Cha Yan Yue Se has been overtaken by Ba Wang Cha Ji. Where is its bottleneck?

This article starts from the development path of the new Chinese tea brand "Cha Yan Yue Se", compares it with the recently emerging brand "Ba Wang Cha Ji", and analyzes the differences in operation methods behind their different development trends. It is recommended for students who are interested in the tea industry and brand operations.

What did Cha Yan Yue Se do wrong?

Cha Yan Yue Se, once the leader in new Chinese milk tea, seems to have fallen behind.

In the past two years, Cha Yan Yue Se has often entered the public eye, mostly because of a "turnaround" - first, Cha Yan Yue Se employees complained about their low wages, and the founder and boss personally came out to angrily confront them; then, the brand's new product used the Changsha slang "picking up a basket", which was suspected of insulting women; in February this year, the Wuhan Cha Yan Yue Se store caused heated discussions because of the "standing in the penalty style" queue for food; only half a year later, Cha Yan Yue Se's tweet "working hard but working hard in vain" caused dissatisfaction among students and some workers...

Shortcomings such as the founder's attitude, brand organization and strategy issues, store queue logic, and excessive marketing have been exposed one by one. Although Cha Yan Yue Se had the best of time, place and people when it started, it is now gradually declining.

On the other hand, in the new Chinese tea beverage market, up-and-coming brands such as Bawang Cha Ji, Cha Hua Nong, Grandpa Doesn't Brew Tea, and Ma Wu Wang are expanding rapidly. These brands are competing for the market share of Cha Yan Yue Se. Among them, Bawang Cha Ji from Yunnan is quietly catching up.

From 2020 to 2021, Bawang Chaji successively received angel round investments from Fosun Group, XVC and other institutions. This year, the brand even received investment from the US hedge fund Coatue, with a post-investment valuation of up to 3 billion yuan. According to data from Zhaimen Canyan, Bawang Chaji has more than 2,513 stores worldwide, covering 234 cities in China, and has more than 70 stores in Singapore, Malaysia and Thailand.

Some people in the catering industry even asserted: "Bawang Chaji has surpassed Cha Yan Yue Se in all aspects and has become the new king of Chinese tea drinks."

As a result, Cha Yan Yue Se, which fell behind, fell into an anxious and twisted state - on the one hand, the brand continued to launch sub-brands such as Yuan Yang Coffee and Goodnight Lemon in an attempt to solve growth anxiety; on the other hand, Cha Yan Yue Se always insisted on direct operation and slow expansion , and it seemed that it did not want to lose its brand tone due to excessive popularity, which was incompatible with the current "tens of thousands of stores" of new tea drinks.

Occupying a mountain does not mean you can keep it forever. As a milk tea lover, New Consumption Think Tank has visited many Cha Yan Yue Se and Ba Wang Cha Ji stores in Changsha and Wuhan. We will compare Cha Yan Yue Se and Ba Wang Cha Ji in terms of ordering experience, market development, organizational strategy, etc., and explore the strengths and weaknesses of the two brands.

1. On-site visits to stores: long pick-up lines, no pleasant taste under the "tea flavor"

Both of them focus on traditional Chinese style. At the beginning, Cha Yan Yue Se and Ba Wang Cha Ji did have many similarities in terms of brand design, product series and market positioning. However, with regional expansion and continuous improvement of the supply chain, the two gradually embarked on different paths.

From the perspective of consumers, the New Consumer Think Tank compared the similarities and differences between the two brands during field visits:

1. Store location, store size and space layout

Cha Yan Yue Se tends to be in business districts . We found that its stores have a wide coverage in busy streets and pedestrian streets. Whether in Changsha or Wuhan, it has almost reached the point of "a Cha Yan store every five steps". The overall visual design, packaging and store decoration are all full of Chinese style. There are many types of stores, including regular standard stores, concept stores, Happy Hall, tea shops, garden parties, etc. In addition to selling beverages, some stores will set up souvenir sales areas, reading areas and other spaces.

As the store is relatively small overall and the pricing rules for its merchandise are particularly complicated, the order in the surrounding shopping areas is occasionally chaotic. Many consumers are unable to figure out the costs and have to ask the clerk how to get the best deal.

The overall size of Bawang Chaji stores is relatively large, mostly concentrated in shopping malls and street shops. The stores are not concentrated, and the store decoration and product packaging design are integrated with hand-embroidery elements. We visited many Bawang Chaji stores in Hangzhou, some of which are even over 60 square meters. The overall size is closer to that of a coffee shop, with few divisions. The stores occasionally have peripheral product sales areas, which can be seen as a social space.

2. Actual traffic flow experience

The overall SKUs of Cha Yan Yue Se remain at around 20, with limited drinks and corresponding tea menus launched according to different seasons. In 2021, when purchasing at the Changsha store, the ordering mode was still very primitive. The staff gave customers paper numbers and pre-order cards, and the customers wrote down what products they needed. In September, we came to the Wuhan store, and the brand opened the mini program for ordering, but in actual experience, we found that customers had to queue up three times in total: one was to queue up to order, the second was to queue up to swipe the verification code, and the third was to queue up to pick up the food.

Take ordering a cup of Orchid Latte as an example. After placing the order through the mini program, the guarantor still needs to be in the store before the tea drink can be made. In Wuhan, we left the counter after placing the order and walked into the bakery next door. Then we were told to line up in the order pick-up area to pick up the food. With not much traffic in the store, it took me about 25 minutes to get a drink.

Many consumers at the scene were indeed dissatisfied with the second queue method, as if there was a false impression of "creating queues". Most stores mainly accept offline orders, and the number of takeout orders is relatively small.

When visiting a Bawang Cha Ji store in Hangzhou, there were few consumers queuing up in long lines, and staff on site held up signs to guide consumers to place orders and pick up food through the mini program.

We used the mini program to order two drinks, Boya Juexian and Huatian Oolong, and it took about five minutes from ordering to picking up the food. Observing the efficiency of the cup delivery, the overall product delivery speed was significantly faster due to the lack of cumbersome ordering and introduction.

We have made a preliminary statistics and found that the store has a large number of takeout orders. The store divides the pick-up area and classifies the food according to the passed number and real-time delivery. Food is picked up normally according to the real-time order number, and the store updates the delivery order number in real time. Orders that have not been picked up for a long time are placed in the passed number pick-up area.

3. Customer Interaction

There are big differences between the two in terms of customer ordering and interaction. Cha Yan’s business strategy is “Chinese-style service” . Its founder Lu Liang once proposed the concept of “becoming the Haidilao of the tea industry”. Employees have more “verbal advertising” services, such as verbal interaction, on-site product experience, and cultural and creative product peripherals.

When you start lining up, the clerk will remind you how many minutes it will take to wait and how many minutes it will take to make the milk tea. During the waiting period, the clerk will also let you try the new product, and after it is ready, he will tell you how to drink it and in what order. In actual purchases, the first experience is relatively novel, but this also leads to a longer order time for individual consumers.

A consumer at the scene expressed this view: "When I passed by the store and heard the uniform slogans in Cha Yan Yue Se, I thought at the time that it must be very difficult to work here, after all, there is not even the right to remain silent."

At the Ba Wang Cha Ji store, apart from asking about the sweetness and amount of ice, the store clerks had almost no verbal interaction.

2. The "direct sales + franchise" model beats the direct sales model

In addition to the comparisons in various micro dimensions, the biggest difference between the two brands is that Cha Yan Yue Se adopts a pure direct sales model, while Ba Wang Cha Ji adopts a "direct sales + franchising" model.

This may be related to the personal experience of its founder, Lu Liang. Before founding Cha Yan Yue Se, Lu Liang started many businesses, but all ended in failure. In addition, the founder had failed in franchising a brand before, so the brand never agreed to join.

In fact, direct sales, franchising, and cross-regional cooperation are all business models, and there is no good or bad, only suitability. Direct sales are conducive to controlling the unity of the brand, but the disadvantage is that the heavy assets and heavy model make the operation flexibility of direct sales not high, while "direct sales + franchising" is the opposite.

But if we focus on the entire tea beverage market, in November 2022, Heytea, which had been directly operated for ten years, opened up for franchising. In July of this year, after the mid-to-high-end tea beverage brand Nayuki Tea announced its opening for franchising, Cha Yan Yue Se became the only new tea beverage brand in the tea beverage market that insists on pure direct operation.

In the tea market, if direct-operated stores are weapons, then franchise stores are leverage. By opening up franchises, brands can expand faster and have more stores than brands that insist on direct sales, thereby quickly achieving capitalization and scale. After rapidly expanding stores, brands can reduce raw material costs through the economies of scale of the supply chain.

Franchising and lightening the model are the general trend . Cha Yan Yue Se insists on not franchising. Such stubbornness and persistence seems very different at a time when new tea drinks are struggling to survive. This also shows the conservatism of Cha Yan Yue Se to a certain extent.

In comparison, Bawang Cha Ji's steps are more radical. By clicking on its official website, we can easily find the entrance to join.

In public, Bawang Tea CEO Zhang Junjie once analyzed the profit path of the tea beverage industry: if the number of stores is less than 50, it can be profitable, but the profit is mainly used for labor expenses, and it is in the stage of brand supporting employees; if the number of stores is between 50 and 500, the profitability is better, and it enters the stage of brand supporting shareholders; for brands with more than 300 stores, the net profit is conservatively estimated to be between 15 million and 30 million yuan.

Bawang Tea Princess never concealed her ambitions and quickly expanded her stores through "direct operation + franchising" at the beginning.

In the actual expansion, Bawang Cha Ji opened 640 new stores in 2022, quickly achieving the goal of 1,000 stores, with a store growth rate of up to 133.4%. As of August 4, 2023, the number of brand stores has reached 2,000.

During an offline visit, a franchisee said that in order to join Bawang Cha Ji, one must be over 25 years old, have been working or started a business for more than 3 years, have idle capital of more than 500,000 yuan, the cost of opening a single store is around 500,000 to 700,000 yuan, and the payback period is about one year.

3. Loss of first-mover advantage: Trapped in Changsha, no solution to growth anxiety

According to the data from Zhaimen Canyan, the total number of Cha Yan Yue Se stores was 443 on August 1, 2022. As of October 30, 2023, more than a year has passed, and the total number of stores has not increased but decreased. The current total number is 435, and the number of new stores opened each year is decreasing. Its competitors are all advancing rapidly - Heytea has entered more than 240 cities, Gu Ming and Shanghai Auntie are striving to open 10,000 stores. After all, they have to be large enough to get on the table.

"I am quite pessimistic. Either we will die by expanding, or we will die by not expanding. If we die by not expanding, we will have more dignity." Lu Liang said this many times in public. Compared with other brands that have set up stores and competed in various cities, Cha Yan Yue Se has always been content with a small number of stores in Wuhan and Changde, not far from Changsha.

This also exposes the brand’s fundamental problems - shortcomings in strategic planning and control radius.

From the perspective of brand strategic planning, a brand needs to thrive and follow the trend. The brand trend changed overnight. Cha Yan Yue Se did not expand its stores when the potential was high. Due to repeated hesitations, it missed the opportunity to become the absolute leader.

If it attacks the first-tier cities, it will have to face Heytea and Nayuki, which have long been entrenched there; if it expands into the lower-tier markets, it will have to compete head-on with Mixue Bingcheng and Chabaidao. Today, it is still trapped in Changsha, and the opportunities it once had have become shackles.

From the perspective of control radius, unlike other tea brands that set up branch warehouses in newly expanded cities, Cha Yan Yue Se has adopted a weekly distribution system. The main warehouse is located in Changsha. Every week, according to store plans, raw materials are arranged to be shipped from the main warehouse in Changsha to major stores.

Lv Liang admitted that the reason for not leaving Changsha was due to insufficient management capabilities. With a high concentration of stores in Changsha, Cha Yan Yue Se's store management costs, logistics costs, and raw material losses were minimized, but in cities farther away, the supply chain could not supply in time, and they were forced to withdraw. This is also the core reason why Cha Yan Yue Se had landed in Shenzhen earlier, taking advantage of the popularity of Wenheyou, but announced its withdrawal after only 5 months.

The opportunity missed by Cha Yan Yue Se is being seized by Ba Wang Cha Ji.

From the perspective of market development, Bawang Cha Ji expanded rapidly in Yunnan, Guizhou, Guangxi and other places, breaking out from the flanks and gradually moving towards a national brand. When it had less than 100 stores in China, it radiated to Southeast Asian countries where there were large Chinese populations, accelerating the pace of overseas expansion.

Bawang Cha Ji quickly took over the national style traffic brought by Cha Yan Yue Se, and we can clearly see its expansion path: its main markets are currently concentrated in new first-tier and second-tier cities. On the one hand, it amplifies brand benefits through franchising, and on the other hand, it expands nationwide to alleviate anxiety about regional density.

"The final form of products in the tea beverage track will return to the two dimensions of competition between tea itself and competition between brand values. Once the product is well made, the operating model is clearly thought out, and the expansion strategy is implemented, the time is right and we will start running." Zhang Junjie said in an interview with the media.

In fact, the technical barrier of freshly brewed tea drinks is not high, and the taste difference of many brands is almost negligible. In addition to products, the most direct way for a brand to retain consumers is to increase its market share by the number of stores.

4. Cha Yan Yue Se’s biggest bottleneck may be its founder

Returning to Cha Yan Yue Se, if nothing is done when the brand's potential is declining, it will be doomed to face the dilemma of "not enough food". Cha Yan Yue Se's determination to move beyond Changsha is not firm enough.

When a company grows to a certain size, the path it takes actually depends on the management quality and vision of the company's top management. The biggest "bottleneck" of Cha Yan Yue Se may be its founding team.

Lv Liang was once the biggest opponent of Cha Yan going out of Changsha: "Cha Yan Yue Se cannot go out, it will die if it goes out", "I am timid and have awe of the market. If I mistake the dividends given by the times for my own strength, I will be the next dead internet celebrity if I go out". Such words show the founder's insecurity.

According to public information, Lv Liang graduated from a junior college and obtained a bachelor's degree through self-study. He has sold rice bowls, stewed food, and popcorn, and failed every time. But he is a typical Hunanese, with a "domineering" gene in his bones, and he never admits defeat. In the first three years of the brand's creation, Cha Yan Yue Se was like a makeshift team with no more than ten employees. Lv Liang's sister was also one of the founders and was responsible for management. In 2016, Cha Yan Yue Se introduced its first professional manager.

The Lu Liangs started their business from scratch, and their management style is still that of a husband-and-wife shop. At the end of 2021, Lu Liang, the founder of Cha Yan Yue Se, spoke out directly during a dispute among employees about salary and called employees to resign, which caused online comments such as "Cha Yan Yue Se boss PUA" and "I never want to drink Cha Yan again". Although Lu Liang apologized the next day, the boss's improper management behavior has had an adverse impact on the brand's reputation. Such family-style management and emotional behavior occur from time to time.

According to industry insiders close to Lu Liang, Lu Liang is a more product-oriented manager who places a lot of emphasis on self-awareness in his daily work, but is arrogant when it comes to strategy and organizational management.

Sun Cuiying, co-founder of Cha Yan Yue Se, said in an interview: "Before, we were running wildly, developing in a rough manner, without methodology and lacking professional means. The back-end team was not slowly formed until 2018-2019, and some professional forces were introduced. In terms of supply chain management, the team did not start to develop an information management system until 2020."

Ultimately, the core problem of Cha Yan Yue Se is that the level and quality of the management team do not match the scale of such a large enterprise. In the small and beautiful stage, the development of Cha Yan Yue Se was in line with Lv Liang's expectations when he started the business, but when capital poured in and competition became increasingly fierce, the helmsman of the company had to do things, create momentum, and follow the trend. All aspects of the ability needed to keep up with the pace of commercial development, but Lv Liang obviously did not have this ability.

In the turbulent business world, Cha Yan Yue Se is too idealistic. The brand positions itself as a cultural evangelist, which leads to a large number of its business operations being wasted on the illusory "lifestyle" communication and "Haidilao-style service".

Cha Yan Yue Se also intends to "make up for its shortcomings", and several sub-brands are about to emerge.

In August 2022, Cha Yan Yue Se launched its sub-brand "Yuan Yang Coffee", and opened 5 stores at the same time in Changsha's "May 1st Business District". The average distance between stores is only about 500 meters, which is still the original Cha Yan style; in September this year, after coffee, Cha Yan Yue Se set its sights on the lemon tea business, named "Good Mo Ning", which is still centered around the new Chinese style, and the price range is also around 15 yuan. The industry speculates that Cha Yan Yue Se may be paving the way for "franchising".

The emergence of new sub-brands seems to be sending a signal to the market - it seems that in the near future, it will eventually embark on the road of capitalization.

We will continue to pay attention to whether Cha Yan Yue Se can break through the contradiction of self-game and what the next step will be for it on the tightrope.

Author: Lele

WeChat public account: New Consumption Think Tank