry analyst, said in an interview with the Science and Technology Innovation Board Daily that "Hong Kong plays the role of a 'bridgehead' in the international market. By opening stores in Hong Kong, we can lay the foundation for the globalization of the brand, and this is why Bawang Tea Princess chose Hong Kong."

There are some stories of new tea brands going overseas. In October last year, Tianlala, the "substitute of Mixue Ice City", opened 6 stores in Jakarta, Indonesia. Mixue Ice City, which has the fastest growth, already has more than 1,000 stores in Southeast Asia. Not only Southeast Asia, but also the Middle East, Europe and the United States are becoming destinations for new domestic tea brands. In October last year, Chabadao, which had just gone public, opened its first overseas store in Gangnam District, Seoul, South Korea; in December last year, Heytea's store on Broadway Avenue in New York officially opened for business, which was the first store of a mainland tea brand in New York.

In the past, with domestic growth in the forefront, going overseas seemed like an issue that could be temporarily put on hold, but now it has become a must.

Author | Lu Fei This article is written by the author of Operation School [Bo Hu Finance], WeChat public account: [Bo Hu Finance], original/authorized to be published in Operation School, and any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.