Tea drinks also won 9.9, the current situation of tea drink track: each has been leading the trend for several years

Through its unique marketing strategy and precise brand positioning, Gu Ming has not only successfully attracted a large number of consumers, but also attracted widespread attention within the industry. This article will explore Gu Ming's growth path, marketing strategy, and challenges, and reveal the secret of its success.

On July 17, #古茗崩了# became a hot search. At first glance, I thought another brand in the tea beverage market was going to fail. In fact, it was because Gu Ming’s free meal promotion was too tempting, and too many users flocked in at once, causing the mini program to be overwhelmed.

On the same day, the free-of-charge activities supporting #古茗口令# and #古茗免单口令# also gained considerable popularity on platforms such as Weibo.

A few days ago, Gu Ming announced the launch of a half-month-long 9.9 yuan promotion for original leaf fresh milk, and at the same time launched its own "Crazy Wednesday", giving out hundreds of thousands of free coupons. By inviting people to get the coupons, you can buy a cup of fresh milk tea for as low as 0.9 yuan.

Gu Ming's operation can be regarded as combining the tactics of Luckin Coffee, KFC, and Pinduoduo together. Judging from the current market reaction, this wave of operations has indeed won people's hearts.

An employee of Gu Ming said on social media, "The receipt for the order has been dragged on the floor. You have one cup and I have another. After one cup is made, there is another one."

01 The countryside surrounds the city. Gu Ming goes south but not north.

Wang Yun'an, the founder of Gu Ming, was born in 1986 in Yunnan and his ancestral home is Taizhou City, Zhejiang Province.

In 2006, Wang Yun'an was admitted to Zhejiang Sci-Tech University, where he majored in materials science and engineering. However, during his college years, he sold quilts, radios, and set up stalls, and ran a number of small businesses.

On April 1, 2010, Wang Yun'an, who had not yet graduated from college, and his high school friend Ruan Xiudi opened their first milk tea shop in Daxi Town, Wenling City, Taizhou City, Zhejiang Province.

At the beginning, the performance of Gu Ming Tea House was dismal, with daily sales less than 100 yuan. The two arrogant young men were tortured by reality.

However, although Wang Yun'an is still young, he is a qualified entrepreneur.

His college classmates once commented that Wang Yun'an was good at business and accounting, and he never gave up when faced with problems, and he could always come up with solutions to get things done. This is indeed the case.

During the darkest time of his business, Wang Yunan kept trying to develop new products, set up a mobile stall with a tricycle, invited neighbors and passers-by to taste his self-developed milk tea, and tried various ways to build his reputation. As the taste improved, business picked up, and people interested in joining came.

The founder's personality determines the brand's background. Wang Yun'an, who has the Zhejiang businessman's genes in his bones, is not conservative.

Gu Ming is targeting the mid-range tea beverage market with prices ranging mainly from RMB 10 to RMB 18. It does not make money by opening direct stores. Unlike Heytea's initial strategy of not franchising, Gu Ming Tea started to develop franchise strategies very early on.

In 2011, the second year after Gu Ming Tea was founded, it opened its first franchise store, which was 11 years earlier than Heytea and 12 years earlier than Nayuki's Tea.

In 2012, Gu Ming had only 27 stores. A year later, with the construction of the back-end supply chain, Wang Yun'an began to focus on tea-producing markets such as Fujian and Henan, and the number of franchise stores increased to 100.

Mixue Bingcheng targets the sinking markets in third- and fourth-tier cities, while Cha Baidao and Shanghai Auntie target the mid-range markets in first- and second-tier cities. Although all of them expand through franchising, Gu Ming has taken a different approach, targeting the mid-range markets in second-, third- and fourth-tier cities, taking the path of "surrounding the cities from the countryside."

As of the end of December 2023, Gu Ming's more than 9,000 stores are only opened in southern provinces. The provinces north of Henan are almost all in a state of not being unlocked. The main provinces are Zhejiang, Fujian, and Jiangxi, while avoiding megacities such as Shanghai and Nanjing.

According to the prospectus, among the more than 9,000 stores, 79% are located in second-tier and lower-tier cities, and 38% are located in towns and villages far from the city center. According to a report by CIC, the above two proportions are the highest among the top five mass-produced tea drink brands in China by store number.

The number of stores in Zhejiang, Fujian, Guangdong, Jiangxi, Jiangsu, Hubei, Anhui and Hunan has reached more than 500, and these eight provinces have contributed a total of 87% of GMV in 2023.

(Source: Gu Ming's prospectus)

Gu Ming could have taken bigger steps, but Gu Ming's moat is inseparable from the layout and construction of a complete supply chain. Only when franchisees make money can the brand make money. This is the concept that the founder has always adhered to.

In order to ensure that the stores have fresher quality and lower purchase prices, Gu Ming starts from the source. It not only grows lemons, mangoes, and bayberries by itself, but also goes deep into the pastures to trace the source of milk.

In addition, most of Gu Ming’s franchise stores are within 150 kilometers of its warehouse, ensuring delivery timeliness and freshness of ingredients.

The prospectus shows that Gu Ming provides cold chain delivery services every two days to more than 97% of its stores. According to a report by CIC, in the nine months ending September 30, 2023, among the top ten brands of ready-made tea shops in China by GMV, Gu Ming is the only company that can frequently deliver short-shelf-life fresh fruits and fresh milk to stores in low-tier cities. The average delivery cost accounts for only about 0.9% of GMV, which is lower than the industry average of 2%.

As for why Gu Ming did not expand to the north or to first-tier cities, Wang Yun'an explained this in a previous interview with Southern Metropolis Daily. He said that Gu Ming's store expansion follows the supply chain. "Wherever the warehouse is built, Gu Ming's store will be opened to ensure that the management of raw materials is in place."

Infrastructure, whether it is the upstream production base, midstream warehouses or downstream cold chain distribution, requires a large amount of capital investment, which may be one of the reasons why Gu Ming is eager to go public.

02 The long road to listing

Since 2024, there has been a lot of news about Gu Ming.

On January 2, it submitted its prospectus to the Hong Kong Stock Exchange on the same day as Mixue Bingcheng; on February 14, Shanghai Auntie also submitted its prospectus to the Hong Kong Stock Exchange. New tea brands are all vying to be the second stock after Nayuki, but in April, Chabaidao was one step ahead and received news that it was accepted by the Hong Kong Stock Exchange and successfully listed.

In June, the originally high-profile collaboration between Gu Ming and "Love and Deep Space" was delayed due to frequent leaks of materials by employees during the preparation period. There was also a suspected employee who said on Xiaohongshu that "Love and Deep Space" was riding on the popularity of Gu Ming.

This series of actions caused dissatisfaction among the players of Love and Deep Space. It should have been a win-win situation, but it forced Gu Ming to apologize and fire the employees involved. Even so, this apology was not recognized by all players.

Source: Gu Ming Statement

Before one thing is settled, another thing comes. The new logo recently launched by Gu Ming is also unpopular. Many consumers question whether it is a "rogue design" or "playing with soft pornography".

(Photo source: Xiaohongshu)

As soon as July arrived, it and Mixue Bingcheng became brothers in distress again, and both received news that their IPO prospectuses had become invalid.

This series of negative news did not seem to affect Gu Ming's determination to open 10,000 stores and strive for a listing.

Recently, Gu Ming has joined its peers in a price war over light milk tea. Is Gu Ming trying a road that is not feasible in the coffee industry?

It is reported that this is not Gu Ming's first round of price war this year. Previously, Gu Ming had launched an offensive against Mixue Bingcheng's lemonade, and the price of lemonade in its stores in Guangdong could be as low as 4 yuan.

Consumers are increasingly sensitive to prices, so tea brands have to upgrade their packaging, prices, etc. Lemonade and light milk tea are the first products that need to lower their profile.

According to an interview with Kamen, an executive of a Shanghai beverage brand said: "The supply chain of products such as fruit tea, milk tea, and milk tea with ingredients has been reshaped. The prices are very transparent, and the gross profit margin is as high as around 70%. Even the gross profit margin of many fresh fruit teas is less than 50%. So if you want to use products to attract customers, light milk tea should be the first to go."

However, some practitioners believe that Gu Ming’s trial is not really about making money from light milk tea, but is using the 9.9 yuan light milk tea to create a "hook product" to increase customer visit rate and stickiness, and promote sales of other types of beverages.

Gu Ming's slogan is that you will never get tired of drinking one cup a day. Just as the slogan means, Gu Ming launched 107 new products in the first nine months of 2023 alone, with an average of 11.8 new products launched each month. Light milk tea accounts for less than 10% of all categories, so it is reasonable to use light milk tea, which accounts for a small proportion, to attract customers.

But what is certain is that all parties are waiting and watching. If 9.9 yuan can really help Gu Ming win a larger market share, other brands will certainly not sit idly by. Before Gu Ming, Nayuki's Tea, Shanghai Auntie and others have tried the 9.9 yuan strategy.

But some people also think that the price of 9.9 yuan is a helpless move. Among the many tea brands, Gu Ming is not the one with the most abundant funds.

The prospectus shows that in 2021, 2022 and the first three quarters of 2023, Gu Ming's total liabilities were 3.25 billion yuan, 3.85 billion yuan and 4.07 billion yuan respectively. In the same period, the company's total assets were 2.044 billion yuan, 3.032 billion yuan and 4.272 billion yuan respectively, and the debt ratio reached 159.01%, 126.94% and 95.21%, with financial liabilities accounting for 71.32%, which was mainly due to the fair value change of convertible redeemable preferred shares.

During the same period, the debt-to-asset ratio of Mixue Bingcheng was only 30%.

If Gu Ming fails to successfully IPO, the potential risk of the bet agreement with capital such as Sequoia will be quite serious, and Gu Ming may even pay a relatively high price.

03 How to achieve differentiation among waist tea brands

In recent years, in addition to the price drops of the two leading tea drinks, Heytea and Nayuki Tea, they have actively sought breakthroughs and opened up for franchising.

Mid-range tea brands such as Gu Ming are also not having an easy time.

As we all know, these brands not only need to make good tea drinks, but also need to be good at co-branding. Co-branding is just the foundation. Brands not only need to provide products with good taste, but also provide good emotional value. Simply taking advantage of whoever is popular is no longer enough to make consumers pay. If effective co-branding is achieved, it is the dilemma that brands need to break.

The essence of phenomenal collaborations such as HEYTEA X FENDI, Luckin X Moutai, and Luckin X Line Dog is not to ride on the popularity, but rather to be the product of a breakthrough under the aesthetic fatigue of the public's collaborations.

(Gu Ming x "Love and Deep Space")

Co-branding is just the most basic brand.

Founded in 1995, the big brother Mixue Bingcheng is still actively building its own IP: Snow King. It has also launched a brainwashing theme song in the image of Snow King, as well as the bottled water business "Snow King Loves to Drink Water".

This year, Mixue Ice City seized the trend of ice cups and launched a one-yuan ice cup, but unexpectedly it stabbed two groups of people in the back: ordinary consumers and the employees who worked so hard.

At present, the business chains of co-branding, bottled water, and ice cups have all failed, so will the milk tea price war be the new marketing fulcrum?

In order to make the price of 9.9 yuan more convincing, Gu Ming also released the "health check-up form" of the original leaf light milk tea, and labeled it with "high-quality milk", "0 creamer, 0 non-dairy creamer, 0 trans fatty acids", to strengthen its brand positioning as healthy and cheap.

(Source: Weibo @古茗茶饮)

But all participants may understand that such a price war can only decide when it will begin. Once the price war becomes intense, the end will be the day of a reshuffle, and it will be either you or me who will die.

There has never been an absolute safe zone in the market for freshly made beverages. Only players who can accurately grasp consumers’ preferences will have the opportunity to enter more advanced games.

Written by Yingchu