Source | Zebra Consumption (ID: banmaxiaofei)
Author | Chen Xiaojing
Image Source | Brand official
New tea is still a good business, but it is also a difficult business.
The involution of the industry has been extended upwards from the C-end, and while grabbing users at low prices, brands have to launch various preferential policies to strive for more franchisees.
When the requirements at both ends of B/C are becoming more and more demanding, the good days for brands to make money are no longer good.
In the first half of this year, the only two listed companies in the industry, Nai Xue's tea turned from profit to loss, and the performance of tea Baidao fell sharply, which is a true portrayal of the industry's situation.
The performance has dropped
Within a week, Nai Xue's Tea and Tea Baidao, the only two listed companies in the new tea beverage industry, successively disclosed profit warnings, allowing the outside world to see that this hot track has turned from sunny to cloudy.
Tea Baidao (02555.HK) HK) expects that in the first half of this year, the company recorded an adjusted net profit of 380 million yuan to 410 million yuan, a decrease of no more than 36.45% from 598 million yuan in the same period last year; The net profit was about 220 million yuan to 250 million yuan, a year-on-year decrease of no more than 63.03%.
As a representative of China's high-end tea drinks and the industry's first Naixue tea, the situation is even less optimistic.
In the past, Nayuki continued to lose money, and finally struggled to turn losses into profits in 2023. However, in the first half of this year, the company turned from profit to loss again, and is expected to record an adjusted net loss of 420 million yuan to 490 million yuan. In the current period, the company's revenue was about 2.4 billion yuan to 2.7 billion yuan, compared with 2.594 billion yuan in the same period last year, it was difficult to achieve a large growth.
In the related announcement, Nayuki's tea (02150. HK) admitted that consumer demand has not recovered significantly, and store revenue is under pressure. In the case that the cost optimization of the store side has basically been put in place, the cost of manpower, depreciation and amortization has limited room for further adjustment in the short term, resulting in greater pressure on the operating profit margin of the store.
At the same time, the company plans to close some stores that have performed less than expected, which will result in an asset impairment provision.
Directly operated stores are Naixue's core source of income. As of the end of June this year, it had a total of 1,597 Naixue directly-operated stores, an increase of only 23 from the beginning of the year, while in the same period last year, the company had a net increase of 126 directly-operated stores.
Tea Baidao is the second stock of New Tea Drink, which was listed on the main board of the Hong Kong Stock Exchange on April 23 this year. In 2023, the company will achieve a net profit of 1.26 billion yuan (adjusted) with a revenue of 5.704 billion yuan.
Unexpectedly, the first interim report card of the listing gave investors a head-on crit.
For the sharp decline in performance in the first half of this year, Chabaidao has its own explanation: during the period, the company increased the support policy for franchisees and the preferential efforts to sell equipment and goods, and at the same time increased the overall market input costs. The company's management believes that the above adjustments are in response to the impact of changes in consumer habits on the company due to changes in the external environment.
Compete for franchisees
In the past decade, China's ready-made tea industry has grown savagely, and it is the fastest-growing sub-category in the catering industry, with the number of stores nationwide exceeding 400,000.
During this period, the industry has completed several iterations, and a serious involution situation has been rapidly formed.
The low-end market is strongly occupied by Mixue Bingcheng, which was once positioned in the high-end Naixue, Heytea, etc., adjusting prices to squeeze the mass market, causing a scuffle. Various brands of rolled tea, rolled fruit, rolled milk, rolled small ingredients and even rolled co-branded.
With the return of rational consumption, end users are increasingly pursuing cost-effective and quality-price ratios, and price has become the most powerful weapon for brands to participate in the war.
Zheshang Securities' "Monthly Catering Topic" continues to pay attention to the changes in the core indicators of the catering track. According to its latest special disclosure, in June this year, among the 16 mainstream new tea brands, 10 saw a year-on-year decline in customer unit price, two remained the same, and only 4 increased. Among the declining brands, there are 4 brands such as Heytea, Lele Tea, Nayuki, and Kurotakitang, with a decline of more than 10%.
The long-term price war has been fought, so we have seen that in the past three years, the proportion of consumption of tea brands below 10 yuan has increased from 7% to 30%; The proportion of more than 20 yuan decreased from 33% to 4%.
Product homogenization is becoming more and more serious, the era of explosive products is no more, the improvement space of a single store has been extremely limited, and the focus of each brand has shifted from the competition for users to the fight for franchisees. Only by reducing the cost of the brand potential formed by the store encryption can we attract more franchises to form a "flywheel effect".
Since Heytea and Naixue, which insist on direct sales, have been opened to franchise in 2022 and 2023, the new tea beverage track has basically been fully franchised.
In the face of many brands, franchisees have more choices. Whoever has a better single-store model and better conditions will vote with the banknotes in their hands.
In January this year, Heytea took the lead in announcing a number of preferential policies for joining, including fee reductions and exemptions related to signing contracts within a limited period of time, as well as subsidies for decoration fees for opening multiple stores.
In February, Tea Baidao followed, and there were also a number of preferential measures such as fee reductions and material rebates.
In the past, Nai Xue, who had always been obsessed with the tonality of "space experience", also had to compromise with reality, announcing that the investment amount of a single store would be reduced from one million to 580,000 yuan, and at the same time, there would be a limited-term marketing subsidy. After the threshold was significantly lowered, it immediately attracted more potential franchisees to submit applications.
Since the beginning of this year, the competition in the mass tea market has become more brutal, and the competition for franchisees has become more intense, and the phased zero franchise fee policy is not uncommon.
Collective wayfinding
In China's major cities, crowded neighborhoods and shopping malls, hand-to-hand combat scenes of various brand tea shops are extremely common. High-quality points are becoming scarcer and more scarce, and they are already saturated.
At the end of 2022, there were 460 ready-made tea stores per million people in first-tier cities, while the density in lower-tier cities was 247 per million people. At this time, the head tea brand has gradually completed the penetration layout of first-tier cities, and the sinking market has instantly become the main battlefield.
According to agency data, in recent years, in third-tier, fourth-tier and below cities, ready-made tea drinks have ushered in rapid growth, with the market size increasing from 16.3 billion yuan and 21.4 billion yuan in 2018 to 71.6 billion yuan and 73.5 billion yuan in 2023, with CACR reaching 34.3% and 28.0% respectively, and it is expected that the growth rate will be higher than that of first- and second-tier cities in the next five years.
While brands are vying for lower-tier cities and even towns, the sinking market has quickly become another "Shura field".
The growth rate of China's ready-made tea market has slowed down significantly, and the general trend from incremental to stock market has been unstoppable.
What to do? Industry players are looking to a wider range of overseas, trying to create a "golden age" again.
The first to take this step is Michelle Ice City. The brand opened its first store in Hanoi, Viet Nam in 2018, and immediately began the pace of overseas expansion.
Almost at the same time, Heytea and Nai Xue chose to go to sea through Singapore. In August of the following year, the first store of Bawang Chaji in Malaysia opened.
In 2023, the overseas fever of China's freshly made tea drinks will enter a climax, and Tea Baidao, 7 Fentian, Shanghai Auntie, Sweet Lala, etc., will enter overseas one after another. The overseas war of Chinese tea drinks is on the verge of breaking out.
After 5 years of cultivation, Mixue Bingcheng has become the vanguard of China's tea drinks going overseas, and by the end of 2023, the number of its overseas stores has reached about 4,000.
In the past few years, the rapid expansion of the leading new tea beverage brands has benefited from the strong boost of various capitals. Now, it's time for them to take a profit and exit.
After Nai Xue's tea and tea Baidao, Mixue Bingcheng, Gu Ming, Shanghai Auntie, etc., are still queuing up in Hong Kong stocks, waiting for the opportunity to ring the bell for listing.
If the top brands are successfully listed in the future, abundant cash on the books + new fundraising may bring new new models. Is it to roll up the supply chain, or down to the market? At that time, it will be the era of the most volatile new tea drink.
However, the capital market has not shown too much enthusiasm for the new tea drink. At the beginning of Nai Xue's tea, the market value was close to HK$30 billion, and now there is only HK$2.569 billion left.
In April this year, Chabaidao was issued at HK$17.5 per share, which fell below the issue price on the day of listing. Yesterday, the company's share price fell 12.38% to close at HK$6.30 per share, with the latest market value of HK$9.309 billion.