Heytea "laid off" 30%, Naixue's tea stock price plummeted by 60%, new tea brands were in a crowded track, and capital began to withdraw one after another.
Wen 丨 BT Finance Hu Haiyang
New-style tea drinks have risen rapidly in a short period of time, with a scale of up to 110 billion yuan in 2020, and brands such as Xicha, Naixue's tea, tea yan yuese, Coco, 1 diandian, and Lele tea have emerged in an endless stream, and the number of stores has reached 550,000. New-style tea drinks are also popular with capital, with a total of 32 financings in 2021, doubled from the previous year, and the total amount disclosed exceeded 14 billion yuan, reaching the peak of 10 years.
However, the wind direction of new tea drinks has changed recently, And Naixue's tea has issued a profit warning for 2021, with an annual loss of 135-165 million yuan; Heytea has recently been exposed to lay off 30% of employees and does not issue year-end awards; and Tea Yan Yuese has closed nearly 100 stores in Changsha's base camp within a year. The new type of tea drinks from running errands to buying, long queues of fragrant food to "mountain tops", tea brands in the crowded track of the scorched, capital also began to sweat for their own hot money. Is the new tea industry still moving?
The new tea industry has changed from "hot" to "cold"
The state of the new tea industry
New-style tea drinking refers to a Chinese drink made of tea leaves, fresh milk, fruits and other ingredients through a combination of tea bases and ingredients, which has become an important way for young people to contact traditional tea. New-style tea drinks are mostly operated in store mode, sold now, with more emphasis on fresh ingredients, becoming the development trend and upgrading direction of the tea consumption market, and many new-style tea brands are gradually becoming popular, such as Hey Tea, Nai Xue's Tea, Tea Face Delight, Coco, 1 Point, Lele Tea, etc.
Since 2015, new tea brands have continued to rise, and the scale of the industry has grown rapidly. According to the "2020 New Tea White Paper", the growth rate of heart tea drinks in 2018-2019 was rapid, with a growth rate of 21% and 83% respectively; affected by the epidemic, the passenger flow was greatly reduced, and the growth rate of the industry scale fell to 4% in 2020, and the growth rate in 2021 only recovered to 8%; it is expected that by the end of 2021, the scale of new tea drinks will exceed 110 billion yuan.
(Data from the "2020 New Tea Drinking White Paper")
With the continuous expansion of new tea brands, coupled with the continuous addition of new brands, the number of stores in the industry as a whole has grown rapidly, from 250,000 in 2017 to 500,000 in 2019, doubling in just 3 years. Affected by the epidemic in 2020, the number of stores closed is relatively large, and in 2021, "compensatory consumption" will be ushered in, and the cost of taking stores is lower than in previous years, and the number of stores will increase to 550,000. In terms of store distribution, offline stores are the mainstay, mainly concentrated in first- and second-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen. However, at present, the development path of internal volume such as "compensatory consumption" has been exhausted.
The financing boom of the "new tea drinking industry"
The popularity of new tea brands has attracted countless entrepreneurs and capital influx.
According to CNBData's "2020 Investment and Financing Trend Report in the Consumer Sector", there were 18 financings for tea brands in 2020, an increase of 8 over 2019, and the total amount of disclosure exceeded 1.7 billion yuan, an increase of nearly 7 times year-on-year. Among them, Naixue completed two rounds of BC financing in June and December, with a total amount of 200 million US dollars; 7Fentian received 150 million yuan in October; heytea also completed the C round of financing in March, the specific amount of which was not disclosed.
Financing in 2021 will take to a new level. A total of 32 financings occurred in 2021, double that of the previous year, and the total amount disclosed exceeded 14 billion yuan, reaching the peak of 10 years. Among them, Mixue Bingcheng, which takes the "countryside surrounds the city", completed the first round of financing of more than 2 billion yuan in January, led by Meituan and Hillhouse Capital, with a post-investment valuation of 20 billion yuan; in July, Xicha completed the D round of financing, with a financing amount of up to 500 million US dollars and a post-investment valuation of 60 billion yuan; Uncle Lemon Tea Hill also completed a pre-A round of financing of more than 100 million yuan in September, and the investors were Guangfa Xinde and Gaorong Capital.
Listing is also a financing channel for new tea drinks. 2021 Naisher's Tea (02150. HK) was successfully listed in Hong Kong, becoming the first stock of new-style tea drinks; in September last year, the Henan Provincial Securities Regulatory Bureau disclosed that Mi Xue Bingcheng was receiving listing counseling from GF Securities; Lele Tea was rumored to be the fastest to go public in Hong Kong this year, with a proposed financing amount of US$300 million to US$500 million; according to media reports, Chabaidao is also considering an IPO in Hong Kong, with a proposed financing of about US$500 million.
Judging from the above financing, most of the capital favored are head brand enterprises, and other waist brands (such as Gu Ming, Shanghai Auntie, Shuyi Xiancao, etc.) have also obtained financing, but the amount is much lower than that of the head company. We believe that on the one hand, the head enterprise has brand strength and product advantages, the risk of failure is relatively low, on the other hand, the head uses the model of direct stores, which helps to enhance the brand image and also has a positive effect on the brand valuation, in addition, the ultimate purpose of capital investment in the head enterprise is to promote its rapid listing and cash-out.
New tea drink "cold"
When capital is pouring in, new tea drinks are in decline and growth. According to the "2021 New Tea Beverage Research Report" of the New Tea Beverage Committee of the China Chain Store and Franchise Association, the new tea market has entered a period of phased slowdown, and it is expected that the growth rate in the next 2-3 years will be adjusted from 20% + to 10%-15%.
Nesher's tea profitability is worrying, with a total net profit loss of more than 300 million yuan from 2018 to 2020, and a recent announcement shows that a loss of 135-165 million yuan is expected in 2021. The stock price has also broken all the way, and the current stock price is around 7.4 yuan, which is more than 1.5 times lower than the issue price.
Other brands have also suffered a "cold snap". Xicha was exposed to problems such as product price reductions, fines due to food safety, and large-scale layoffs; there were hundreds of stores in Changsha, the base camp of Tea Delight, and three centralized stores were closed in 2021.
With the intensification of industry competition, the bubble of new tea drinks has been punctured, how to maintain the rapid expansion of stores and continuously improve the profitability of stores has become a life-saving straw for the survival of the brand.
What is the intention behind the layoffs of Xicha?
Attract big investors and complete Series D financing
Xi tea originated in 2012 in Jiangmen City, Guangdong Province, the riverside alley, with a cup of cheese tea to open a new era of tea, the company's business model is only to do direct stores, do not franchise stores, store decoration to black and white gray simple wind mainly.
(Image from the company's official website)
In July 2021, Heytea completed the D round of financing, with a financing amount of up to 500 million US dollars, and the investors included Sequoia China, Hillhouse Capital, Tencent Investment and other investment giants, and the valuation after the investment has reached 60 billion yuan, which has also refreshed the financing valuation record of the new tea industry.
(Image from Sky Eye)
Heytea layoffs hurt who
In the past decade, Heytea's stores have expanded rapidly, and they are directly operated stores, and the cost pressure is increasing, and the news of layoffs to reduce cost pressure has recently been exposed.
According to insiders, Heytea's layoffs will involve 30% of employees, of which the information security part will face all layoffs, the store development department will be laid off by about 50%, and the laid off personnel can be compensated by N+1 or internally transferred. The news of "no year-end bonus" circulating on the Internet was exposed again, and some employees complained that there was no meal allowance for Xicha, very few benefits, often working overtime until eleven or twelve o'clock, either no year-end bonus or year-end bonus postponement, etc., saying that "salary increases, year-end awards" and other messages were laid out on the live screen of the annual meeting.
In response to the above information, Xicha issued an official statement saying that the rumors were false information, and the company was not a large number of layoffs, but based on the year-end assessment of personnel adjustment and optimization. The person in charge said in an interview with the media that the year-end award is distributed to employees before the Spring Festival according to the annual performance.
This is not the first time that Heytea has been exposed to problems, before the Heytea store was fined 450,000 yuan for food safety problems, specifically because the advertising content of "Bayberry Upgrade", the origin of Bayberry, "Fresh fruits are fresh every day" and other publicity and actual situation is inconsistent with the actual situation.
Store profits also declined, according to Jiuqian consulting data, in October 2021, the average store revenue and sales efficiency of Heytea fell by 35% and 32% year-on-year, it is estimated that the main and industry competition intensified, rapid expansion of stores superimposed on the rise in store rents, resulting in a surge in store opening costs.
Heytea variety of problems appear frequently, the real reason behind the development of Heytea has been bottlenecked, in order to obtain financing or successful listing, you have to pay a beautiful financial statement. Heytea in high-end shopping malls in high-end cities, core business districts and other store space has been very narrow, in order to sink the channel, Heytea on 14 single products for 1-9 yuan of decline, began to reduce the dimensionality of competition, and strive for mid-range tea consumption groups.
The speed of opening stores slowed down, and the race was temporarily over
The Heytea brand is positioned at the high end, and its stores are mainly opened in first- and second-tier cities. In the segment of high-end new tea chain stores, the market share of Heytea is as high as 27.7%, and Nai Xue ranks second with a market share of 18.9%.
The expansion of Heytea's stores is relatively rapid, and the directly operated stores cannot rely on their own financial strength alone, and capital boosting is an important premise of Heytea's "horse racing". After the completion of the B round of financing in 2018, the total number of Heytea stores reached 163, exceeding the sum of the number of stores in the first 5 years of establishment; from regional to national, the strategy of opening stores before 2018 was to lay out super-first-tier cities and the "base camp" market in South China and the Pearl River Delta, and in 2018, it successively entered major cities such as southwest, central, northern and coastal areas to complete the "pan-national" layout.
After receiving the Series C financing led by Hillhouse Capital in 2020, it expanded against the trend during the epidemic, with 695 stores at the end of 2020. Stores have newly entered 18 cities, and the top 15 cities in the number of new stores in the whole year are: Shanghai, Shenzhen, Beijing, Guangzhou, Chengdu, Hangzhou, Dongguan, Chongqing, etc.
In 2021, according to Jiuqian data, the number of heytea stores in 2021 was 865, compared with 170 new stores opened in 2020; at the end of January this year, the total number of stores was 879, an increase of 16% month-on-month.
(Data from publicly available sources)
The number of stores opened by Heytea in first- and second-tier cities is close to saturation, the number of new openings every year is also declining, and the profitability of single stores has not increased with the opening of stores, which is why Heytea has increased sales of single stores and reduced the cost of ping efficiency to improve profitability by reducing labor costs, reducing prices to attract consumers, and strengthening customer interaction.
Nesher profit warning, after high-speed expansion into the internal optimization period?
Nesher expanded nationwide
As a well-known new tea brand in China, Naixue's tea was founded in Guangdong Province in 2015, the founder is Peng Xin, and the name comes from the founder's online name "Naixue". Naixue's tea adheres to the good life experience of "providing a good cup of tea and a soft European bag", brings good tea to everyone through a simple and modern lifestyle, and promotes Chinese tea culture to the world.
Nesher's tea is also a direct-operated model, without any form of joining. In December 2017, Naixue's tea went out of Guangdong and launched the "National Urban Expansion Plan" to march towards nationalization, with 490 stores by the end of 2020, an increase of 335 over 2018, covering 67 cities across the country. Nesher brand positioning high-end, stores mainly cover high-traffic areas, such as high-end shopping malls, office buildings, core business districts and other core locations, nearly 70% of the stores are concentrated in first-tier and new first-tier cities, followed by second-tier cities.
(Data from prospectus)
According to Naixue's original plan, it will continue to open 300 and 350 stores in first-tier cities and new first-tier cities in 2021 and 2022, of which 70% are Nesher Pro tea shops. At the same time, the company also disclosed in the prospectus that the number of new stores opened in 2023 is at least not less than 2022.
Profitability declines
Nesher's single-store sales are declining year by year. According to the disclosure of Naixue's prospectus, horizontally, the longer the opening time of Naixue stores, the stronger the daily sales capacity of the stores, and the average daily sales gap is about 2,000 yuan; vertically, whether it is an old store or a new store, the daily sales of single stores from 2018 to 2020 show a downward trend of varying degrees. Same-store profit margins also showed a downward trend, with same-store margins in first-tier cities falling from 24.2% to 12.5% in 2020 and new first-tier cities falling from 27.5% to 13.7%.
The company's net profit has not yet turned a loss into a profit since 2018, with a loss of 200 million yuan in 2020 affected by the epidemic, and an estimated loss of 135-165 million yuan in 2020 to achieve loss reduction.
Rapid expansion forms a large-scale and enters the "internal optimization period"
In order to improve profitability, Nesher's strategy is to rapidly expand to form a scale advantage, so as to reduce store costs and expenses, thereby reducing breakeven to achieve overall profitability. Therefore, in the fourth quarter of 2021, Nesher opened 149 stores, which is equivalent to the number of stores opened in previous years.
It is understood that in the fourth quarter of last year, 23 standard stores were converted into Nesher Pro stores, compared with standard stores, the upfront investment cost of Pro stores was lower, and replaced the baking mode of the previous "front store and rear factory" on-site production, and changed to the central kitchen in advance production, which greatly saved rental costs and labor equipment and other costs. In addition, the number of clerks in Pro stores averages 13, far lower than the 22 in standard stores.
With the expansion of Naixue's tea store network, continuous implementation of product innovation and continuous improvement of brand awareness, in the next stage, Naixue will further strengthen its own brand effect, and constantly develop new explosive products to solve the problem of homogenization of products in the industry, and the company's performance is expected to improve.
conclusion
At a time when competition is becoming increasingly fierce, where should new tea drinks go?
Product quality is a top priority. The rapid development of the Internet and mobile devices has made the spread of messages very costly. In addition, consumers' health consumption concept and quality and safety awareness continue to improve, once the products of new tea shops develop quality problems, sooner or later they will be exposed, and once exposed, they will quickly spread to the target or potential consumer groups.
Coordinate price positioning during the sinking process. Positioned in the high-end Xicha, Naixue and other brands in high-tier cities after the store is full, to do the market sinking will encounter product prices, brand positioning and other issues, and Honey Snow Ice City price is close to the people, in the low-tier cities expansion is very good, to the first and second-tier cities are also popular, what does this mean? This shows that the current Consumption Potential of China is mainly in the middle class, there are so many high-end consumer groups, the price is popular, the target group can be expanded, and the channel sinking is relatively easy.
(Data from Ai Media Consulting)
Strengthen store management. Store management is a very deep learning, many store models are accelerating expansion, but management can not keep up and buried hidden dangers. In the store mode, managers should train store staff and franchisees, plan logistics and distribution, and choose marketing publicity.
The new tea industry needs a change, are you optimistic about the development of the new tea track in the future?
【BT Finance Tips】This article is for reference only and does not constitute investment advice. Investors should not use this report as the sole reference factor in making investment decisions, nor should they believe that this report can replace their own judgment.