4 yuan for Heytea, free Bawang Tea Girl: No coupon for coffee but no coupon for tea?

This article analyzes the price reduction strategies of tea brands Heytea and Bawangchaji, and explores the competitive situation in the new tea market and the business model of brand expansion. It provides in-depth insights into the price war, franchise model and brand marketing in the tea industry. It is recommended for readers who are interested in new consumer brands, the tea market and marketing strategies.

If 2023 is the year of involution for coffee brands, the popularity of 9.9 has spread from Kudi to Luckin Coffee, and even KFC, which has just entered the coffee market, has joined the battle, forcing Starbucks, which has been sitting on the Diaoyutai for more than a decade and has always insisted on never cutting prices, to start cutting prices. By 2024, a new consensus seems to have been reached - burning competitors to death through price wars is an impossible goal in the short term. Moreover, although it is often split, new tea drinks, which are competing for coffee consumers to a large extent, are still eyeing them.

As a result, several coffee brands simultaneously tightened their price wars. Luckin Coffee's 9.9 products were reduced to less than 8, and Kudi also more or less tightened its subsidies . However, the coffee brands that could not roll up the market probably never thought that new tea drinks would suddenly roll up in 2024. First, they relaxed the franchise at the beginning of the year and collectively listed on the Hong Kong stock market... Then in May, Heytea, which had not made any big moves since the beginning of the year, directly made a big move.

After the May Day holiday, Heytea launched a limited-time event for its 12th anniversary . The original price of 15 yuan for the "Zhizhi Golden Phoenix Tea King" is now 7.5 yuan a cup for buy one get one free, while the original price of 8 yuan for the "Pure Green Tea Queen" is only 4 yuan a cup after using the coupon. The Heytea coupon instructions state that more than 10 products in the Ming Tea, Light Milk Tea, and Thick Milk Tea series can participate in the buy one get one free event.

I'm afraid consumers did not expect that in 2020, the average customer spending was close to 60, and even a single cup of drink was 30+. Even after the price reduction in 2022, Heytea's price remained at a relatively high level among new tea drinks. One day, it may be able to compete with Mixue Bingcheng in terms of low prices.

1. There is no free lunch in the world, but there is free Bawang Tea Princess

In fact, in the new tea beverage market, if Mixue Bingcheng is the "god" of store expansion, then Heytea can almost be said to be a weather vane on another level. When Heytea cuts its prices, almost all new tea beverages at the same price as Heytea will have to cut their prices to some extent. Since Heytea announced its price cut in 2022, mid-to-high-end new tea beverage brands including Nayuki and Lelecha have almost all announced price cuts. After that, almost all brands followed Heytea's multiple price cuts and pricing strategies.

And this time, the huge discounts for Heytea's store anniversary are no exception. Heytea just announced a 4 yuan discount after the May Day holiday, and Bawang Cha Ji directly launched an even more explosive event on May 15th, "May 15th - May 21st, 100 million cups of Bawang Cha Ji are free!" The event is somewhat like there is no free lunch in the world, but the store does have free milk tea.

In fact, whether it is price reduction or price war, the reason why new tea brands continue to test the possibility of new markets by lowering prices is fundamentally different from the 9.9 yuan of coffee brands.

For the new tea beverage brands at this stage, compared with the competition in the chain coffee market, which is almost centered around the chain giants Starbucks, Luckin Coffee, Cody, Manner, and Tims, and except for Cody and Luckin Coffee, each company has different business ideas, product positioning, and even sales models. In addition to those leading brands, new tea beverages also have various local chain brands, whether it is Cha Yan Yue Se, which has opened all over Hunan, or Qu Cha Shan, which is preparing to expand into the Shanghai market in the near future based on the large-scale battle in Guangxi.

The new tea beverage market is already an extremely crowded market with more than 3,000 brands and nearly 420,000 stores. Not to mention that compared to coffee, which is positioned as a "caffeine supplement" in most cases, young people have more or less cultural demands for tea drinks. This has also led to brands such as Cha Yan Yue Se and Qu Cha Shan forming a strong bond with the local cultural and tourism economy to a certain extent.

Even some small brands may become a highlight in the cultural tourism background due to the enhanced hot spot effect brought by the overlap of consumer groups, or they are good at innovating and exploring local cultural characteristics. For example, during the May Day holiday, an ice cream shop called "Fushan Moxiang" in Suzhou quickly became a popular check-in spot with its unique hydrangea ice cream and ranked first on the local beverage shop hot list. It is reported that this small shop with an area of ​​only 20 square meters had a turnover of more than 160,000 yuan during the May Day holiday, and the highest single-day revenue exceeded 40,000 yuan.

Faced with such a competitive environment, it is almost an inevitable choice to "decentralize" one's own brand to various cultural and tourism cities by lowering prices to attract more widespread attention. After all, only when the audience becomes wider and wider can one have stronger communication power in today's fiercely competitive environment.

2. Price reduction for franchise and brand activities

On the other hand, the market is increasingly experiencing a price cut trend. Topics of affordable consumption such as "20% off at Haidilao" and "home decoration at half the price" are gaining popularity on social platforms, and "no promotion, no purchase" seems to have become the new normal. This seems to be a good explanation for why milk tea brands continue to lower prices - to cater to the trend of consumption downgrade.

On the contrary, the price of Quchashan was over 30 ten years ago. In addition, unlike many new tea brands that originated in Guangzhou and Shenzhen and quickly entered the traditional high-consumption markets such as Beijing and Shanghai, Quchashan has always been struggling in Guangxi, a traditional "downstream market", and only recently prepared to enter the Shanghai market. This seems to be somewhat divided. The huge chain brands continue to lower their prices, while the local brands in a remote corner can maintain high prices and even gain recognition from many people.

But in fact, these two points are not contradictory. For a brand targeting a broader market, lowering prices to lower the threshold for brand materials, store decoration, and raw materials can not only attract more franchisees so that the brand can expand its circle faster, but also launch a wider range of SKUs and use more popular and diverse product lines to attract consumers with different tastes in different regions. As for regional brands, they have more experience in pleasing the tastes of local consumers, and use some raw materials that are more local, or even almost difficult to find in other places, to increase the value of their products, thereby selling them at higher prices.

This is why price cuts and franchising are almost complementary. In November 2022, the same year that Heytea announced its price cuts, Heytea, which had been established for 10 years, began to change its obsession with "doing it yourself", confirmed the opening of franchising business, and recruited partners. The number of stores has since skyrocketed. According to the "2023 Annual Report" (hereinafter referred to as the "Report") released by Heytea, as of the end of 2023, the number of Heytea stores has exceeded 3,200, of which more than 2,300 are business partnership stores; the store scale has increased by 280% year-on-year, nearly three times compared to 2022, becoming the fastest growing brand in the industry; the user scale has also continued to grow, and the current membership has exceeded 100 million, an increase of 37 million throughout the year.

After all, for franchisees, if milk tea is sold at a high price, it means that more money has to be invested in raw materials, stores and personnel configuration. The high price not only limits consumers' enthusiasm for purchasing, but also limits the enthusiasm of franchisees in the early stage of investment. In the subsequent operation process, high-quality and high-priced raw materials means that if the goods cannot be circulated quickly, expired raw materials will increase the burden on franchisees. The lower the circulation efficiency and the higher the loss, the probability of franchisees tampering with the shelf life and using unqualified raw materials will increase invisibly. These will increase the management costs of the brand to a certain extent.

Going a step further, if we temporarily put aside the supply chain and franchisee considerations, for new tea brands, a wider audience also means that each marketing campaign can cover a wider group. And for national franchise brands, the number of stores will greatly save the brand's marketing expenses, whether these marketing activities are targeted at consumers or franchisees.

For the current milk tea market, compared with the nearly 36,000 stores of Mixue Bingcheng worldwide, whether it is Heytea or Bawang Chaji, if we only look at the Chinese market, there are a lot of up-and-coming companies that far exceed Heytea and Bawang Chaji in the number of stores.

As the efficiency of store opening and the number of stores continue to increase, in the new tea beverage industry, which has been involuted to the extreme and product homogeneity is extremely serious, as time goes by, brands with an advantage in the number of stores may only need a representative memory symbol to continue to leave a memory in the minds of consumers. For example, Snow King, which appears almost in every street and lane, and you can hear it from time to time when passing by the store: I love you, you love me, Mixue Ice City is sweet.

For brands with relatively few stores, if they want to maintain this memory, they may need to attract consumers' attention through joint ventures, spokespersons, new products, advertising, and even occasional price cuts and promotions. But it is undeniable that cases like FENDI that can detonate the entire network traffic have never been the norm, and as the Internet becomes more and more stratified, the probability of creating a phenomenal case that young people who are accustomed to circling the circle will only become smaller and smaller.

As people always say, young people's needs will only become more and more personalized. If we really want to find a common consumption concept among young people, it may only be: "There is no standard for consumption. Interests, appearance, joint names, IPs are all superficial. The key is that money can't buy happiness."

However, it is undeniable that reaching new customers through co-branding and deepening brand perception through content are mutually reinforcing and intertwined. Price cuts can greatly expand the range of people who can accept brands, thereby amplifying the influence of co-branding to a certain extent. It can also make it easier for franchisees to expand their stores into the sinking market.

Author: Innocent Roland; Source public account: iBrandi (ID: 1089233)