Changsha's top tea drinker sells snacks for 2.5 yuan

In response to new consumption trends, Changsha's well-known tea brand Cha Yan Yue Se has innovatively opened a "Snack Life Grocery Store". This move not only expands its product line, but also reflects the new tea brand's search for new growth points in the highly competitive market.

“Cha Yan Yue Se has entered the ‘busy snacking’ mode.”

Changsha is a city with its own traffic and is also a machine for manufacturing new internet celebrity consumer brands.

For example, Cha Yan Yue Se, as a regional milk tea brand, has won the entire new tea beverage market with its popular marketing and unique online word-of-mouth, and has become one of Changsha's city business cards.

Another example is Snacks is Very Busy, a snack company that started in Changsha. After merging with Zhao Yiming Snacks, the number of its stores exceeded 10,000, making it the first company with 10,000 stores in China's mass-market snack chain industry.

Two well-known brands from different fields have "merged" by chance. Recently, Cha Yan Yue Se opened its first "snacks and daily necessities store" in Changsha, becoming the first brand in the new tea beverage field to become a "discount supermarket".

Image source: Xiaohongshu

The concept store is themed "Hard Discounts, Bulk Sales GO" and focuses on low-price discounts. It has many "2.5 yuan zones" and "9.9 yuan zones" covering multiple categories such as tea and tea powder, snacks, daily necessities, stationery and trendy toys, and the products are mainly private brands.

So, when Cha Yan Yue Se entered the busy snack market, was it a strategic foresight to find a second growth curve, or a desperate attempt to find a cure under internal competition?

01 Cross-border retail supermarkets, looking for the second growth curve

"Looking for new growth" is the sword of Damocles hanging over the head of every new tea brand.

As the industry growth slows down, the new tea beverage track has entered the "stock era" of close combat. According to iMedia Research, the growth rate of my country's ready-made tea beverage market will drop from 13.5% in 2023 to 5.7% in 2025. The bonus era when the entire track took off together is gone forever.

In the stock era, the logic of doing business has changed. Currently, there are two mainstream expansion models in the new tea beverage track:

The first is to win by quantity. By maximizing the franchisee resources, forming economies of scale, and seizing the minds of consumers. For example, Mixue Bingcheng has already exceeded 30,000 stores, and brands such as Guming and Chabaidao are rushing to reach the goal of 10,000 stores. Even Heytea and Nayuki’s Tea, which previously insisted on direct sales, have opened up to franchising.

The second way is to win by category, by launching private-label bottled beverages and snacks and crossing into the retail market.

Such as bottled water products such as Heytea NFC juice drinks and Nayuki sparkling water, baked products such as European bread, cake rolls, scones, etc. launched by Nayuki and Heytea, and Mixue Ice City also sells small packages of snacks such as biscuits, French fries, and melon seeds.

Image source: Nayuki's Tea official Weibo

The data proves that this cross-border business is effective. According to Nayuki's 2024 mid-year performance announcement, among Nayuki's four major businesses, bottled beverage revenue increased by 0.8% year-on-year to 172 million yuan. However, in general, major tea brands have not made snacks a "sideline business" as their core focus, and the number of products is usually controlled at around 10.

Faced with such a market situation, Cha Yan Yue Se has obviously chosen the second path. It is undeniable that Cha Yan Yue Se has advantages in entering the field of mass-market snacks.

First, there is a sufficient user base. Cha Yan Yue Se is a brand that is good at using "product thinking". In addition to stabilizing its "main business" every year, it is also strengthening the development of its "side business".

For example, its new offline retail store "Cha Yan Garden Party" sells various peripheral products such as tea, tea cups, canvas bags, snacks, etc., and it will introduce new products every once in a while.

According to statistics, Cha Yan Yue Se currently has more than 30 types of snacks, most of which are in small packages, among which the “2.5 Yuan Snack Group” has 12 members.

At the same time, Cha Yan Yue Se has also launched various peripheral products in its Tmall flagship store and WeChat mini-programs, reaching customers through multiple channels and establishing its own membership system and data assets.

It is worth mentioning that in recent years, the revenue share of Cha Yan Yue Se’s retail products and freshly brewed tea drinks has been 3:7, and the Li Jin database shows that between July 2023 and June 2024, the sales of Cha Yan Yue Se snacks in e-commerce channels has exceeded 100 million yuan.

Second, there are fixed consumption venues. As we all know, Changsha is a popular city on the Internet. Souvenir shops of all sizes have already opened all over the streets. As Changsha’s business card, Cha Yan Yue Se’s peripheral products have long been a regular on the souvenir list.

Judging from the scene of this snack grocery store, Cha Yan Yue Se intends to target tourists and satisfy one-stop shopping. There are more than 200 products in the store, which is divided into two floors. The first floor is mainly snacks and tea shelves, and the second floor is a daily groceries area. Some netizens joked: "I would like to call it Cha Yan Wholesale Market."

Image source: Cha Yan Yue Se Xiaohongshu official account

The person in charge of Cha Yan Yue Se said, "The purpose is to sell together the products that people cannot buy in ordinary stores, so that everyone can choose and buy them conveniently." It can be seen that Cha Yan Yue Se is trying to provide social and emotional value to consumers through "hard discounts, bulk sales GO" to create a greater brand effect.

Third, there is the bonus of being in a popular market. The mass-market snack market has been a "star market" in the past two years, and professional players such as Mingminghenmang, Haotemai, and Lele have proven the feasibility of this business model.

This time, Cha Yan Yue Se has entered the "hard discount" industry, enhancing the exposure of the snack food category and increasing the sales of low-frequency snacks. This is a way to drive business growth, but is the snack supermarket track really suitable for Cha Yan Yue Se?

02 Falling behind in new tea drinks, only wanting to “get fat”

In the past, retail products were just a “bonus” for new tea brands.

Cha Yan Yue Se has crossed over to become a "discount snack supermarket" and has made "extras" one of its main businesses. The reason for this is that it has fallen behind in the competition to open 10,000 stores, at least in terms of store scale, it is not on the same order of magnitude as other brands.

From the perspective of business model, there are two paths for the development of new tea beverage brands: direct operation and franchising. As the name suggests, the direct operation model is to face the market independently and win the market through product reputation and service quality. The advantage is that it is easier to manage and can grasp quality control.

Of course, the shortcomings of this model are also obvious. If a brand wants to expand across the country, it must have sufficient financial support.

The franchise model takes brand output as its core value and makes profits by earning franchise fees or selling raw materials. There are several key factors for the success of this model. First, the brand is well-known enough, second, the product is highly scaled, and third, the brand can handle the management and training after being scaled up.

At present, Cha Yan Yue Se does not meet the conditions for opening up for franchising.

First of all, as a top internet celebrity milk tea brand, Cha Yan Yue Se’s usual routine is to use the “queueing atmosphere” as a gimmick for its high popularity. Once the store capacity expands rapidly, the queuing effect will be weakened, giving consumers a guess that the “brand is outdated”.

Secondly, Cha Yan Yue Se has many shortcomings in marketing and management. For example, after placing an order online, one needs to go to an offline store to take a number and queue up. It has been accused by netizens of insulting women. Such shortcomings may be further magnified if they are placed on a scale of thousands or even tens of thousands of stores.

As the store scale could not keep up, Cha Yan Yue Se chose to trade "category" for "quantity". The founder Lu Liang's idea was very simple: he just wanted to run his own territory in his hometown.

Judging from the actions of Cha Yan Yue Se, on the one hand, it adopts a platform-based approach, allowing sub-brands to flourish in multiple locations and creating a Cha Yan matrix that covers all categories and all time periods for consumers.

Image source: Cha Yan Yue Se Xiaohongshu official account

In 2020, Cha Yan Yue Se launched offline retail stores such as "Cha Yan Garden Party", covering multiple categories such as tea, tea powder, snacks, stationery, daily necessities, etc. In 2022, Cha Yan Yue Se opened Yuan Yang Coffee with its sights on the coffee market. In 2023, Cha Yan Yue Se built its first self-built R&D and production base project and built a fully automatic tea extraction production line.

In 2023, the third sub-brand was launched, the new Chinese lemon tea brand "Good Lemon", which was opened in the original Cha Yan Yue Se store in the form of a store-in-store; this year, Cha Yan Yue Se officially announced the opening of "Day and Night Poetry, Wine and Tea·Art and Culture Bistro", focusing on new wine and tea...

On the other hand, Cha Yan Yue Se has been working hard on its e-commerce model, trying to "go global" online to make up for geographical restrictions. For example, it has launched a variety of products such as self-shaking milk tea, snacks, and Cha Yan peripheral groceries in its Tmall flagship store and Cha Yan Yue Se mini program.

According to LatePost, Cha Yan Yue Se achieved a net profit of about 500 million yuan in 2023, beating many national tea brands. According to the profitability ranking of single stores, Cha Yan Yue Se is obviously slightly better.

Public data shows that in 2023, Nayuki's Tea's revenue exceeded 5 billion yuan, with a net profit of 21 million yuan; Bawang Chaji's revenue exceeded 4 billion yuan, with a net profit of 800 million to 1 billion yuan;

Cha Baidao's revenue exceeded 5.5 billion yuan and its net profit exceeded 1 billion yuan. According to the store scale of different brands, Cha Yan Yue Se contributed an average of about 900,000 yuan in profit per store, which is more than 23 times the profit of Nayuki's Tea per store.

Despite having many sub-brands and impressive performance, Cha Yan Yue Se is still trapped in Changsha. From the perspective of the capital chain, since it is not listed, Cha Yan Yue Se has never had enough money on hand.

If you want to set up a discount snack supermarket, you will definitely need a more sound supply chain and a larger store coverage, both of which require financial support.

03 Involved in the competition to open 10,000 stores, can Cha Yan Yue Se win?

What is the key to making money for mass-market discount snack shops?

Deeply cultivate the supply chain, scale effect, big-brand traffic, and white-label profitability, the core point is discounts and low prices, that is, by compressing the supply chain and using "low gross profit + high turnover" to achieve scale reach to consumers.

Take Snacks Is Busy, a leading player in the market, for example. With a wide range of SKUs, it reduces the markup rate to offer 50% to 60% off snacks, satisfying consumers’ demand for high-quality and cost-effective products. At the same time, after the merger with Zhao Yiming, the number of stores quickly exceeded 10,000, achieving scale quickly.

Image source: Snacks Are Busy official Weibo

Only when the number of stores increases can we have a say in the supply chain and have more control over profits. Ultimately, the ultimate price-performance ratio is ultimately a competition on the supply chain side.

According to the "White Paper on Hard Discounts on Snacks in China", the prices of mass-market snack shops that have penetrated into communities are 20% to 40% cheaper than those in traditional retail stores.

From this perspective, the gap between Cha Yan Yue Se is still very obvious.

First, there is the difference in the number of SKUs. Data shows that the SKUs of Snacks are maintained at around 1,600, while Cha Yan Yue Se, a "hard discount store" that mainly promotes snacks, has only more than 200 SKUs and more than 30 kinds of snacks.

In comparison, Cha Yan Yue Se is far inferior in terms of store professionalism and product richness.

The second is the structure of its own products. For Cha Yan Yue Se, the points that attract consumers to shop in the store are "brand" and "personality". With its own Internet celebrity brand attributes, consumers hope to buy products that are exclusive to Cha Yan Yue Se, rather than another "busy snack shop".

Compared with snack discount stores that mainly engage in OEM, Cha Yan Yue Se may be able to find its own characteristics through product differentiation and avoid homogeneous competition.

Finally, there are the drawbacks of scale. In order to pursue the ultimate cost-effectiveness, Cha Yan Yue Se must develop economies of scale, establish a supply chain that can meet low prices and discounts, reduce operating costs, and improve the profitability of single stores. However, at present, Cha Yan Yue Se is not good at opening a franchise system.

Perhaps for Cha Yan Yue Se, mass-market snack brands have never been its competitors, just like it does not compete head-on with other new tea brands. This move is more to consolidate the brand's own influence and enhance the confidence of investors.

Overall, Cha Yan Yue Se's entry into the discount store market signals that new tea brands are actively transforming, neither deviating from their original track nor constantly seeking new growth.

However, Cha Yan Yue Se's slow pace of exploration will leave its competitors with more opportunities to take advantage.

Author: Jia Hehui | Editor: Kuang Shimin This article was written by the author of Operation Pie [New Retail Business Review], WeChat public account: [New Consumption 101], originally created/authorized to be published on Operation Pie. Reproduction without permission is prohibited.

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