On the afternoon of February 8, Nesher's Tea issued a profit warning, saying that the company recorded revenue of about 4.28 billion yuan to 4.32 billion yuan for the whole year of 2021, and an adjusted net loss of about 135 million yuan to 165 million yuan.
Stretching the timeline, according to the prospectus, from 2018 to 2020, Naixue's annual operating income of tea was 1.087 billion yuan, 2.502 billion yuan and 3.057 billion yuan, and the adjusted net profit was -56.6 million yuan, -11.7 million yuan and 16.64 million yuan, respectively. In contrast, in 2021, Nesher's tea revenue showed a growth trend, but the profit situation was not optimistic, and the typical increase in income did not increase profits.
In the secondary market, Nesher's tea has also been on the decline since its listing in June 2021, and in just half a year, the company's market value has been cut by 62%, and the stock price trend has also flowed smoothly, all the way down.
01
High-end dilemma
The reason is nothing more than the limited growth space of the company.
The first is the limitations of the track. As we all know, Naisher's tea focuses on the "tea + soft European bag" dual product model, "tea" refers to the use of high-quality tea, fresh milk, fresh fruit and other natural, high-quality ingredients, through a more diversified tea base and ingredients combined into a fresh tea drink. The ready-made tea drinks, according to pricing, can be divided into high-end (average price of more than 20), mid-end (average price of 10-20), low-end (average price of less than 10 yuan), Naixue's tea is in the high-end price band.
In the past few years, after the emergence of new tea drinks led by Neisher's tea, the scale of the ready-made tea market has grown rapidly, and the market size GAGR in 2016-2020 is as high as 22.6%, and a number of institutions have heard the wind, and a large amount of investment has flowed into ready-made tea companies.
However, with the arrival of the new crown epidemic in 2020, the mainland's economic environment has also decreased, and the willingness of residents to consume has also decreased, coupled with the tightening of epidemic prevention and control, the customer flow of ready-made tea brand stores led by Nai Xue has dropped sharply, and even closed down several times under the strict epidemic prevention policy.
In this context, Nesher's tea has to invest a lot of money in digitalization to seize online orders and takeaway customers. According to the founder of Naixue's tea, starting from the beginning of 2020, Naixue has implemented digital tactics in stages, accelerating the integration of online and offline through online channels such as mini program ordering, third-party takeaway platforms, WeChat malls, live broadcasts, and Tmall flagship stores, which has alleviated the pressure on store operations to a certain extent. According to the financial report, in the first half of 2021, the proportion of Nesher's tea line revenue has reached 72.2%. But correspondingly, the company's store operating profit margin has decreased year by year.
Even aside the environment, the ceiling of high-end ready-made tea is much lower than on other tracks.
The most fundamental limitation lies in the expansion of space. High-end restricted tea often rely on shopping malls, according to Frost & Sullivan statistics, the total number of shopping malls in the country in 2018 is less than 5,000, although there is no updated data, but according to Sullivan's calculations, by 2023, the total number of shopping malls in the mainland will still not be able to break through five figures. Even though the number of stores has multiplied since The beginning of The Burning Of Nesher's tea, as of December 31, 2021, There were only 817 tea shops operated by Nesher.
In contrast, other price points of tea brands, casually a slightly well-known can hang high-end tea brands, according to the Northeast Securities Research Report, to the street shop-based low-end tea brand Michelle Ice City through the franchise model of rapid expansion, the number of stores has reached 13846, and deep penetration of the market, the number of stores in the third-tier and below cities accounted for more than 60%. The mid-range tea brand is basically a combination of street stores and shopping mall stores, and the number of Coco and 1-point stores that we are familiar with has reached 4278 and 3462 respectively, and even the highly regional mid-range tea brand Tea Beauty has 323 stores in Changsha alone.
In contrast, high-end ready-made tea drinks are trapped in the price range, the consumer group is much smaller than the low-end tea drink, and the area that can be expanded is also limited.
Some people may say that although the number of high-end tea stores is small, it wins by quality and is stronger than low-end tea.
It is undeniable that the unit price of high-end fresh tea is expensive, but in terms of profitability, high-end ready-made tea drinks are not necessarily how high-end, review the characteristics of Naixue tea drinks: superior tea, fresh milk, fresh fruit. Tea is also good to say, fresh milk and fresh fruit on the transportation, preservation conditions are extremely high, of which the fruit also has obvious seasonality, seasonal taste and flavor differences greatly, will affect the final tea flavor of the production. Therefore, the raw material cost of high-end ready-made tea will be much higher than that of those low-end teas that use tea powder, creamer and fruit mushrooms to process raw materials.
Source: Prospectus
And in addition to raw materials, the staff cost of high-end ready-made tea is also very high, most of the milk tea shop production process is relatively simple, just blend milk tea, add small ingredients, and high-end ready-made tea drinks are different, due to the addition of fresh fruit, so that employees have to spend a lot of time processing fruits, such as peeling, seeding, juicing, etc., the time and complexity required to spend far more than low-end tea drinks.
According to Naixue's tea prospectus, in 2018, 2019 and January to September 2020, raw material costs accounted for 35.3%, 36.6% and 38.4% of total revenue, respectively; staff costs accounted for 31.3%, 30.0% and 28.6% of total revenue, respectively. Rental expenses and property management fees accounted for 17.8%, 15.6% and 15.2% of the total income respectively, and the expenses of the three costs together accounted for more than 80% of the total income. It can be seen that the cost of tea operation in Naixue is very high.
02
Nesher dilemma
In addition to the high cost, the high-end ready-made tea industry has a low entry threshold and a fast return on investment, but also attracted a large number of entrants, 2016-2018 in just three years, the number of ready-made tea stores in the mainland increased from 190,000 to 450,000, the market volume expanded rapidly, after 2019, affected by the epidemic, the tea market appeared saturation signs, and the competition between tea brands also began to heat up.
Recently, Heytea and Naixue's tea have lowered the price of products, and the behavior of the two seems so out of place at a time when catering companies have raised their prices due to cost pressures.
Ready-made tea drink this product is difficult to give birth to what "secret recipe", when a certain taste, a certain category of fire, the rest of the brand can be quickly imitated in a short period of time, for high-end ready-made tea brands, the market space is naturally limited, in the face of lower prices, taste difference imitators, it is difficult to have the power to fight back, the price is down, deep into the sinking market, may be the final battle to decide the winner and loser, but this process is undoubtedly painful for the tea company that is still burning money.
In addition to the ceiling of the industry, Nesher's tea business model also has some problems.
Unlike xi tea, Nai Xue's tea has always been known as the "next Starbucks" by the outside world, and there are often people who use Starbucks' market performance to value Nai Xue's tea when it is listed, but to be honest, against Starbucks, Nai Xue's tea is a bit high.
At the time of listing, the founder of Naixue's tea once said that space is the second product of Naixue and the core component of the brand core, creating an "all-weather urban waiting room", which is the "third space" that Starbucks was talked about in the past.
Naixue believes that doing "third space" can allow the company to go out of a differentiated development path and enhance The brand recognition of Naixue, in the past, The expansion of Naixue was also dominated by large-scale stores, but in the capital market, "third space" is not a good business has become a consensus. The logic is also very clear, "third space" means that a larger store area is needed, and Naixue's tea also has higher requirements for store traffic because of the special attributes of tea drinking. High crowd flow, large stores, the corresponding rental costs are bound to be very high.
Starbucks is different, as a pioneer in the Chinese coffee market, it has accumulated unparalleled brand power in the mainland, and general shopping malls will have different degrees of preferential policies for this very appealing brand, which means that Starbucks can get better-positioned stores at lower prices, and also make them more patient to do this "space business".
The third space of Naixue obviously has not yet made it stand out from the high-end tea brand species, and the tea customer groups of Xicha and Naixue have a high degree of overlap, and it is difficult for most consumers to achieve the degree of "you must not" love, and the space has little effect on the promotion of store traffic.
To make money by relying on the third space, Nai Xue has to increase the unit price of each table, "a good tea, a soft European bag", bread with tea is the main path for Nai Xue to increase the unit price of customers, but bread is also the same as the tea raw materials mentioned above, requiring strict quality control and freshness, which complicates the difficulty of store management.
In the tea drinking lake where the situation is not yet clear, if it is lost, it may be a thousand miles away, although The new stores opened by Nai Xue now are mostly smaller PRO stores, but whether they can run out of this melee is still uncertain.