Nesher's tea "encryption" battle: a new store opened one day in 2021 to follow up with Xicha into VC

Per reporter: Wang Ziwei Per editor: Liu Xuemei

In addition to opening stores, Nesher's tea may now be putting its business growth hopes on investment.

On the evening of March 29, Nesher's Tea released its 2021 performance announcement. According to the annual report, The total tea revenue of Nesher in 2021 was 4.296 billion yuan, an increase of 40.5% over 2020. Among them, Nesher's tea online order revenue accounted for 71.8%. Revenue from Mini Program pick-up and takeaway orders was 35% and 36.8%, respectively.

It is worth noting that Nesher is still not out of the loss. The financial report shows that the adjusted loss in fiscal 2021 was 145 million yuan. Even so, Nesher is still active in business, and its strategy is summed up in two words: encryption.

"Encryption" mainly refers to making offline stores more densely covered. According to the financial report, as of December 31, 2021, Nesher's Tea had 817 tea shops in 80 cities, all of which were self-operated. In the whole year of 2021, 326 new tea stores were opened in Nesher. Nesher hopes to open 350 new stores in 2022.

In addition, Nesher's business began to become "dense". According to Qixinbao information, on March 28, Shenzhen Meimei Own Power Investment Co., Ltd. was established with a registered capital of 10 million yuan, 100% owned by Shenzhen Pindao Catering Management Co., Ltd., whose executive director and general manager is Peng Xin, the founder of Naixue's tea.

Investment in the tea industry is not unfamiliar, in 2021 Heytea invested in 5 brands in a row and therefore "out of the circle". This time, Nai Xue also bet on the investment track, which can't help but arouse the curiosity of the outside world: the head players of the new tea drink have competed to be VCs, have they seen the growth ceiling of the track? So, will the next war for new tea drinks be in the field of investment?

2021 is almost a day to open a new store: Nesher "crypto" expansion

Nesher used the word "encryption" to describe the strategy for the whole year of 2021, specifically referring to the expansion of stores in first-tier, new first-tier and second-tier cities. In the earnings report, Nai Xue said that the reason for this is to cultivate and consolidate consumers' consumption habits of high-end ready-made tea.

In the whole year of 2021, Nesher's tea opened 326 new stores, an average of 0.9 stores per day. This speed is already very fast for offline stores that are still affected by the epidemic. The secret of fast is that The new store of Nesher is more of a second-generation pro store type.

Naixue's new store is more of a second-generation pro store type Image source: Per the reporter Wang Ziwei photo

Store growth is one of the most important drivers of the growth of new tea brands. Zhang Chenkai, director of CIC's Insight Consulting, told the Daily Economic News that opening stores can not only improve the reachability of consumers, but also produce scale effects, dilute supply chains and other related operating costs in the same area. For brands, a dense store strategy is more conducive to operation.

However, in the past experience, there have been tea and coffee chain brands due to the excessive density of stores, resulting in the phenomenon of "left and right hand fighting" between stores and stores, resulting in a decline in single-store operating profits.

Chinese food industry analyst Zhu Danpeng told reporters that opening stores too intensively will also cause a kind of internal friction. Opening a store scientifically, reasonably and accurately is something that needs to be considered in Neixue's "encryption" strategy.

Analysys brand retail industry analyst Li Xinyi from a regional point of view, although Nesher's stores are concentrated in first-tier, new first-tier and second-tier cities, but more than 100 of the more than 800 stores are distributed in Shenzhen, the rest of the first- and second-tier cities are only a few dozen or even single digits, the distribution is uneven and has not yet reached saturation, the "encryption" focus may be in other cities except Shenzhen.

"For Nesher, expanding the scale is the inevitable path, the question is only what kind of scale strategy to adopt. Basing on first- and second-tier cities rather than rushing into third- and fourth-tier cities is a more stable way to expand, which is conducive to stabilizing the basic disk of Nesher. Li Xinyi said.

The financial report shows that in 2022, Naixue will still take the "encryption" of store expansion as the core work, and will further increase the density of stores in existing first-tier, new first-tier and key second-tier cities. In 2022, Nesher's tea is expected to have 350 new stores. And these "encryption" strategy under the store type, will be based on Nesher pro stores.

In terms of site selection, the second-generation pro store will focus on the location of high-end office buildings and residential communities, and compared with the first-generation pro store opened in the core location of the supermarket, the store cost of the second-generation store is also decreasing.

For crypto stores, Lin Yue pointed out that there is another benefit: strengthening the coverage capabilities of O2O.

"The purpose of Naixue's intensive store opening in first- and second-tier cities is also to make the volume larger and further expand the influence of the brand, so as to achieve the effect of 'grabbing the land' with Starbucks and Xicha." In addition, this is also an important measure to improve the layout of the last mile of online business. It's better to improve the customer experience. Lin Yue said.

From the financial report, The online order revenue of Nesher accounted for more than 70% (71.8%). Revenue from Mini Program pick-up and takeaway orders was 35% and 36.8%, respectively.

Much of this figure is contributed by Nesher's online ordering strategy. The cost of online ordering in Nesher is low: free delivery within 3 km, no minimum delivery fee, which is enough to make milk tea lovers eager to try.

With the "encryption" of Nesher in first- and second-tier and new first-tier cities, perhaps Nesher's online ordering and delivery capabilities will cover more consumer groups.

Already in the Ceiling? A new war or a fight in the VC field

From the perspective of these two years, whether it is Xicha or Naixue, the new tea drinking method in its own business is four words: reducing costs and increasing efficiency.

Specifically: improve internal efficiency, such as deep ploughing the upstream and downstream of the supply chain, so that the cost of raw materials and other costs can be controlled and gradually reduced; use digital iteration of store efficiency; standardize personnel operation processes, and explore the maximization of human efficiency.

External expansion, one is to start the layout of the "stars arch moon" pattern with large stores as the main and small stores as the supplement, so as to maximize the benefits from the user experience and coverage of the crowd; the second is that the products regularly launch new products to continuously drain the flow and new; the third is to expand sales channels, and the retail products of the online takeaway platform and the online mall are listed here.

The growth path of the new tea drink, in the past two years, seems to have been played over and over again by the head players, as if it can no longer play flowers.

Judging from the financial report, Neixue stressed in 2022 that its plan is still "reinforcement": reinforcing the strategies that have been implemented in the early stage, such as "encryption" for store expansion, stable product newness, and comprehensive digitalization.

New consumption enters 2022 and begins to de-heat up. Nesher also wrote about this in his earnings report. These "reinforcement" strategies may help Nesher stabilize its existing positioning, so how can it get more growth? Is there a better way to grow?

Nesher may have given another answer: be a VC.

Qixinbao shows that just one day before the release of Naixue's financial report (March 28), Shenzhen Meimei Own Power Investment Co., Ltd. was established with a registered capital of 10 million yuan, 100% owned by Shenzhen Pindao Catering Management Co., Ltd., whose executive director and general manager is Peng Xin, the founder of Naixue's tea.

The path to investment in new tea drinks is not unique to Nesher. In July 2021, After completing a US$500 million Series D financing funded by Sequoia Fund, Hillhouse Capital, Tencent Investment, Temasek and other star capitals, Heytea invested in five consecutive "beverage" related businesses in the remaining six months.

"Daily Economic News" once analyzed this, believing that Xicha at that time was looking for room for business growth and doing high valuation. Zhang Chenkai told reporters this time: "New tea drinkers invest in coffee, juice, lemon tea, pre-mixed wine, oat milk and other beverage tracks, is constantly trying to expand the scope of products and potential consumer groups, open up trends, innovations, characteristic brands and products that attract young people, and are essentially seeking the second growth curve of business." ”

At present, the investment direction of new tea companies is mainly in the two directions of other beverage brands and supply chains. The logic of investing in the supply chain is also very simple: supply chain management has become one of the core elements of competition in the second half of tea drinking.

Zhang Chenkai said that the head of the fresh tea shop brand usually sets high standards for its raw materials, and a strong supply chain means that the brand's economies of scale and lower procurement costs.

Li Xinyi believes that for the head brand, continuous innovation in ready-made tea products to cope with the increasingly inward competitive environment is only the basic standard, and more diversified means are needed to consolidate their industry position.

"Investing in other categories can not only make the head tea brand have stronger multi-scenario and multi-category service capabilities, but also open up more room for growth imagination to support high valuation." She said.

This time, Nai Xue followed up on the VC trip of XiCha, and the two head players of the new tea drink seem to start a struggle in the investment field. But there are also industry insiders who are worried about this.

Lin Yue also told reporters: "Choosing to do investment is actually risky, especially in the areas where you are not good at, it is better to cultivate some sub-brands and make the format category more plump." ”

Is there room for other players to play with the new tea drink?

Before the release of the financial report, on March 17, Nai Xue's tea official announced a sharp price reduction, launched a "relaxed series" of 9-19 yuan, and promised to add at least one product of less than 20 yuan per month. The industry believes that this price adjustment is a long-term strategy, and it is also a step to follow up on the price reduction announced by Heytea in February. At present, the head players of these two new tea drinks have bid farewell to 30 yuan in full line of products.

When the "Easy Series" of NaiXue was already used as a time-limited event in mid-January this year, an industry insider close to Nai Xue told the "Daily Economic News" reporter that the sales performance of the "Easy Series" was "particularly good", and it was not ruled out that the follow-up would become a "fixed program".

After the "easy series" became a "fixed program" in March this year, the industry source told reporters that the orders of the Naixue store "exploded" on the day of the price cut. The "Cherry Blossom Series", which was limited to March, is also said to be selling "very well".

The takeaway packaging of the Pro store in the center of Nasher Lecheng was placed in bundles at the order Source: Photo by reporter Wang Ziwei

Orders will not come out of thin air, and the head price reduction will naturally squeeze to the milk tea players who were originally priced in the price range of 15-25.

Zuo Si (pseudonym), a long-term consumer who has been buying tea baidao, works near Guomao, and there are 7 ready-made beverage brands such as Chabaidao, Luckin, Xicha, Naixue and Coco to provide takeaway services, and there are also 3-5 milk tea shops near the office building. She told reporters that after the price reduction of Xi tea, she sold a cup of Xi tea "Chong Xi" on the same day, and after Nai Xue's price reduction, she and her colleagues also passionately ordered Nai Xue's afternoon tea.

"The price reduction is still very attractive, tea baidao and coco I ordered a lot before, change the taste, the price has not changed much." She told reporters.

The price reduction "inner volume" inside the track, this form can not help but worry, the incremental space of the new tea drinking track itself still exists?

The industry is still very optimistic about this.

CIC Insight Consulting expects that in the next 5 years, the scale of China's ready-made tea market will still have a high growth rate of more than 20%. Analysys also told reporters that the tea drinking track is still in a period of rapid growth, and the next few years will still maintain a relatively high growth rate.

Lin Yue told reporters that the new tea drink has not reached the growth ceiling. "There is still a lot of room for innovation in the tea track, such as store functions and atmosphere, product upgrades, service innovation and so on."

But it is undeniable that the current competition is already in a white-hot state. Lin Yue told reporters that low-end players are indeed facing great challenges. "The downward exploration of first-line brands will cause great interference, and if you blindly fight a price war at this time, I think there is no advantage for players who position the price range of 15-25, and they will fall into a vicious circle of low profits."

In addition, there are many consumers who have the same consumer psychology as Zuosi, which can be used in reverse for new tea brands. Lin Yue said: "A big difference between tea and coffee is that tea customers will not have strong brand loyalty, and the new generation will pay for enough trendy and dazzling products without considering the price." ”

He suggested that for such a competitive environment, players positioning the mid-range price band should not do the opposite, do some product innovation, such as peripheral derivatives, readjust the strategy and positioning upgrades, or cultivate high-end sub-brands to face the competition.

Judging from the financial report, the business scope of Neixue in 2022 is still based on first-tier, new first-tier, and second-tier cities, and the main cities of Xicha are also first- and second-tier cities.

Perhaps deep ploughing in the region is another choice for players who were originally positioned in the mid-range price belt.

Cha Yan Yueshi once told reporters when adjusting the price of Xi tea that its pressure comes more from the impact of the general environment, "We are actively improving the ability of all aspects of the brand, laying a solid foundation, and insisting on doing a good job in products and services." ”

That is to say, after the new tea has given a full answer to the "infrastructure" problem of growth, the spillover effect of its "soft value" such as brand culture is still worthy of attention. The reporter found that another tea brand that creates a tea culture space, "Boiled Leaves", is also slowly expanding in the first and second lines, and its single product price is in the range of 20-45 yuan. In July last year, Boiling Leaf also received A+ round financing from Dachen Venture Capital.

In a promising industry, waist players are squeezed "not very comfortable" in price, some special new tea brands are still trying to deepen the scene, and three or two head players who choose to grow through investment. Together, they make up the current ecology of the tea market.

In this way, 2022 may be a watershed for new tea drinking players. Whether it's growing from investment, deep scenarios, or price wars, it's time for other players to make a decision.

Daily economic news