Du Guoying, the founder of small pots of tea, apologized for spending 100 million yuan on advertising and marketing

The slogan "master" of small pots of tea, whether it is made by the master himself, has caused many controversies. On June 25, at the 12th anniversary press conference of small pots of tea, Du Guoying responded to the long-term "masterpiece" controversy, saying that the corporate advertising slogan had caused trouble to everyone, and he had reflected on it for many years and solemnly apologized to everyone

The small pot of tea from the "marketing veteran" Du Guoying, who claims to be a "masterpiece", is one of the objects of controversy and questioning. This tea brand, which was born less than 10 years ago, has rapidly expanded the market with its sword-oriented marketing style, building a new standard in the hearts of a new generation of consumer groups and creating a new brand.

However, the development concept of small pots of tea integrating categories has undoubtedly impacted the pattern of traditional tea enterprises and the inherent impression of users, and its characteristics of heavy marketing, dazzling technology and high pricing have also become important factors criticized by the industry. The famous small pot of tea, is it an "IQ tax" or a "weather vane"?

First, consistent marketing bloodline

Founded in 2014, Xiaocan Tea was founded by Du Guoying, the father of well-known brands such as Beibeijia, 8848 mobile phone, and Haojixing, and was born with Internet marketing genes. In the official introduction of small pots of tea, the brand is defined as a modern tea merchant born under the Internet thinking and experience economy.

Du Guoying once revealed his own marketing strategy, he believes that if tea wants to be a brand, it must extract empirical thinking, switch to scientific thinking, relatively simplify complex problems, and simplify cognition with unified standards. The "unified standard" has also become the methodology for small pots of tea to build a "modern tea brand".

The rise of small pots of tea can be called a reproduction of Du Guoying's past marketing experience. The brand integrates 8 traditional Chinese tea categories and launches a unified product packaging of 4 grams of original leaf tea in one can, one brew, and each can of original leaf tea, subverting consumers' perception of traditional tea with the aesthetic ideology of "small but fine" and simple operation process.

Xiaocan Tea adopts the same marketing method as the 8848 mobile phone, spending a huge amount of money to sign an exclusive advertising agreement with CCTV to ensure that other tea brands cannot compete with it in the same channel for a certain period of time. With the authoritative endorsement of CCTV and the "bombing" advertising, the brand quickly became well-known in the industry.

In Du Guoying's view, the most important reference path for the future of Chinese tea is coffee, and the whole category brand is the only choice for industry giants. Looking at the marketing activities of small pots of tea in recent years, it is not difficult to see that it is stirring the traditional tea market with new retail thinking similar to the coffee industry such as IP co-branding and digital marketing.

Taking the "Hundred Craftsmen and Hundred Blessings" project initiated by Xiaocan Tea as an example, on the occasion of the Spring Festival in 2022, it joined hands with 100 inheritors of the quintessence of traditional skills to create 101 works with the character "Fu" to display on the Great Wall. Among them, the representative works will be sold online in the form of digital collections, and each work will be priced at 19.9 yuan.

Behind such a large amount of advertising, the marketing cost of small pots of tea is bound to be expensive. Previously, when some media combed through the brand's litigation documents, it was learned that from 2017 to 2019, Xiaocan Tea Company and its subsidiary Huangshan Xiaocan Company invested a total of about 270 million yuan in advertising production, of which 147 million yuan was invested in a single year in 2018.

It should be pointed out that today's small pot of tea ambition is no longer limited to small cans of raw leaf tea, and has launched large cans that cater to the mass self-drinking consumer group, color cans that meet the aesthetics of young people, and continue to explore vertical fields such as tea bags and freeze-dried tea powder.

Second, high-end and high-price positioning, whether it makes money?

At the beginning of the product's launch, the small pot of tea started the name of "high-end, high-quality and high-price". The unified unit price of 50 yuan/can and 6,250 yuan/jin seemed to have far exceeded the average market price of about 130 yuan/jin at that time. Under this premise, the retail sales of small pots of tea in 2018 still quickly exceeded 2 billion yuan, becoming a veritable dark horse in the industry.

To this day, the price of small pots of tea remains high. Take the brand's best-selling "Morandi Color 24 Cans Gift Box" in the official flagship store of Taobao e-commerce as an example, this product covers four categories: Tieguanyin, Da Hong Pao, Jin Jun Mei Black Tea and Jasmine Tea, with 4 grams per can, and the discounted price is 425 yuan, equivalent to 2604 yuan per catty.

Such a high price has undoubtedly attracted questions about "windfall profits" and "IQ tax" from the outside world. However, in an interview with the media in 2018, the general manager of the small pot tea market center revealed that it only reached breakeven in 2018 and is expected to achieve profitability in 2019.

According to Du Guoying, the small pot of tea at that time, which was 6,250 yuan/catty, after excluding various expenses such as channel profit distribution, raw material costs, processing and production, marketing expenses, and labor costs, the final net profit was "only 5%", less than 8% to 10% of the net profit of common tea companies on the market.

On the occasion of the 10th anniversary of the establishment of small pots of tea in June 2022, Du Guoying publicly responded to netizens' questions, saying that "there are always people who say that our gross profit has 90%, but in fact, our average gross profit margin does not exceed 50%", and even bluntly said that "small pots of tea have not earned a penny for ten years since its establishment, and it can be verified by looking at the financial statements after ten or twenty years of listing".

It is true that the small pot of tea, which has not yet been listed, has not disclosed financial data, but is the brand really as "zero profit" as Du Guoying said? Previously, it was reported by the media that in order to claim compensation, the lawyer's representative of Xiaocan Tea disclosed that the product profit margin of Huangshan Xiaocan Company was 56.68%, and the statement that "the average gross profit margin does not exceed 50%" is not accurate.

In addition, according to the relevant people who joined the regional brand of small pots of tea, the franchised stores need to pay a product deposit and reach the first batch of purchases to be authorized. Among them, the multi-bubble deposit is 5,000 yuan, and the first batch of purchases is 20,000 yuan; The deposit of the gold pot series is 1-20,000 yuan, and the first purchase amount is 50,000 yuan, which is equivalent to a net profit margin of about 35% to 40%.

Looking at the packaging of small pots of tea, according to the brand's promotional content, it spent a lot of money to hire well-known Japanese designers, and it took nearly three years to exclusively create a food-grade aluminum small can that is "not taste-absorbing, not damp, not oxidizing, not breaking, and not aging". However, according to industry estimates, the cost of this aluminum can is about 6 yuan per piece, and a single box packaging will cost nearly 100 yuan.

As early as 2017, Xinhua News Agency criticized small pots of tea for excessive packaging and promoting flashy goods through "face consumption". In addition, "Life Times" also pointed out that the behavior of "throwing an aluminum can after brewing 4 grams of tea" in small pots of tea wastes resources and pollutes the environment, which is not in line with the concept of sustainable development advocated by the state.

3. Word play under "Master Craft".

"Small pot of tea, masterpiece", the reason why small pot tea can rise rapidly and attract many consumers to pay for it is inseparable from the strong brand endorsement brought by its "master marketing".

In order to deepen the consistent high-end image of small pots of tea, the brand repeatedly tells in its promotional videos that its product managers adhere to high standards and strict requirements, spend three years visiting various places, finally meet 8 national treasure tea masters, and finally join forces to create the brand story of high-quality small pots of tea, in an effort to increase the emotional and symbolic value of the product.

And it is the deep binding under the "god-making logic" that makes the small pot of tea stand on the cusp of public opinion. In 2019, some netizens questioned the "masterpiece", saying that "8 tea masters made it by hand, and one master fried 250 million tea a year, and each master fried 1466 catties of fresh tea leaves a day on average, and the master of a small pot of tea is not tired".

In this regard, the small pot of tea issued a statement saying that "master work" refers to the work on behalf of the master's skills, not the master hand-roasted tea, the tea masters as the "chief product manager" and the small pot of tea jointly formulate tea product standards, check the raw material picking and production process, and more hard work, tired work is gradually solved by modern equipment.

However, the wordplay on small pots of tea from "master-made" to "master-supervised" has not calmed down the criticism from the industry that it is overhyped. In the opinion of some industry experts, the small pot of tea's claim that "works representing the master's skills" does not have a clear direction, and it is easy to cause misunderstanding among consumers in the case of unclear meaning.

According to Article 8 of the Anti-Unfair Competition Law, business operators shall not make false or misleading commercial promotions about the performance, function, quality, sales status, user evaluation, honors, etc., of their goods, so as to deceive or mislead consumers. In this dimension, small pots of tea are suspected of being fictitious or exaggerated, or suspected of illegal propaganda.

After that, the small pot of tea low-key changed the slogan of "small pot of tea, masterpiece" to "distinguished guests, small pot of tea". However, Bedo Finance found that the small pot of tea has not given up its binding with the master who symbolizes specialization, and on its social platform account, the slogan "8 tea masters, toast you with a cup of good Chinese tea" is still used today.

Not only that, but there are also contradictions in the marketing rhetoric of the small pot tea production process. According to its official website, the quality of hand-picked tea is better, and the unique cross-section of hand-picked tea is more conducive to the production of premium tea. Therefore, all the green tea of this product is hand-picked by experienced old tea farmers.

However, on the other hand, the brand said that it is committed to taking the road of industrialization and standardization, and is developing intelligent tea picking robots, striving to accurately identify fresh tea leaves of various grades such as single bud, one bud and one leaf, and accurately pick buds and leaves and collect and classify them.

4. Conclusion: The use of new retail thinking to transform the traditional tea industry marketing model of small pots of tea can undoubtedly help it achieve a market breakthrough in the short term. However, success is also marketing, failure is also marketing, and small pots of tea are still stuck in the quagmire of "IQ tax" today, precisely because it failed to maintain the balance between price and value in the development process.

Du Guoying once emphasized at the 2024 annual meeting that tea is an agricultural product, a consumer product, and a cultural product, and these three attributes cannot be separated. Returning to the small pot tea operation model itself, its continuous marketing momentum aims to maximize the value of consumer goods, but ignores the most important drinking attribute of tea products.

Although there are no clear and consistent selection criteria on the tea consumption side, under the premise that the quality is difficult to match the price, unconvincing consumers often do not pay for the brand premium for a long time. Small pots of tea are indeed good at storytelling and marketing, but the brand still has a long way to go to turn traffic into "retention".