The "Ice Cup Effect" is here! Orders surge, production capacity doubles, and a new business is quietly generated

Who is quietly planning the 63 billion yuan business behind the "ice cup"? Friends who want to understand this issue are recommended to read this article, hoping it will be helpful to everyone.

Open the cup lid, add 80% orange juice, and then pour in a bag of coffee liquid. It only takes one minute to drink a cup of Orange C Americano, which costs 5-6 yuan, only a fraction of the same price of Luckin Coffee. This summer, the DIY trend of "ice cup +" has become popular among young people.

This low-priced and ritualistic blend, with its cool and stress-relieving experience, makes workers unable to stop.

Various formulas for mixing special drinks have become popular on social media. "Seven days of different drinks, ten yuan for all you can drink", caters to the personalized consumption needs of young people today.

Young people are willing to save money while spending it on low-priced items that bring pleasure.

Behind the hot consumption phenomenon on the C-end is the "barbaric outbreak" of the B-end ice cup industry.

According to statistics, the ice cup orders in the industry have soared by 30% this summer, and ice factories are frantically expanding their production capacity and adding product lines. Some merchants told Yibang Power that most ice factories are out of stock this year, and the market is in short supply. Some even need to pay a month in advance to place orders.

In particular, the strong entry of Nongfu Spring and Mixue Ice City has doubled the pressure on this originally Buddhist track.

Is ice cup a good business that can generate sustainable profits? What is the future market prospect? Where are the opportunities for small and medium-sized businesses? Yibang Power tried to explore the new business of ice cup by communicating with several leading suppliers.

1. The 63 billion business is booming

The ice cup is an imported product and only officially entered China in 2019.

But before that, ice cups in Japan and South Korea had long been standard equipment in convenience stores, with sales comparable to those of instant coffee. They were popular not only in the summer but all year round.

In Japan's convenience stores, annual sales of ice cups reach 2.57 billion cups.

South Korean young people declared that they would "drink iced Americano even if they were frozen to death". In contrast, China does not seem to have the habit of drinking iced water. Thanks to the popularity of ice cups this summer, it has entered the public eye through social platforms.

It is understood that China's ice cup industry is in its early stages, and there are currently three types of typical players. The first type is suppliers such as Binglida, Bingjixian, Bingqun, Haomiao, and Xiaode.

The second category is convenience stores such as 711, Bianlifeng, Lawson, FamilyMart, Hema, Meituan, and Pangdonglai Supermarket, which have launched their own brand ice cups.

The third category is cross-border players such as Nongfu Spring, Aoxue, and Mixue Ice City.

More cross-border players are entering this market. So far, on the Tianyancha App, 2,056 existing companies can be found by using the keyword "ice-making factory". Among them, 158 companies were established within one year, and only 6 companies had a registered capital of more than 1 million yuan, indicating that most of the new players are small and micro businesses.

"We didn't expect that ice cups would become so popular this year," said Liao Bilin, general manager of Binglida. The surge in demand from convenience stores has led to a doubling of production capacity.

He revealed that Binglida's sales volume has doubled this year and its production capacity has at least doubled compared to last year.

Liao Bilin remained unusually calm in the face of the "wealth" that fell from the sky.

He believes that the current popularity of ice cups is more like a social currency, rather than a sales increase caused by changes in the living habits of young people in Japan and South Korea. As a product of the trend of substitute consumption, it is unknown how long the popularity of ice cups will last.

Sun Lei, co-founder of Ice Extreme, also expressed caution. Faced with the entry of many small and medium-sized enterprises, he believes that this year's blue ocean may not continue into next year, one of the reasons being that giants are stepping up their entry.

"As far as we know, there are already two or three milk tea brands preparing to launch their own 1 yuan ice cups. If these brands can solve the supply chain problem next year, will the market still be a blue ocean?"

For leading suppliers, convenience stores remain their core users.

One reason is that the market is large enough, and the other reason is that it has a channel moat.

Since edible ice has high requirements for cold chain transportation, it will be affected by temperature and distance during transportation, resulting in a loss of about 2%-3%. As the distance increases, the loss will gradually increase.

In addition, suppliers all have their own core channels.

For example, Binglida, located in Guangzhou, considers convenience stores in South China as its core channel; Bingjixian, located in Zhengzhou, focuses its main channels in North China and Central China. Shanghai Xiaode, which was established earlier, has two factories in Tianjin and Shanghai, and its channel coverage is wider.

"If the transportation distance exceeds 300 kilometers, the freight will be nearly two yuan. But if the distance is within 200 kilometers, the cost is basically just a few cents," said Sun Lei.

Currently, suppliers are competing more fiercely for channels. In particular, the entry of Nongfu Spring, which has the advantage of brand volume, is likely to lead to further involution of the industry.

It is worth noting that domestic instant retail players have also begun to make plans. Channels such as Meituan Flash Purchase, Hema, and Ele.me have launched ice cups. Based on their advantages such as freshness and immediacy, they have launched pure ice cups, ice balls, coffee ice cups, juice ice cups, bagged ice and other products to meet the needs of different scenarios such as parties, cocktails, and home use.

These ice cups already have their own flavors, so consumers don't have to spend money to buy more drinks. They can just add water or a drink to get their own flavored drinks.

Yibang Power learned that Hema plans to add frozen food display cabinets in the future and increase the frozen food display area, which will provide another feasible path for the expansion of the ice cup market.

According to the "2023 White Paper on Consumption Trends of Ice Products and Ice Drinks in Instant Retail", the scale of ice products and ice drinks in my country's instant retail market is expected to exceed 63 billion yuan in 2026.

More than 40% of consumers want to consume alcoholic beverages, drinks and dairy products in an iced state. All of the above categories can produce chemical reactions with ice cups and are expected to gain a considerable market share.

2. Under the “Ice Cup Effect”, do manufacturers make money?

In the eyes of many people, ice making is an industry with a low threshold. A few people and a few pieces of equipment can start working immediately, and the investment can be recovered in one summer.

But unlike what people might imagine, ice-making companies, especially edible ice companies, have high costs and low profits, and are not an easy business to do.

The retail price of an ice cup is 3-6 yuan, and the cost of ice is only 0.2-0.3 yuan. The remaining cost comes from equipment, electricity, labor, packaging, logistics and other links. The investment in these links may exceed the imagination of the outside world.

It is understood that the most expensive part of the ice cup is the packaging material, which accounts for about 60% of the total cost.

The cup of the ice cup is different from the PET material of ordinary beverages. First, it must ensure low temperature resistance and ensure that it will not crack under long-term low temperatures of -18℃ to -20℃. Second, it must ensure high temperature resistance. For example, when making a coffee ice cup, it must ensure that the boiling coffee liquid will not melt when it touches the wall of the cup. Therefore, the requirements for packaging materials of ice cups are relatively high.

At the same time, the ice cup must be covered with a heat shrink film, which must also comply with national standards to ensure health, safety, non-toxicity, recyclability and biodegradability.

Secondly, the cost of purchasing, maintaining and energy consumption of the ice machine.

Ice-making equipment factories are at the upstream of the industry chain. In the past, large commercial ice-making machines were mostly purchased from global brands such as Scottsman, Ferguson, and Japan's Hoshizaki.

However, as a precision instrument, ice machines are prone to damage to parts if they are operated in a low-temperature environment for a long time. With the expansion of production capacity in the domestic ice-making industry, increasing investment in research and development and launching self-developed equipment is an inevitable trend.

It is worth noting that in addition to the three typical players mentioned above, Chinese home appliance brands are also planning to enter the home ice maker market.

On Xiaohongshu, the search term "ice maker" has received 340 million views. Leading brands such as Wellcome, Coca-Cola, Westinghouse, Bear, Midea, Supor, and Wotolai have become popular products reviewed by experts.

At the beginning of 2024, Haier also released the latest Bingjian series ice maker, which can produce crystal clear "diamond ice", which means cross-border entry into the high-end ice-making track.

Does the accelerated layout of large enterprises mean huge market opportunities in the future?

In the opinion of industry insiders, the ice cup industry is a "water-like" industry, with a development history similar to that of mineral water.

Xu Hongwei, the founder of Shanghai Enqin Food Co., Ltd., has been engaged in the edible ice industry for more than ten years. He believes that although the gross profit of ice cups is low, the volume will be large in the future.

"Ice cups are fast-moving consumer goods, just like mineral water. Once many people in the market are willing to drink them, and even drink several bottles a day, the volume will definitely increase. At that time, ice brands in the market will definitely fight hard."

As Chinese people become more sensitive to the taste of drinks, especially the more refined taste experience of coffee and alcoholic beverages, after trying the sensory difference brought by adding ice, they can no longer accept the taste without ice. In the long run, they will form the habit of drinking any drink with ice.

"Take bottled drinking water for example. When it was launched, not everyone accepted it immediately. But after consumers accepted it, the market size became unimaginable. We estimate that the consumer population of ice cups may grow by 20%-30% each year, and the overall scale will continue to expand," said Liao Bilin.

Ebang Power named it the "Ice Cup Effect", which means that companies quietly occupy the minds of users and change consumer habits by launching new products, thereby achieving economies of scale and creating a blue ocean market.

Of course, the ice cup effect also depends on the economic cycle, consumer habits and breakthroughs in industry technology/process. For players in the game, whoever can overcome the industry's cost dilemma first through technological research and development will be able to seize this round of blue ocean opportunities.

3. Can small and medium-sized businesses still share the spoils?

After the ice cup became popular, many small and medium-sized businesses also wanted to share in the "cup" of the pie. In addition to exploring opportunities in the sinking market, how can new players get into the 63 billion blue ocean market? Many companies have begun to explore.

1. High-end

That is, we provide high-end ice such as moon ice, shake ice, cube ice, and Colin ice to high-end hotels, bars, and high-end catering brands. This type of high-end ice not only melts more slowly, keeping the drink fresh for a longer time, but can also add a sense of depth to the drink through the addition of ice cubes.

Some companies told Yibang Power that since this year, the demand for high-end ice scenes represented by bars has been increasing.

Different from ordinary ice cups and edible ice, the edible ice provided for the above high-end scenes has higher requirements and more complicated processes. For example, Binglida makes moon ice by filtering water into pure water, making a large ice block of about 70 kilograms, then cutting it into balls through equipment, and also simulating the surface of the moon and grinding it into an uneven shape.

The ice produced by this process is crystal clear and contains very few minerals, so it will not affect the taste of tea or alcohol. After being made into balls, it needs to be frozen again to make the ice harder and melt more slowly.

In recent years, Binglida has also set its sights on the high-end ice market. The cubed ice it produces is used in a variety of high-end consumption scenarios, such as the high-end and modern new Chinese tea brand Tea'stone, whose ice balls are supplied by Binglida.

2. Product innovation

Innovative products are also an important direction. Referring to the rich SKUs of Japanese and Korean ice cups, the current category of Chinese ice cups is still relatively single, and there is great room for innovation in the future.

Wang Genzu, founder of Jiangsu Shangjie Beverage Technology Co., Ltd., is the supplier of "Big Blue Cup" for Ele.me. Before making ice cups, Shangjie mainly made ready-to-eat frozen fruits. With the advantage of fruit supply chain, Shangjie crossed over to the ice cup business. Lemon ice cup is its first creation, and there are also strawberry ice cups and other fruit ice cups.

Shangjie also has two ice cup brands, Guoyin and Bingweiqu, with more than 10 SKUs. The Guoyin brand also includes a series of new products such as fruit juice, fruit and vegetable juice, smoothie, and fruit shake.

Just like the deep distribution system of Nongfu Spring and Coca-Cola in the past, Wang Genzu believes that ice cup suppliers will eventually have to compete for terminals and set up cold drink cabinets in local supermarkets for sale, so product richness is particularly important.

"Only when your products are rich will the terminals be willing to use your refrigerators. Only when you have enough products can you support the refrigerators and supply them to the terminals. Therefore, product structure will be a focus in the future," said Wang Genzu.

It is understood that Ice Extreme is also increasing its product research and development efforts. In the next two years, it will launch 3-4 product lines, and each product line will launch N+ categories. This year, Ice Extreme has launched tea ball ice cups and fruit ice cups in convenience stores.

"Only by continuous innovation, improving the supply chain system and building a brand moat can an enterprise have a chance to survive," said Sun Lei.

3. Become a shovel seller

Mechanical equipment is the key barrier in the ice-making industry.

At present, many companies are spending a lot of money on research and development and maintenance of equipment. Xu Hongwei, who has started three businesses, knows that blindly entering the market will eventually lead to market reshuffles. At present, there are many giants in the edible ice industry, and he believes that ice machine companies may still have opportunities.

"The coming year will be a bonus period for ice machine companies. This is because many companies will enter the ice cup market next year, and the leading domestic ice cup companies have large volumes and need to buy machines to expand production capacity."

In addition to the above three answers, Liao Bilin believes that to develop into a brand, it is necessary to adhere to long-termism. "It is difficult to seize every opportunity, you can only be prepared and wait for the opportunity to come. It is like going fishing. I have done some research in advance to see if there are any fish in the river, and I have prepared all the fishing materials. Then I start fishing. I don't know when I can catch fish, and I don't know when I can catch a big fish, but I know that sooner or later I will catch fish."

I wonder who will be a flash in the pan and who will become the next "Nongfu Spring" among the large industry army under the "Ice Cup Effect"?

Author: Jiang Qi

Source: WeChat public account "Yibang Power"