Source: Visual China
Author 丨 Zhang Rui
Edit | Kang Xiao
Produced | Shenzhen Network Tencent News Xiaoman Studio
The competition pattern of the tea track with a unit price of more than 30 yuan and less than 15 yuan has been determined, and the tea market in the price band of 15 to 25 yuan has become a must for players. Xicha originally wanted to rely on the sub-brand Xixiao Tea to enter the sinking market, but the results were minimal, which became the prelude to the price reduction of the main brand Xicha against the trend.
Since February 24 announced that "no more new beverage products of more than 29 yuan will be launched, and promises that existing products will not increase prices within this year", Heytea stores have become busier, and some stores have even appeared "burst orders" phenomenon.
The author recently visited two tea shops located in Chaoyang Joy City and Xihongmen Huiju Center and found that there are many customers waiting to pick up tea inside and outside. "Now when orders are placed, there are still 200 single numbers in the queue in front, because there are too many customers waiting in the store, and the store has suspended online orders," the staff of the Xicha Shop in Huiju Center told the author.
The picture on the left shows the Joy City store of Heytea Chaoyang; the picture on the right shows the customers who are queuing up in the store waiting for Heytea
Not only are offline stores in a market, but the author was also told when placing orders on the Heytea GO Mini Program, "Tea making is busy, and online only fresh food, ice cream, bottled drinks and other goods can be purchased." ”
"The restriction of orders placed by the Heytea GO Mini Program does not exclude the marketing component, but since the price reduction in the early 2022 against the trend, Heytea has indeed grabbed some users of the new tea brand at the same price," Zhang Hua (pseudonym), a tea drinking entrepreneur, told Deep Web.
At the beginning of 2022, at the same time that brands such as Starbucks and Tea Yan Yueshi announced price increases, "high-end" tea brands such as Hey tea and Naixue's tea have bucked the trend and reduced prices.
According to the author's observation, the price reduction category of Heytea includes pure tea, milk tea and fruit tea, with a decline of between 3 yuan and 7 yuan. Among them, pure tea products are the cheapest after the price reduction, such as pure green tea from 13 yuan to 9 yuan; pure milk tea in the milk tea category from 22 yuan to 15 yuan; pure berry in fruit tea has also dropped from 32 yuan to 25 yuan; and cheese series of shiba raspberry has dropped from 32 yuan to 29 yuan.
After the price adjustment, in addition to a few city-limited products, surrounding areas, as well as a small number of products in LAB stores and handmade stores, the product prices of heytea mainstream stores have been comprehensively lower than 30 yuan, and the price of products priced at 15-25 yuan has accounted for more than 60% of all products of heytea.
The price reduction of Heytea is partly due to the improvement of its cost control ability. For the price reduction, Heytea officially replied to the "Deep Net", "This is due to the brand potential, scale advantage, and the accumulation of supply chain, so that the price of some products can be adjusted under the premise that the product formula, materials and quality have not changed." ”
However, on the other hand, with the peaking of user growth in first- and second-tier cities and the change of user consumption habits by the epidemic, high-end tea brands in first- and second-tier cities have to consider seizing more users by sinking or reducing prices to improve store efficiency and their own profitability.
From "Hermès" to "McDonald's"
The story of Heytea began in 2012.
In 2012, nie Yunchen, who was only 21 years old, opened a milk tea shop in Jiuzhong Street, Jiangmen City, Guangdong Province, with the 200,000 yuan earned from selling mobile phones, named RoyalTeA (renamed "Xicha" in 2016). A widely circulated story in the circle is that Nie Yunchen, who has just started a business, spends a dollar in half, and one person takes care of all the work such as store decoration, menu design, product modulation and so on.
"The first cup of cheese tea was made in December 2011, when I hadn't opened a store yet, and I was working on the product at home. Initially tried milk lid tea and it felt good. At that time, most of the milk caps in the industry were made of powder, which was something that the industry could not get around. From the perspective of consumers, this must be bad, and we need to find new breakthrough points," Nie Yunchen said in an interview with the media, explaining his original intention of choosing to open a milk tea shop.
Fresh cheese, fresh milk, coupled with the tea leaves now brewed tea base, Nie Yunchen's cheese milk cover tea quickly sold in Jiangmen. Because of the insistence on making tea with only fresh milk and fresh fruits, the price of a series of single cups such as heyte cheese milk cover fresh fruit tea once exceeded more than 30 yuan, becoming the "Hermes" in the milk tea industry.
However, the high price does not prevent users from "spending hours queuing up to buy Xi tea". Some newly opened stores are too hot, and even the phenomenon of "scalpers" increasing the price of buying hey tea.
In the eyes of the outside world, Xicha, which breaks through the ceiling of milk tea prices, has always been smooth. In August 2016, Heytea received IDG Capital and today invested more than 100 million yuan, and Heytea, which inserted the wings of capital, opened the wild running mode.
However, in Nie Yunchen's view, his early experience in starting a business could not be looked back. "I've encountered a lot of problems that I'm not good at dealing with, and they even exceed my cognition, such as being exchanged by suppliers, and others charging training fees and franchise fees outside in the name of the founder of Heytea."
The small bugs in the early stages of entrepreneurship did not stop the pace of Heytea's rapid expansion. In 2016, the number of Heytea stores was more than 50, and in 2019, this number climbed to 390, more than 7 times, and once became the head of high-end ready-made tea drinks.
Some investors have revealed to "Deep Net" that "the competition pattern of the tea drinking track of more than 30 yuan and less than 15 yuan was basically fixed at the end of 2019." In the high-end tea drinking track of more than 30 yuan, Xicha is the head; and Michelle Ice City has become the boss of the tea market below 15 yuan. In the future, the tea market in the price band of 15-25 yuan will become a must for the runners of this track, because this price range still has the possibility of running out of the head."
The market pattern of more than 30 yuan and below 15 yuan is fixed, which means that the players in these two price ranges have entered the stage of stock competition, and if Heytea wants to maintain rapid growth, it must attack the tea market of 15-25 yuan.
For the planning of Xicha after 2019, Nie Yunchen once said in an interview that there are only two barriers in the consumer industry, or eventually become a wheel that has been 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.
Judging from the development path of Xicha since 2020, it has obviously given up its intention to do a new tea drinking track "luxury brand" and turned to a species with brand barriers like "McDonald's".
Some Xicha insiders revealed to the "Deep Web" that "the focus of Heytea's future offensive is the 15-25 yuan market to reach more consumer groups."
Break the life cycle of influencer shops
To reach more consumer groups and do the "McDonald's" of the new tea drinking track, we must first break the life cycle of internet celebrity stores.
"Consumer goods have an iterative cycle, because consumer tastes are changing, the market environment is changing, and finally what remains is some unchanged categories and brands, which are finally adhering to the ultimate cost performance, and strive to achieve just need and high frequency", the above investors explained to "Deep Web".
Zhang Hua, a tea drinking entrepreneur, has a deep understanding of this. "Stretching the time, the life cycle of the influencer brand is not long." Seven points of sweet to do poplar branch manna do well, some peers rushed to do poplar manna, saw deer horn lane do brown sugar pearl collision milk well, and immediately turned to do black sugar pearl collision milk, and now see hi tea out of the explosive product, they rush to copy, even research and development have been saved."
Heytea wants to build its own brand barriers like Coca-Cola, Starbucks, and McDonald's, and it is imperative to reach more people and make these people repeat customers. The "Heytea GO" store and mini program launched by Heytea in 2018 have become one of the grippers for Heytea to reach more users.
Heytea stores are divided into three categories, the main store, the main takeaway Heytea GO store, including black gold, Lab, pink and other theme stores. In addition to the main store, Heytea GO stores have grown rapidly. According to data, among the more than 300 stores added by Heytea in 2020, about 30% of the stores are Heytea GO stores.
Xicha GO stores are generally opened in office buildings or communities, with a small area, a self-pick-up cabinet in the store, online orders for users, and on-site pick-up. Compared with the standard store, the labor and rental cost of the Heytea GO store are lower. More importantly, Heytea GO stores can help the main store and theme store radiate a wider range of people.
Since Heytea's stores are mainly distributed in first- and second-tier cities, to achieve high frequency, just need, reach more people, Heytea must explore the low-line market. In this context, Xi Xiao Tea came into being. In April 2020, Xi tea launched the low-end price brand "Xi Xiao Tea", focusing on the low-tier city market with a price range of 10-15 yuan.
The picture shows the distribution of Xicha City, source: narrow door dining eye
Xixiao tea mainly "fresh milk manufacturing, affordable and material", sales categories include fresh milk tea, fruit tea, coffee, ice cream, pure tea, etc., product positioning in the price range of 8-16 yuan, the price is basically the same as tea color, a little, Yihetang, CoCo and other brands.
However, from the perspective of the speed of opening stores, XiXiaocha obviously did not complete the dream of Xicha to take down lower-tier cities. According to the data of the narrow door restaurant eye, as of now, there are 28 Xixiao tea stores, mainly concentrated in Guangzhou, Shenzhen, Dongguan, Foshan and other cities, and have not yet left Guangdong Province.
Some entrepreneurs speculated: "The price reduction of Xi tea against the trend may also be related to the 'unfavorable teacher' of Xi Xiao Tea, and the direct price reduction of the main brand is more effective."
Whether you want to reach more users or break into the sinking market, the ultimate cost performance is the key. "Take the road of extreme cost performance, transition from the net red shop model to the affordable store model, and suppress the unit price of the product and become a must-have in the eyes of consumers," the above-mentioned investors said.
"One wheel" covers the upstream and downstream
In order to suppress the unit price of Heytea products, it is first necessary to disassemble the cost composition of Heytea products.
The cost of the new tea industry is mainly divided into three blocks, raw material costs, staff costs, and rent. Since Heytea has never announced the proportion of these three parts of the cost, we compare it with the tea of Nesher that has already been listed.
From 2018 to 2020, the cost of tea raw materials in Nesher accounted for 35.3%, 36.6% and 37.9%, respectively; labor costs accounted for 31.3%, 30% and 30.1%, respectively; and the depreciation of use rights assets accounted for 11.1%, 10.5% and 11.5%, respectively.
That is to say, in the cost composition, raw materials and labor costs account for the majority. Since new tea is also a service industry, reducing labor costs by compressing employee wages will cause personnel loss, so new tea companies such as Heytea can only work raw materials and supply chains.
Nie Yunchen had already prejudged this. "The consumer industry should become a wheel that keeps turning, constantly affecting the upstream and downstream, so as to further expand its own scale."
In terms of supply chain system, Heytea told The Deep Web: "The company not only has the strength of large-scale procurement, but also goes deep upstream, through self-construction, co-construction of bases and other ways, deeply involved in the planting and production of upstream tea gardens and orchards, which not only ensures the continuous and stable supply of raw materials, but also optimizes procurement costs." ”
In addition to building its own tea garden in Fanjingshan, Guizhou, and jointly building a betel nut taro planting base in Guilin, Guangxi, Heytea has also built a back-end supply chain through investment in recent years. For example, YePlant, a wild plant that Heytea invested in October 2021, is a supplier of oat milk.
Whether Heytea's management of the supply chain system can become a sharp tool for reducing costs is difficult to draw conclusions at present. But what is certain is that in the absence of external capital transfusion, Heytea will surely slow down the pace of expanding stores and enter the era of refined operation of stores.
However, some industry insiders close to Xicha explained to the "Deep Net" that "Xicha currently maintains a profitable state and has its own hematopoietic ability, so it has the confidence to lower the price."
Slow down the hi tea
For its own profitability, Heytea did not comment. To be sure, Heytea has adjusted the speed of expanding stores, from the previous rapid expansion to the stage of refined operation.
From the growth rate of Heytea stores from 2017 to 2021, it can be seen that 2021 is an inflection point in the development of Heytea. Since the second half of 2020, Heytea has entered the "slow lane" of Tuodian.
According to the narrow door restaurant eye data, from 2019 to 2021, the number of Heytea stores was 390, 695 and 886 respectively, with a year-on-year growth rate of 139%, 78% and 27.5% respectively.
There is a law for the development of direct catering enterprises, the faster the store is expanded, the single store ping effect will decline, and the less cash flow each store can contribute, and even the loss. For example, when there are 100 stores, each store can contribute tens of thousands of profits per month, but when the store reaches 1,000 stores, each store may bring tens of thousands of losses per month.
"When the new consumer investment is hot, entrepreneurs can expand rapidly in order to scale, but in the cold winter of capital, companies without capital transfusion must consider their own hematopoiesis and profitability problems," listed investors explained to The Deep Web.
This law is no exception for Xicha. Heytea last announced the financing in July 2021. At that time, Heytea announced the completion of a $500 million Series D financing. Since then, there has been no news of financing from Xicha.
From July 2021, Heytea has significantly slowed down the pace of expanding stores. According to the data of the narrow door restaurant eye, since July 2021, the monthly growth of Heytea stores has declined significantly. Taking September as an example, in September 2020, the number of heytea stores grew by 60 in a month, but in September 2021, the number of stores in that month increased by only 16.
The decline is not only the speed of store expansion, but also the average revenue and efficiency of the store. According to jiuqian consulting data, from July 2021, heytea began to decline nationwide. Taking the Data of October 2021 as an example, the average revenue and sales efficiency of stores fell by 19% and 18% compared with July; compared with the same period in 2020 last year, it fell by 35% and 32%.
When the average revenue of stores declines, it is crucial to improve supply chain management and refine the operation of stores. However, in the view of some of the employees who have left The Tea, the first step in solving the problem of Heytea is to reduce costs and increase efficiency and lay off employees.
Some Xicha employees anonymously revealed in the pulse: "Xicha has started layoffs at the end of 2021, and the layoffs in 2022 are still continuing."
For the news of layoffs, Heytea replied to the "Deep Web": The relevant rumors are false information, and the personnel adjustment is based on the normal personnel adjustment and optimization of the year-end assessment.
But this also reflects from the side that there are still problems in the organization and management of Heytea. "The last mile of organizational capacity is management capacity. When your organizational radius does not match the store system enough, there will be a state of development imbalance, and the part of the scale value that should have spilled may be lost," Cong Yonggang, a global partner at Fosun, once discussed the relationship between the speed of catering enterprises and their organizational capabilities.
Industry insiders close to the management of Xicha explained to "Deep Net", "Because the catering service is more arduous, and the employees are mostly post-95s or even post-00s, store management is an art, and employee mobility and complaints are normal phenomena."
The fact beyond the controversy is that Heytea, which was once rapidly expanding, has "slowed down", and Heytea, which has undergone a wave of internal optimization, is struggling to find a balance between organizational strength and scale expansion.
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