In 2024, the new tea beverage track entered the "big year of listing". In April this year, Chabaidao successfully listed on the Hong Kong Stock Exchange, becoming the second new tea beverage company. Behind Chabaidao, a number of tea beverage brands such as Mixue Bingcheng, Guming, and Shanghai Auntie have all published their prospectuses and are queuing up to be listed. Recently, another well-known brand announced its IPO. In mid-June, Cha Yan Yue Se's affiliated company Hunan Cha Yue Cultural Industry Development Group Co., Ltd. underwent industrial and commercial changes, and investors such as Tiantu Capital, Shunwei Capital, and Yuansheng Capital withdrew from the company's shareholders. Netizens described it as a "capital liquidation exit", while industry insiders believed that this move might be a preparation for Cha Yan Yue Se's IPO in Hong Kong. The company immediately refuted the rumor and said: "The company currently has no IPO plans." It is worth noting that this is the fourth time that Cha Yan Yue Se has been rumored to go public since October last year, and the rumored target listing location has changed from the United States to Hong Kong. In fact, new tea beverage companies entering the stock development stage need a lot of funds to prepare for the next stage of competition. By going public and "stockpiling food and grass", they can take more initiative in the next round of competition. Zhu Danpeng, a Chinese food industry analyst, believes that in the context of involution and the increasingly obvious "Matthew effect", new tea beverage companies need to rely on capital empowerment to maintain their own sustainable development, thereby improving the supply chain, speeding up store openings, etc., and they must not fall behind in all aspects in order to win in the end. However, compared with other brands that have thousands or tens of thousands of stores and a relatively mature franchise system, Cha Yan Yue Se's development seems to be "half a beat slower." 1. Seven shareholders exitAccording to information, Cha Yan Yue Se was founded in Changsha in 2014. It is the first milk tea shop in mainland China with a "Chinese style" theme. The prices of its products are basically between 13 and 18 yuan. So far, Cha Yan Yue Se has received three rounds of financing, with investors including Tiantu Capital, Shunwei Capital, Yuansheng Capital, 5Y Capital, etc. The last round of financing was in October 2021, two and a half years ago. Image source: Qichacha On June 12, according to Tianyancha, Cha Yan Yue Se's affiliated company Hunan Cha Yue Cultural Industry Development Group Co., Ltd. underwent industrial and commercial changes, and 7 funds collectively withdrew from its shareholders, namely Wuhan Shunying Equity Investment Partnership (Limited Partnership), Wuhan Shunhong Equity Investment Partnership (Limited Partnership), Suzhou Yuanhan Equity Investment Partnership (Limited Partnership), Suzhou Yuanchu Investment Partnership (Limited Partnership), Shenzhen Tiantu Dongfeng Small and Medium-sized Enterprises Equity Investment Fund Partnership (Limited Partnership), Nanjing Wuyuan Qixing Venture Capital Center (Limited Partnership) and Chengdu Yuancheng Venture Capital Center (Limited Partnership). In addition to the industrial and commercial changes, Xu Liang, the founder of Yuansheng Capital, withdrew from the board of directors of Cha Yan Yue Se. Except for an external director, Pan Pan, a partner of Tiantu Capital Management Center, the current management team consists of the founding team Lu Liang, Sun Cuiying, and Sun Xiaoju. At the same time, the total investment amount was also changed from 7.0102 million yuan to 5.0672 million yuan. An analyst said, "It (Cha Yan Yue Se) is building a VIE structure and preparing for an overseas listing." The outside world believes that this explanation has some rationality. After all, many companies planning to go public choose to build a VIE structure overseas to facilitate overseas listing. However, after the new regulations are implemented in 2023, the VIE structure will also need to be registered with the China Securities Regulatory Commission. Many companies have even dismantled the VIE structure in order to quickly go public. According to the statistics of the Live Report in 2023, only three VIE structure companies in Hong Kong stocks have passed the registration, namely Cheche Technology, Jitu Express and Ririzhu, with a pass rate of 8.1% and an average approval time of 89 days. Moreover, after checking Nayuki's Tea and Chabaidao, which have already been listed on the Hong Kong stock market, and Mixue Bingcheng, Shanghai Auntie and Guming, which have submitted prospectuses, Value Planet found that none of the above new tea beverage companies have built a VIE structure. It seems that the authenticity of the view that Cha Yan Yue Se has built a VIE structure and is preparing for listing is still worth discussing. There is also another view that the equity change was triggered by the listing terms of the investment bet, and the company repurchased the investors' shares. At present, it seems that many shareholders of Cha Yan Yue Se have been running for five years or even longer, and it is indeed time to seek returns. In addition, the return of funds has indeed become the biggest demand of many VCs in recent years. It is obviously much easier for the actual controller who signed this bet agreement to repurchase than waiting for share transfer, merger and acquisition, direct listing, etc. 2. New tea drinks flock to IPOFrom the listing of Nayuki's Tea, the first stock of the new tea beverage industry, on June 30, 2021, to the listing of Chabaidao, the second stock, on April 23, 2024, the listing journey of domestic new tea beverage brands has been suspended for nearly three years. Many industry analysts said that the reason for such a long vacuum period is that Nayuki's Tea's stock price did not perform well after its listing. For other new tea drink operators, postponing the listing can avoid repeating Nayuki's mistakes to a certain extent. On the other hand, Nayuki was mainly directly operated when it went public, while in recent years, tea drink brands have generally opened the channel franchise entrance. This new model will take some time to be recognized by the market and investors. However, faced with intensified competition in the tea beverage industry, various brands have had to choose to "walk on two legs", striving to reach a "scale of 10,000 stores" while seeking to go public and obtain capital support. Image source: Zhaimen Canyan According to data from Zhaimen Canyan, as of June 10, nearly 30 brands in the tea industry have more than 1,000 stores, and 7 have more than 5,000 stores. Among them, the largest brand, Mixue Bingcheng, has more than 30,000 stores, covering 364 cities in 32 provinces; Guming, Chabaidao, and Shanghai Auntie also have more than 8,000 stores. Due to their superior scale, the above four companies have successively gone to Hong Kong for IPO. On the other hand, some brands that have not received funding have already encountered crises. At the end of last year, Yidiandian Milk Tea was exposed to funding problems, which immediately triggered a wave of store closures. According to Hongcan Big Data, from February 2023 to November 2023, the number of Yidiandian stores decreased from 3459 to 3019. In April this year, Xie Yao, the founder of Yuanzhenzhen Milk Tea, shared his "failure experience" on social media, complaining that he had closed nearly 300 stores due to capital flow problems. According to ChinaVenture, Chabaidao also ran out of cash at one point, with cash and cash equivalents of only 32 million yuan at the end of March 2023. Fortunately, in June of that year, Chabaidao completed a strategic financing of 1 billion yuan, which alleviated its financial difficulties. In this "hand-to-hand combat" of new tea drinks, whether a brand can obtain capital support has become one of the key factors for it to "upgrade its status", "seize territory" and "control the match point situation". 3. Cha Yan Yue Se’s Difficulties in ListingLooking back on the rise of Cha Yan Yue Se, it is inseparable from "differentiated positioning". Since its establishment, Cha Yan Yue Se has always been focusing on the "Chinese style", and the brand value culture it outputs is also full of "Chinese flavor". Specifically, Cha Yan Yue Se incorporates ancient Chinese elements into its brand logo, store style and other dimensions. For example, Cha Yan Yue Se's brand logo uses cinnabar red, ancient ladies, round fans and octagonal windows as the main elements; the store decoration is based on Chinese style; the product names are also poetic, such as "Orchid Latte", "Fireworks Cool Down Easily", "Floating Life Half Day", etc. Secondly, Cha Yan Yue Se also has its own cultural and creative products, selling peripheral products including tea cups, umbrellas, travel cups, mobile phone stickers, puzzles, sewing books, postcards, etc., in order to meet the diverse individual demands of young people and achieve the integration of "good tea taste" and "trendy culture". In terms of products, unlike other tea brands such as Heytea and Nayuki, Cha Yan Yue Se rarely launches common pearl milk tea and fruit tea. Instead, it mainly focuses on the combination of tea base + milk + cream + crushed nuts, and tea base + milk, highlighting the layered taste of tea and obvious product differentiation. According to Meituan’s data statistics for the whole year of 2023, the product with the highest monthly sales per store for takeout throughout the year was "Orchid Latte" from Cha Yan Yue Se, the second best-selling product of the year was "Bai Ya Jue Xian" from Ba Wang Cha Ji, and the third best-selling product of the year was "Sheng Sheng Oolong" from Cha Yan Yue Se. It can be seen that it is precisely because of these advantages of Cha Yan Yue Se that it is able to stand out in the fierce competition in the tea beverage market. However, the core of listing lies in profitability and development potential. From these two points of view, Cha Yan Yue Se seems to have some shortcomings. First, Cha Yan Yue Se's regional characteristics are too prominent, and national expansion faces challenges. Unlike most ready-made beverage brands that adopt a franchise model, Cha Yan Yue Se insists on a direct-operated model. According to Zhaimen Canyan data, Cha Yan Yue Se currently has 627 stores, covering only 17 cities in four provinces, Hunan, Hubei, Chongqing, and Jiangsu. Among them, Changsha has 344 Cha Yan Yue Se stores, accounting for as high as 54%. Image source: Zhaimen Canyan Compared with the franchise model, the direct sales model allows Cha Yan Yue Se to maintain a high degree of uniformity and standardization in product production processes, raw material supply, service quality, etc., respond to market changes and customer needs more quickly, and effectively manage risks and control finances, thus winning a good reputation and a loyal customer base. At the same time, the direct sales model also has the challenges of large capital requirements and high management costs. Secondly, Cha Yan Yue Se is half a beat slower than its competitors in supply chain layout. Lv Liang, the founder of Cha Yan Yue Se, once publicly stated that the deeper reason why Cha Yan Yue Se had been slow to expand was that it took time to build up its organizational strength, supply chain and infrastructure. The worry about quality control, organizational capabilities and supply chain not being able to keep up after going abroad also made him anxious. "It's not that I don't want to, but I will really die if I go out." In order to reverse this situation, in September last year, Cha Yan Yue Se invested 520 million yuan to build a research and development and production base in Changsha, Hunan. The project is expected to be put into trial production in 2025. After full production, the production capacity will cover the supply of core technology raw materials for more than 5,000 stores. In contrast, other leading tea brands have already made great efforts in the supply chain. According to the prospectus of Mixue Bingcheng, the company has a complete supply chain system, covering procurement, production, logistics, research and development, and quality control, and has achieved 100% procurement of franchisee beverage ingredients, packaging materials and equipment from the brand. Nayuki's Tea has built its own tea gardens, orchards, gardens, etc., and has also developed its own supply chain system. Heytea currently has 41 raw material warehouses covering more than 300 cities. Gu Ming has created the first large-scale production area of Taiwanese perfume lemons in the mainland in Xishuangbanna, Yunnan, and later invested 1 billion yuan to build its raw material production base in Zhuji, Zhejiang... Based on previous experience, building a self-supply chain system is not only a guarantee for new tea beverage companies to further dilute costs and obtain higher profits, but also allows the company to "respond quickly" and adjust SKUs when terminal sales performance is poor. Finally, Cha Yan Yue Se’s several “sub-brands” are still small and cannot provide sufficient support to the company. The road to the sub-brand of Cha Yan Yue Se began in 2022. First, the Xiao Shen Xian Teahouse was opened in May 2022, returning to the scene of "smelling and tasting" tea. In August of the same year, Yuan Yang Coffee was launched, and the phrase "Eastern learning spreads to the West, coffee is Chinese" expressed the "new Chinese" brand positioning and "tea coffee" product positioning of Yuan Yang Coffee. In September 2023, 5 stores of the new Chinese lemon tea brand Good Mo Ning opened at the same time, and the stores were concentrated in the May Day business district in Changsha. Subsequently, the Day and Night Poetry, Wine and Tea·Art and Culture Bistro opened, positioning itself as a casual interest bistro with art and culture/poetry themes. Recently, there was news that Cha Yan Yue Se set up a "sugar shop" in the store and launched 6 sugar water products at the same time. Although Cha Yan Yue Se has tried five business formats, unfortunately its overall voice is not very large, and many of its operations are still based on the "store-in-store" format. In contrast, its competitors, Mixue Ice City's sub-brand "Lucky Coffee" has opened more than 2,900 stores across the country. According to data from CIC, as of December 31, 2023, Lucky Coffee is China's fourth largest freshly ground coffee brand in terms of store numbers. Shanghai Auntie only officially announced its sub-brand "Hu Coffee" in March 2023. According to monitoring by a third-party data platform, its number of stores has expanded to 1,810 by January 2024. After several years of rapid development, the ready-made beverage industry has shifted from the first half of high-end rise and consumption upgrade to the second half of market sinking and fierce competition. "2023 New Tea Beverage Industry Insights" believes that the industry will develop in three major directions in the future, namely product innovation, supply chain optimization, and channel expansion. Of course, all three directions require a lot of financial support, which may be the fundamental reason for the "listing boom" of new tea drinks. It is obvious that it is only a matter of time before Cha Yan Yue Se goes public. After all, in this fierce competition, whoever has the "cash ability" will have the "capital" to fight on. References: [1] “Digging for Gold in the New Tea Beverage Era: Focusing on Supply Chain, High Efficiency per Square Meter and Strong Brands”, Wanlian Securities [1] “2024 New Tea Drink Supply Chain White Paper”, Fresh Drinks & First Financial Daily Author | Tang Fei Editor | Weber This article is written by the author of Operation Party [Value Planet], WeChat public account: [Value Planet], original/authorized to be published in Operation Party, and any reproduction without permission is prohibited. The title image is from Unsplash, based on the CC0 protocol. |
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