In the new 10 yuan era of tea drinks, it is not only about price

The price war has spread to the tea beverage market. But is tea beverage really just about price? If you want to know the answer to this question, I recommend reading this article. I hope it will be helpful to you.

As the scale of my country's new tea beverage industry continues to expand, major brands are expanding rapidly, opening stores, going lower-tier cities, and going overseas... the entire track has been "rolled up" into a flower.

In order to cope with the intensified market competition and diversified consumer demands, tea beverage brands have begun to explore new market positioning and pricing strategies, and have achieved affordable prices by optimizing costs and improving efficiency.

In the first few years when the tea beverage industry accelerated its development, brands competed more in marketing and communication, with joint ventures, implantations, and cross-border collaborations emerging in an endless stream.

At present, the focus of competition among brands has begun to shift, gradually leaning towards competition in infrastructure such as labor efficiency, warehousing, and supply chain, which is also the fundamental reason for the price war.

1. Milk tea enters the 9.9 era

The price war among tea beverage brands has actually been going on for a long time. As early as the beginning of 2022, several leading brands announced comprehensive price cuts, moving away from the 30 yuan price range, which set off a new round of price cuts among tea beverage brands.

At that time, many brands drastically reduced the prices of their signature products by 10 yuan, setting the unit price below 19 yuan.

Since the beginning of summer this year, new tea beverage brands have started another round of "crazy" price adjustments. Even some brands that once vigorously developed the market in high-end cities have entered the 9.9 yuan era.

According to Clour's observation, Shuyi Herbal Jelly has been adjusting its pricing strategy in some stores since April, and announced the update of its product line in May this year, launching a number of new products priced at around 10 yuan. Its current main products such as succulent bayberry and bayberry white moonlight are priced at 9.9 yuan, and the average price has been reduced by about 3-6 yuan.

The relevant person in charge of the brand stated in an interview that in the future the overall product price of Shuyi Herbal Jelly will be reduced to around 10 yuan, and even products with prices of 6 yuan, 7 yuan or even lower may be launched.

Coincidentally, Gu Ming also released "500,000 free coupons" and announced that the mini program will launch a 9.9 yuan all-you-can-drink event every day. The brand directly stated that "it wants to let healthy original leaf milk tea enter the 9.9 yuan era."

Not only that, Gu Ming also launched a discount campaign for lemonade products in some stores. The lemonade that originally cost 10 yuan was only priced at 4 yuan.

In addition, the prices of Mixue Bingcheng and Chabaidao, which are already known for their cost-effectiveness, still have room to fall. Chabaidao's green plum green tea, which returned in the summer, is only priced at 6.9 yuan per unit after adding platform coupons and discounts.

After adding the platform discount, the unit price of Mixue Bingcheng’s signature lemonade is even less than 1 yuan.

The picture shows the preferential prices of some brands of tea drinks, source network

Brands cut prices to gain publicity, which consumers like, but it makes franchisees suffer. Franchisees of many tea brands complained in interviews, "We have to go the low-price route, but the material cost has not changed, and the franchisees are the ones who get hurt." "At the current price, dine-in can barely make money, and take-out will probably lose money." "Can we compete with Mixue Bingcheng by cutting prices?"

2. Do it out of necessity

Crawley believes that engaging in price wars is not actually the original intention of the brands. It is the change in consumer consumption concepts and the saturation of first- and second-tier markets that have forced brands to adapt to the sinking market and acquire a larger customer base.

For consumers, the cost of choosing milk tea products is not high, and the product lines of various brands are relatively overlapping and similar.

In this case, price has a great influence on consumers. In the current consumption situation, consumers pay more attention to cost performance and tend to look for products that are both affordable and high-quality. Many consumers said, "I will definitely drink the cheapest one" and "Since they are all about the same, why don't I choose the one with a lower price?"

The marketing director of a tea brand told Crawley that today's consumers are becoming more rational, and the 10 yuan price just lowers the consumption threshold, attracting potential customers who were originally blocked by high prices and expanding the brand's consumer base. Brands must adapt to the consumption concepts of young people, otherwise they will be eliminated by the market.

In addition to enhancing the brand's appeal to young people, another purpose of the price reduction is to adapt to the sinking market in low-tier cities and thus attract more franchisees.

For brands that are open to franchising, franchisees are an important force contributing to brand revenue.

Take Gu Ming and Mixue Bingcheng as examples. As of the end of last year, franchise stores contributed 99.9% of Gu Ming's GMV. Among the approximately 9,000 stores, Gu Ming only has 6 self-operated stores. Most of Mixue Bingcheng's revenue comes from selling goods and equipment to franchisees. The proportion of franchise stores reached 99.8%, and only 0.2% were self-operated stores.

Therefore, the "scale war" has become a new focus for new tea beverage brands, and various brands have accelerated their expansion to attract franchisees.

In April 2023, Lelecha announced that the profit model of its directly-operated stores has been polished and matured, and it will soon open up its franchise business to the public.

In July of the same year, Nayuki's Tea also announced that it would officially launch the "Partnership Program" in order to allow more consumers to experience Nayuki's products and services more conveniently...

As of January 1, 2024, the number of stores of Mixue Bingcheng is 26,350, that of Guming is 8,927, that of Cha Baidao is 7,883, that of Shanghai Auntie is 7,595, that of Heytea is 3,074, and that of Nayuki is 1,544.

Although more and more brands are opening up franchise businesses, the number of existing stores of tea brands has shown a month-on-month decline this year.

According to Yilan Business statistics, in March, the number of existing stores of 26 new tea brands was 114,900, but in April it was only 110,800. There was a slight increase in May to 114,800 stores, but compared with March, the net number of new stores was still negative.

Under such circumstances, the only way for brands to continuously explore new markets and ultimately attract partners from lower-tier cities to participate in brand management is to launch new products suitable for the sinking market. Lowering prices becomes the most "simple and crude" method.

Competition in the incremental market has forced new tea beverage companies to start moving to new blue ocean markets and looking for new growth curves. The sinking market has become the first direction for companies to shift their "fire of war". However, as mentioned above, blindly lowering prices will inevitably reduce the profits of franchisees, and not adjusting prices will not attract franchisees in the sinking market. This deadlock is still a difficult problem facing brands.

3. What to do in the second half

From "volume new products" to "volume marketing", from "volume prices" to "volume sinking markets", the center of the "battlefield" for tea beverage brands has been changing. In the future, competition among tea beverage brands may return to infrastructure and service capabilities.

At the same time, as competition in the lower-tier markets intensifies, overseas markets may bring new growth to tea brands.

A person in charge of a tea beverage brand once told the media that supply chain construction and brand building are the core of the tea beverage brand, and supply chain construction is the foundation.

Relatively speaking, supply chain construction belongs to the back-end, with large investments and slow results, but it is of great significance to future development. Currently, leading companies are building their own (supply chains), which actually raises the threshold of the industry.

At the same time, he believes that the low-price competition among tea brands is increasingly testing the brands' comprehensive performance in supply chain efficiency and bargaining power. If they cannot withstand the test, the brand's competitiveness will gradually weaken, the industry may concentrate on the top, and the Matthew effect will become prominent.

The person in charge gave two examples to Clour. One is that the self-built cold chain supply chain and logistics management have become the "moat" of Gu Ming, widening the gap with other mid-range tea drinks. This is also the common solution of ready-made beverage companies with a brand of 10,000 stores. The other is that Luckin has sold more than 5 million cups of sauce-flavored lattes, which also reflects Luckin's strong supply chain management capabilities.

It is reported that Luckin Coffee did not build its own warehouse, but instead cooperated with three third-party warehousing and logistics suppliers to improve replenishment and delivery efficiency through artificial intelligence, digitalization and other technologies.

In addition, going overseas is another growth path for new tea brands.

In 2023, the new tea beverage market saw a collective "going overseas fever". In February last year, Mixue Ice City's "going overseas" territory expanded from Southeast Asia to Sydney. As of November 2023, the number of Mixue Ice City's overseas stores was close to 4,000.

In addition, Cha Baidao’s first overseas store was opened in South Korea. In December of the same year, Nayuki’s Tea’s first store in Thailand officially opened.

It is worth noting that the cost structure of overseas operations is completely different from that in China, including labor costs, raw material costs, logistics and tariff costs, etc. Therefore, the unit price of tea beverage brands' products overseas is higher.

For example, the average customer spending at Mixue Bingcheng's Sydney store was between RMB 9 and RMB 15 during its trial operation, but the price rose by 80% a week later. In addition, the average customer spending at Chabaidao in South Korea is RMB 32, which is also higher than in China.

The huge operating costs make it impossible for brands to implement their low-price strategies in overseas markets, and the brands’ competitiveness overseas is relatively lower. At the same time, many brands’ overseas audiences are only overseas Chinese, which essentially cannot be said to have truly opened up overseas markets.

4. Final Thoughts

Price wars are good for consumers, but they are not a long-term solution for brands and are more often done out of necessity.

While prices are falling, brands cannot ignore product quality and service. They must formulate reasonable pricing strategies and shoulder the responsibility of promoting the healthy and orderly development of the new tea beverage market.

In the future, the "war" in the new tea beverage industry will not be extinguished easily, and sinking, going overseas, and opening up new markets are topics that can never be avoided.

In the fierce competition, new tea beverage brands can only find new breakthroughs to see the moon after the clouds have cleared.

Reference: Competition is becoming increasingly fierce. What will the new tea beverage industry "volume" in 2024? / Securities Daily

Collective price cuts: Milk tea enters the 10 yuan era/Hongcan.com

Author: TopKlout

Source: WeChat public account "TopKlout"