Heytea's "quiet price reduction" did not take long in the past, and recently there was news of a major layoff within Heytea, involving 30% of employees overall.
Founded in 2012, this new tea brand sells products, brands, designs, social spaces, and frequently becomes a darling of capital, but with the rumors of layoffs, it shows its rarely exposed side: the extension of year-end awards, the layoffs of departments, the infighting of the company...
Picture from: Hi Tea
Coincidentally, some time ago, the salary storm of "11 hours per capita working hours and less than 3,000 monthly salaries" was also boiling over.
If you pay attention to the recent tea drinking news, you will find that the news such as the price reduction of Xi Tea, the price increase of Tea Color, the price reduction of Nai Xue, and the welfare of Employees of Tea Face is not long. This makes one wonder: What has happened to the new tea market lately?
Layoffs, price cuts, price increases... What's happened to the new tea drink lately
The "new" of new tea means that "new" things are always in the news.
The morning report said that Xicha laid off 30% of employees, many departments were laid off, the gang formation between executives was very obvious, employees did not have year-end bonuses, and the biggest prize at the annual meeting was 188 yuan in cash. Coupled with the speculation of former employees of Xicha, "the company's performance this year is not good, although it is making money, but the net profit is growing negatively." Streamlining human resources can make the financial report look better."
It seems that the recent situation is not good, and there is no momentum to move forward at the beginning.
Heytea stores need a lot of staff to make tea
Xicha's response also came exceptionally quickly. In the afternoon, Xicha responded to the media that "the relevant rumors are false information, the company does not have the so-called major layoffs, and a small number of personnel have been adjusted to normal personnel adjustment and optimization based on year-end assessment." At the same time, the year-end bonuses of employees have also been issued to employees normally before the Spring Festival according to their performance performance."
For a while, the viewers did not know which side to believe was better, after all, there were many cases where the media reported errors and official rumors were finally confirmed to be true. The only thing that is certain is that the days of the new tea brand are indeed not so good. In previous years, when there were customers lined up at the door of every store, no one would have believed this kind of news.
At that time, new tea drinks had not yet entered so many cities, and new tea drinks were still a phenomenon at that time.
The new tea drink brand is pleasant
But now the new tea has become a daily consumption, which one to choose for every afternoon tea? The price increases and price reductions of these brands are naturally of great concern because they are related to your wallet. Last year, tea baidao, CoCo, a little bit and other milk tea brands have announced price increases, most of the new tea drinks are reaching the 20 mark, milk tea is getting more and more expensive, really a little unaffordable to drink.
The most important price increase brand is the tea color at the beginning of this year, the price of each cup rose by 1-2 yuan, but the one that should be bought will still be bought. It's just that there are also no small problems inside the tea color, which can be seen from the response of the executives of the tea face to the employees.
At the end of last year, some Changsha employees had raised questions about the reduction of working hours and salary cuts due to the epidemic, and the founder Lu Liang responded that the tea face during the epidemic was 20 million yuan per month, and also believed that employees did not "empathize". "I ask you, although the salary is small, but does the company owe you, although it is small, but it is not given according to work."
Cha Yan Yue color was controversial in the employee discussion, screenshot for the founder Lu Liang to speak
The dispute not only caused a hot search to raise the question of whether employees should feel empathy, but also made a number the focus of discussion - 20 million. If a head enterprise like Cha Yan, which has attracted much attention, also lost tens of millions of dollars during the epidemic and needed to rely on price increases to survive the winter, smaller new tea brands will only become more and more difficult.
The hardships are all similar for new tea brands, but the choices made can be different. At the same time as the price increase of many brands, the original positioning of high-end Xicha and Naixue went against the road and chose to reduce prices, and since then it has become possible to drink a cup of Xicha for less than 10 yuan.
Hi Tea. See watermark for image source
However, the brand has never done a loss-making business, and unlike other brands whose price increases to improve profit margins, The price reduction of Xicha Naixue is more to enhance customer orders. Two brands that can make the unit price of tea drinkers reach more than 30 yuan have also begun to sell tea drinks of less than 10 yuan, which is a dimensionality reduction blow for many brands, and the attraction is extraordinary.
Invisible changes: cost control, increased efficiency
If the price increase and the possible layoffs are what consumers can see in real life and in news reports, there are more changes in new tea drinks hidden in the invisible places, they are hidden in the earnings reports and inconspicuous news, telling the transformation of the new tea road - the explosive new products are still important, but the cost reduction is the top priority.
Nesher's Tea's fourth quarter 2021 financial report shows that the brand has basically returned to the sales level of the same period last year, and some mature markets have also seen same-store revenue growth. When analyzing the causes, the operating costs of brands that have been successfully reduced are not small.
Nesher's tea
The company's self-developed automated tea making equipment has begun to select manufacturers and trial production at the end of the fourth quarter. These devices have been put into trial in some stores during idle hours, and are expected to be officially applied in tea and tea shops in Neixue across the country by the end of the third quarter of 2022.
The relevant automation equipment and measures are expected to reduce the labor cost of the company's tea shop and reduce the rigidity of labor costs. The Company plans to disclose quantitative indicators of cost reduction at an appropriate time after the official application.
According to Nesher's prospectus, employee costs are the bulk of brand spending, accounting for 30.01% of employee costs in 2020. If the cost of materials can also obtain higher bargaining space through the expansion of the brand, the space for employee cost compression is much smaller, and a little carelessness may rush to the hot search like tea.
Nesher store
Automated tea making equipment is a good solution, the efficiency of the store kitchen has increased, and fewer people have been hired.
Another way to reduce costs is to open a small shop, And Heytea, Nesher and other brands have pulled them out of their place because of their unique decoration styles. The tone is there, but the cost is also up. If you want to reduce costs, you should open fewer large shops, less atmosphere, more refinement, and save a solid rent cost.
Hi Tea GO is also a small shop
Nesher's Tea Pro shop is a great way to reduce costs. As a "convergent" store that was launched at the end of 2020, not only are new stores in this mode, but old stores are also moving closer to it. As of December 31, 2021, 23 standard tea shops in Nesher's Tea have been converted to Nesher Pro Tea Shops.
The store is small, if you can do a good job in store management, so that the same brand stores are not too dense, the ping effect will naturally go up. In the report of Xicha's layoffs, two departments were specifically pointed out, that is, the information security department and the store development department. It is rumored that the store development department has been cut by 50%, if this is true, it means that Heytea has also paid more and more attention to the continuous decline in ping efficiency in recent years.
Nesher PRO
From 2020 onwards, the ping effect of Heytea has begun to decline, and tea that used to require customers to queue up to buy can now be bought in three stores. Customers don't have to queue up, and the number of cups sold in a single store is also reduced. For the diversion of stores brought about by the rapid opening of stores, the solution can only be to improve the supply chain and operate stores more finely, but this is a long-term project, and the fastest way is naturally to stop or slow down the expansion.
Store expansion is a little less, and the cost can be lower. We have reported that Heytea's taro mud wave series uses betel nut taro from "Heytea Co-construction Planting Base". The official narrative is "reverse customization of taro puree, with the high standard of new tea drinks affecting the cultivation of upstream raw materials". But in addition to better raw materials, the cost must also be effectively controlled.
Heytea's taro planting cooperation base
In addition to throttling, can Xicha and Naixue still be head players?
What is the reason behind the new tea brand's explicit and implicit efforts to reduce costs and improve ping efficiency?
According to the "2021 New Tea Beverage Research Report" of the China Chain Store and Franchise Association, the growth rate of the new tea market in 2020 is 26.1%, and the growth rate of 2021-2022 will drop to about 19%, which shows that it has entered a slow climbing stage.
If you single out the tea, the situation is not optimistic. According to jiuqian consulting middle office data, in October 2021, the average revenue and sales efficiency of Heytea stores fell by 19% and 18% compared with July of the same year; compared with the same period of the previous year, it fell by 35% and 32%.
At the same time, as consumers, we can more or less perceive that the new tea drink, which uses raw materials as a major selling point, has fallen into innovation anxiety.
Last summer, Nai Xue's oil citrus and the yellow skin of Xi cha were a small fire. The favor for niche fruits not only reflects the ingenuity of the new tea brand, but also shows that the innovation of milk tea and fruit tea itself is in the inner volume, and players must turn their attention to niche fruits with geographical restrictions, difficult to adjust, and unstable supply chains.
Oil citrus. Image credit: Nesher's tea
There is also a fact that cannot be ignored, the mid-range price band is still the mainstream consumer market for new tea drinks.
The "2020-2021 Chinese New Tea Industry Development Report" shows that in the acceptable price range of a single cup of milk tea, the consumer group corresponding to 10-15 yuan accounts for 57%, and the consumer group corresponding to 15-20 yuan accounts for 27%.
Whether it is the direct price reduction of Xi tea or the "price reduction and price reduction" of Nai Xue, it has given consumers a kind of intuition - Nai Xue and Xi Tea also have teas below 10 yuan, which sounds like quite good. The final effect may be like the analysis of Zhang Gansheng, deputy secretary-general of the Guangdong Chain Store and Franchise Association:
This round of price reduction of Xicha is more to reduce the rental-to-sales ratio and the proportion of manpower after increasing the turnover of the store. This price reduction is a phased strategic behavior, which further squeezes the profit margins of low-end opponents.
The so-called low-end players, including "you love me I love you" Michelle Ice City, "after delisting to live well" Luckin, as well as coCo, ancient tea, tea and a little bit of coCo in the streets and alleys and major shopping malls...
These are all representatives of "cost reduction and efficiency increase", not so tonal, and not so many "big stores", but it is true that users are wider and the cost is lower. For the new tea drink head, relaxing the price while maintaining the advantages of the product and reaching more consumers in the sinking market means competing for more new traffic.
However, Xicha and Naixue will not really return to the traditional tea drinking mode of the past, and in addition to exploring a wider price band, of course, they must ensure the throne of the "head player".
Wild Mountain.
From 2021 to now, Heytea has not only invested in new tea brands such as Suge Fresh Tea and Wild Cuishan, but also bet on consumer brands with large business gaps such as pre-mixed wine WAT and specialty coffee Seesaw, and made at least 6 investments.
According to the analysis of interface news, the ambition of Heytea may lie in the fact that by absorbing excellent consumer brands in different segments of the beverage field, supplementing the market areas and business gaps that Heytea itself cannot touch, and finally creating a super beverage company.
New Chinese dim sum. Image credit: Nesher's tea
Other new tea drinks are also "almost inseparable". In July 2021, Cha Yan Yue Se announced its investment in Changsha's local tea brand "Guo Ya Ya", while Nai Xue launched more than 20 new Chinese dim sum in January this year to continue to cultivate in the baking field.
More importantly, new tea drinks such as Xicha and Naixue are not only new in product strength and consumer feelings, but also new in their use of Internet thinking to operate brands, which can be seen from the differentiated strategies such as cross-border joint branding, social media marketing, and scene-based marketing.
Nayuki Suiyuan Yuan Universe.
But this also means that new tea brands with obvious dependence on traffic are more likely to be placed in the spotlight and regurgitated by traffic, whether it is the previous food safety problem and the public evaluation of friends by the founder of Xicha, or the internal management and employee compensation contradictions that have been exposed and unconfirmed.
Making "streamlining human resources and making financial data more beautiful" and "preparing for listing" is a common speculation about heytea price cuts and layoffs. If true, this is also very close to the characteristics of some Internet startups, and the "land capital" of "looking at the outlet, setting up a company, raising huge amounts of financing, burning money to expand, and quickly seeking IPO" is a representative of the middle and extremes.
The capital market wants to see Xicha, which has been developing upwards, but operating a brand always needs to work slowly and do fine work. Nie Yunchen, the founder of Xicha, once responded in an interview to "what are the barriers to new tea drinking":
There are only two kinds of barriers in our consumer industry - either eventually become a wheel that keeps turning, constantly affecting the upstream and downstream, so as to further expand its own scale, and finally realize the super platform of the strong Hengqiang, such as Meituan, Tmall, JD.com, and Amazon; or become a super brand with a brand itself as a barrier, like Coca-Cola, Starbucks, McDonald's, or those luxury brands.
Will the new tea market eventually grow super platforms and super brands? It's too early to draw conclusions, and we'll see.
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