Young people queue up to buy milk tea at the Drum Tower in Beijing. Photo Source Visual China
Written by Xiao Wang Edited by Wen Shijun From Prism Tencent Xiaoman Studio
Written by Xiao Wang Edited by Wen Shijun
Published by Prism Tencent Xiaoman Studio
Milk tea stores, which have been squeezing their way through the county to open stores, have now shifted their battlefield to the Hong Kong Stock Exchange.
With the recent update of Guming Hushang Auntie’s listing application on the Hong Kong Stock Exchange, Naixue’s Tea Tea Baidao having been successfully listed, and Honey Snow Ice City submitting its application in January 2024, the Hong Kong Stock Exchange can be said to be milk tea drinking to the support of the Hong Kong Stock Exchange.
Milk tea store was once the most favored entrepreneurial track of choice for young people, no academic threshold, low start-up capital, high consumer repurchase rate. Taking the east wind of new consumer investment in recent years, the tea drinking track is running out of a number of billionaires who started from scratch. Such as specialist graduates of hi tea founder Nie Yunchen to 7 billion yuan in the Hurun list of rich people after 90 white hands Zhang Hongchao junior high school did not graduate from the working Zhang Hongchao, rely on the honey snow Ice City and his brother Zhang Hongfu Chopped 45 billion in the family Tea Baidao founder Wang Xiao-Kun Liu Weihong couples, from the doorway of a high school in Chengdu, a husband and wife store in 2008, in 2024 with a 6 billion yuan of the Hurun list of the richest!
At the same time, milk tea stores are facing fierce homogenization competition, but also the rapidly changing tastes of young people’s picky, nine deaths.
Milk tea store will still be a good choice for young people to start their own business? After swarming across the fragrant river, how to tell their own story to the capital market milk tea stores?
Milk tea stores swarm into counties, prices beat down
During his college days, Wang Yunan was evaluated by his teacher as suitable for business operation. There is no need to work, just start a business. In April 2010, Wang Yunan, who was about to graduate from Zhejiang University of Technology, opened the first Guming milk tea store in his hometown of Daxi Town, Wenling, Taizhou.
Guming’s prospectus points out that Daxi Town is a typical sinking market, and Wang Yunan has a keen eye for opportunities in sinking markets. As of the end of September 2024, Guming had 4,943 stores in third- and fourth-tier cities and below, accounting for 51 percent of its total number of stores, with 80 of the stores located in second-tier cities and below.
By the end of 2024, Guming has been around for 14 years, and Wang Yunan is ready to knock on the door of the Hong Kong Stock Exchange with 9,778 stores 19.2 billion yuan in GMV merchandise sales and 6,441 billion yuan in revenue by the end of September 2024 .
Guming emphasizes that second-tier cities and towns represent a huge untapped market with enormous potential.
Snow King Honey Snow Ice City also claimed that the current coverage of ready-made tea beverage stores in Tier 3 and below cities is limited and there is huge room for market enhancement in the future. By the end of 2022, the density of ready-made tea beverage stores in third-tier and lower cities will be 247 stores per million people, compared to 460 stores per million people in first-tier cities, and it is expected that the number of ready-made tea beverage stores in third-tier and lower cities will grow at a CAGR of 24 6 .
As at the end of September 20 23, Honey Snow Ice City had over 36,000 stores, of which approximately 4,000 were located in 11 overseas countries, with 18,297 stores located in Tier 3 and below cities, accounting for 56 9 percent of the total. Honey Snow Ice City emphasized that it has the highest penetration rate in Tier 3 and below cities, and has more stores than the second to fifth place in the market combined.
Cha Ba Dao also pointed out that there is still a large market space in lower tier cities and intends to further encrypt its stores in second tier and below cities and encourage existing franchisees to open multiple stores.
From Beijing back to the east of Henan home county white-collar Tang Xiaoxiao also found that in the past two years, the county’s main commercial road is crowded with milk tea store, Gu Ming, honey snow ice city sweet la la Shanghai auntie Yihe Tang tea Baidao and other new tea drink brands have been stationed in a number of outlets, and even Ruixing and honey snow Ice City’s Lucky Café.
However, in the price band, Snow Ice City is also firmly stuck in the affordable drinks, its main product price band in 2 8 yuan, while other milk tea brands are priced between 10 22 yuan.
At the same time, the past to take the high-end route of the tea Nai Xue’s tea also began to take the pro-people route.
Sullivan released a white paper on the development of China’s new tea beverage industry, which shows that in 2020, the average unit price of 52,56 yuan of Xi tea is far ahead of other similar brands. At the beginning of 2022, Xi Cha said goodbye to the 30 yuan era, and then rushed to the hot search. Now, open the small program, only two 28 yuan of classic drinks to highlight its once high-end, its main product prices concentrated in 15 22 yuan, the lowest is 8 yuan a cup of jasmine tea.
Naixue’s tea current products are mainly concentrated in 16 22 yuan, and its prospectus filed in early 2021 shows that its customer unit price is 43 3 yuan, and the average price tag of tea drinks is 27 yuan.
Since 2022, the past adherence to direct operation of brands such as Xi tea Lele tea Naixue’s tea and so on is more open to join one after another, in order to expand the purchase of convenience, to complete the layout of the third and fourth tier cities. In the first-tier cities have long been no longer in 2017 queuing the feast of hi tea, began to sink after the county is still sought after, netizens say, eighteen line small county hi tea still have to queue .
This means that the milk tea stores will continue to be white-hot in the county to open stores.
Do not rely on the franchise fee to rely on the sale of goods
Milk tea brands have no special business model. In addition to earlier adhere to the direct operation of Naixue’s tea, most of the new tea drink brands to join the chain to quickly do large-scale.
China Chain Store Association pointed out that because of the low investment threshold, high degree of standardization, strong reproducibility, drinks are all food and beverage categories in the chain of the highest rate of categories. In a sample survey of core business districts in many cities, the chainization rate of new tea drinks is more than 80%.
Crazy store opening has become a footnote for all milk tea brands in recent years.
You can visualize the opening speed of several milk tea brands Auntie Shanghai’s information shows that its stores were 1994 at the beginning of 2021, and by the end of September 2023 it had soared to 7,297 stores.
Honey Snow Ice City at the end of 2021, the total number of domestic stores 19,731, to the end of September 2023 soared to 32,180, equivalent to nearly 20 stores opened every day, which does not include the adjustment of the withdrawal of the store.
Lemony Snacks still has just over 420 stores in 2021, more than 1,000 stores by the end of 2022, and more than 6,000 by the end of 2024.
The milk tea brands’ main revenue is selling goods and equipment to franchisees, collecting royalties and franchise fees, etc.
Take Shanghai Auntie as an example, its revenue from selling goods and equipment to franchisees accounted for 79.7% and franchise service revenue accounted for 16.4%. The revenue from the sale of goods and equipment to franchisees accounted for 94.8 percent of the revenue, while royalties and franchise fees accounted for 39 percent.
The most extreme was Honey Snow Ice City, whose combined merchandise and equipment sales accounted for 98.2%, while franchising and related services accounted for only 18%.
Miyuki Ice City emphasizes that it does not rely on franchise and related service fees as its main source of income. And in order to ensure the quality and supply of ingredients while optimizing costs, it has achieved 100 self-production of core beverage ingredients such as sugar milk tea curry. By the end of September 2023, its merchandising revenue reached RMB 14,505 million, or 94 3 .
Allowing franchisees to quickly return to capital Making money is a common selling point emphasized by current milk tea brands, and it is also the core of their rapid expansion of store networks Expanding sales of raw materials.
China Merchants Securities pointed out that the ready-made tea drinks, especially milk tea brands and products change faster, customer stickiness is relatively difficult to maintain, the life cycle is relatively short, so that investors are more inclined to the initial investment in low return cycle of short brands and stores.
Honey Snow Ice City’s advantage is a lower franchise fee requirements, fast return cycle. China Merchants Securities pointed out that the Honey Snow Ice City franchise fee of 7,000 11,000 yuan per year, compared with other brands have a certain competitive advantage. Benefit from the store area is small 20 25 or so Brand power advantage and sinking market related costs are low, the overall investment of about 38 40 million, excluding rent for 28 30 million, the overall return cycle is shorter for about 12 months.
Guming also emphasized in the prospectus that its franchisees’ single-store operating profit reached 376,000 yuan, with a single-store operating profit margin of 20 2 , while the single-store profit margin of the market’s tea beverage stores was 10 15 during the same period. Bringing considerable income to the families of franchisees, franchisees are willing to be active, with an average of 2 9 stores operated by each franchisee.
On the other hand, earlier adhere to the self-management mode Go high-end route of Nai Xue’s tea, now also open to join. China Chain Store Management Association mentioned Naixue’s tea announced 2024 to join the new policy shows that a single store from 580,000 upfront investment. Related costs include brand cooperation fee of 60,000, opening comprehensive service fee site selection design opening counseling 40,000, staff training fee of 30,000, security deposit of 30,000, equipment and props from 250,000, renovation fee of 120,000, the first allocation of 50,000, while there are operational management fees, turnover full of 60,000 paid extracted 1 .
As of the end of June this year, Nexue’s tea has 1,597 directly-managed stores, 297 franchised stores, but the revenue contribution from franchised stores is not yet obvious.
The single-store economic model of Naixue’s tea shows that labor and rent costs are the highest, with the cost share further increasing to 41 7 in 2024. Under the franchise model, however, labor costs and rent are borne by the franchisee, significantly reducing the capital tied up in the brand.
Naixue’s Tea store economic model, screenshot from Naixue’s Tea 2024 interim report
Young people are fast losing their appetite for milk tea
Consumers’ taste preferences change rapidly, and no milk tea store can keep consumers on their toes.
Koo Ming points out that people are becoming more aware of their calorie intake, hence the introduction of low-sugar products. Meanwhile, as caffeine has also become a consideration for many, the company has also introduced drinks with different caffeine levels.
Milk tea stores are not the only competitors, there are even coffee chains such as Ruixing Manner Kudi Coffee. Auntie Shanghai also pointed out that coffee Juice Carbonated drinks or other drinks such as yogurt set off a craze, all of which will make the entire ready-made tea store industry affected.2024 Hurun Hundred Rich List, Manner Coffee 31-year-old Lu Jianxia became one of the list’s only three white-handed one of the post-1990s, Han Yulong Lu Jianxia couples wealth of 7 billion yuan.
After a certain brand lowered its price, I thought it wasn’t good anymore. The actual fact is that the actual actual actuality is actually a lot more than just the actual actual actuality. When choosing a milk tea, the fact that it tastes good and that she hasn’t gotten tired of it is her main consideration. I’m a consumer, I don’t need any brand loyalty.
Another big milk tea consumer, Cui Jian, said that his main drink after work has slowly shifted from milk tea to coffee, and that workers need caffeine to refresh themselves.
Milk tea stores are still opening stores like crazy, but young people are already drinking fast.
In the first half of this year, Nexue’s tea directly-managed stores customer unit price fell 15 1 to 27 5 yuan year-on-year, single-store daily orders fell 26 8 to 265 9 single year-on-year. Its store operating margin slid from 20 1 in 2023 to 7 8 in 2024.
Cha Ba Dao also mentioned that in the first half of 2024, the group’s revenue decreased by 10 0 0 year-on-year to 2,396 m illion yuan, with revenue from the sale of goods and equipm ent decreasing by 10 0 0 year-on-year, and revenue from royalties and franchise fees decreasing by 5 8 year-on-year. But on the other hand, its store count grew 20 6 year-on-year.
Tea Budao said it increased policy support and sales incentives for franchisees in the first half of 20 24, taking into account that consumer habits were affected by changes in the external environm ent.
Guming’s prospectus shows that in the first three quarters of 2024, its revenue was 6.441 billion yuan Adjusted profit was 1.149 billion yuan, up 15 6 and 9 98 year-on-year, respectively. Behind the growth in brand performance, Guming’s single-store GMV slipped slightly from last year’s 1,857.6 million yuan to 1,776.3 million yuan, and the average daily GMV of newly-opened franchises slipped from last year’s 5,800 yuan to this year’s 5,200 yuan. In this regard, Guming said it was due to the overall industry slowdown and increased competition.
In the blueprint that milk tea stores have painted for the capital markets, the increasing purchasing power of consumers, the increased frequency of consumption, the convenience of takeaways Product innovation and the standardization of chain brands offer tremendous growth potential.
But on the other hand, with milk tea stores of all brands lined up in shopping malls, the industry is flirting with the idea that there are not enough franchise owners to go around.
Tea drinks are considered the most competitive sector in the chain industry, and there may be mergers and acquisitions and capacity clearing in the future. Well-known consumer investor Song Qianqian, founder of Jiahua Capital, said.
Song forward, said the tea drink industry is loved by young people, the market demand, the future may come out of the successful brands, such as tea in the brand quality digital operations on the construction, honey snow ice city to sink the market route, in the supply chain management is very hard work, these are welcome changes in the tea drink industry.
But Song forward also pointed out that the tea drink track is absolutely homogenized competition, and has a class of financial attributes by fast joining the supply chain profits, and the supply chain side is just a cost plus rather than in-depth processing. The quality of competition in the industry is not high.
Song Qianjin said, a large number of young people choose a low threshold, small investment, fast results, just need high-frequency track entrepreneurship, in China’s huge market and massive user base, creating the above-mentioned billionaires from scratch. But the industry’s profit margin and stability are hardly high quality development. There are not many opportunities left for the latecomers.
Narrow door dining eye data shows that as of December 15, 2024, milk tea beverage industry stores totaled 410,600, the last year, newly opened 127,800, the net growth in the last year, less than 178,000.
The real competition in the tea beverage industry has just begun. Song forward said.
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