Sugar-free tea: the market is hot, and the capital is indifferent
Text | Hu Miao
Edit | Yu Le
If the protagonist in the beverage market in the first two years was sparkling water, then in the summer of 2023, the C position of bottled drinks belongs to "sugar-free tea". Shuo Ruo, a distributor of bottled water, told the author: "Since the beginning of this year, orders for Oriental Leaf and Suntory drinks have increased by more than 15%, and they have been in a state of hot sales and tight supply. This also made Aro deliberately circle these two products when advertising on social platforms to attract new customers. Under the demonstration effect of the head players, more and more brands have joined the competition for sugar-free tea drinks.
Standing in front of the water counter of the convenience store, you can feel the intensity of this battle: Suntory oolong tea and oriental leaves are firmly at the core, next to the old Japanese tea brand Itoen, and the "burning tea" of Genki Forest, the unified "Chali King" and Master Kong's "pure extract" are displayed above and below... Behind the few remaining "debut" positions, countless emerging tea beverage brands are vying for the first place. Behind the façade of prosperity, lies a fierce struggle.
Like the "sparkling water war" set off by Genki Forest a few years ago, this new war is also an expensive war of attrition: many new products use convenience stores as the entry point of offline channels, making convenience store channel costs rise. "At the most exaggerated, our channel fee was over 200%." Shu Yi, the founder of "Let Tea", told the author.
This means that for every 1 million yuan of products sold in convenience stores, the brand side has to pay 2 million yuan in channel costs. Marketing expenses may even be higher than channel fees. According to a tea industry insider, a new tea beverage brand that has completed several rounds of financing invited a first-line male star to endorse with an endorsement fee of 30 million yuan, plus equivalent supporting advertising promotion positions, and the overall cost exceeded 60 million yuan. At a gross margin of 40% per bottle, the brand had to sell 120 million bottles to earn that money back. Such a "grand occasion" is inevitably reminiscent of the last round of the "sparkling water" war.
According to incomplete statistics, from 2019 to 2023 after the popularity of Genki Forest, more than 30 brands have launched different sparkling water products. But after 2022, the release of new sparkling water products has been greatly reduced, many sparkling water products have disappeared from the market, and some new enterprises have also fallen into financial difficulties after financing failures. Take Yueji Future, the parent company of "light automobile" sparkling water that once sold a large number of goods in Hema and convenience stores, as an example, it has been stolen by many legal lawsuits and is listed as a high-consumption enterprise. In this round of sugar-free tea drink wars, capital's response was even more apathetic. After inquiring about a number of consumer investment institutions, the author learned that in the first half of 2023, many investors took the initiative to find sugar-free tea beverage brands for negotiation, and some institutions asked FA (financing consultants) to push related projects, but the actual negotiation was very rare.
Wang Kai, a consumer investor, said venture capitalists need to consider whether small businesses still have opportunities in the track. But at present, sugar-free tea drinks have been laid out by large enterprises, running out of Oriental Leaves, Suntory and other head products, it is difficult for small enterprises to build long-term barriers. "It's still a big player's thing." He said.
Strive to be the "third in the industry"
With the growth of consumers' demand for low-sugar diets in first- and second-tier cities, sugar-free tea beverages as a whole have entered the fast lane of rapid development.
According to the "2023 China Sugar-free Tea Industry White Paper" released by Yiou Think Tank, the online sales of sugar-free tea drinks have increased nearly 10 times in five years from 2018 to 2022. According to Euromonitor data, from 2017 to 2021, the market size of sugar-free tea drinks will grow at a compound annual growth rate of 28.6%, and in 2022, the market size of sugar-free tea drinks will be about 7.38 billion.
It is estimated that by 2027, the size of China's sugar-free tea beverage market will reach 12.4 billion yuan. Tang Binsen, the founder of Genki Forest, mentioned in a speech in 2023, "The biggest opportunity in the entire tea drink is not the growth of sugar-free tea, but the cannibalization of sugar-free tea on two-yuan water and sweet tea." "According to the data of the Central Research Institute of Industry Research and the Prospective Industry Research Institute, in 2021, the size of the bottled water market will exceed 200 billion yuan, and the market size of bottled tea will also be close to 100 billion yuan. In the face of such a large market potential, no one in beverage companies wants to miss the wind, traditional brands, cross-border players, startups... All parties are coming.
Genki Forest re-energized the market, improved old products, launched new products, and hoped that sugar-free tea could become the brand's next mature main product after sparkling water and electrolyte water. "Chali", a tea bag brand known as "China Lipton", launched the sugar-free tea bottled tea drink CHALI last year, inviting Xiao Zhan to endorse it, and the billboard fell into the bus stop in the core business district of high-tier cities; Serial entrepreneur Shu Yi left the Internet industry, cut into the consumer goods track in 2020, and after opening up the supply chain, launched the sugar-free tea drink "Let Tea" in 2021... There are also many "crossover players" among the contestants: Heycha from the ready-made tea industry, Naixue's tea, and Bama Tea from the tea industry have all launched their own bottled tea drinks, and even the dairy giant Yili is not willing to be lonely and launch "freshly brewed tea" products. On the e-commerce platform, some merchants have listed the price of this product with a recommended retail price of 6 yuan to 6.5 yuan as high as 29.9 yuan per bottle.
Draftsman: Hu Miao
Although many new players have entered, in the track of sugar-free tea drinks, the two "veterans" of Suntory and Oriental Leaves are still ahead. On the Little Red Book, a bottle of Suntory oolong tea is "played" with a variety of tricks: adding almond flour is "whitening water", adding grapefruit oil orange powder is "scraping oily water", and combining with kale powder becomes "falling scale water"... The characteristics of zero sugar and zero fat make this pure tea drink become an "artifact" for "weight loss" and "fat reduction", and even become a "exquisite life" label for urban beauty.
At the same time, the oriental leaves, which were once rated as "the top 5 most difficult drinks to drink" when they were listed, have also ushered in the "counterattack" of the market and word of mouth after more than ten years of precipitation, and gradually moved from the edge of the container to the core position. Ah Ruo told the author that Oriental Leaf was once abandoned by him because of poor sales, and did not return until around 2019, and at the end of 2021 ushered in a sales explosion, and many supermarkets and shops began to take the initiative to ask for more products with Oriental Leaf.
This growth is also reflected in Nongfu Spring's financial report. In 2022, tea products, including Oriental Leaves, generated revenue of 6.9 billion yuan. According to Nielsen's data analysis, in the past 12 months, the growth rate of nearly 79% of oriental leaves far exceeds the overall growth rate of the tea beverage market.
Even if a head brand is born, the opportunity of sugar-free tea drinks still exists, and new and old beverage companies still have room for "breakthrough". Li Qingshan, a consumer analyst at Yiou Think Tank, said: "At this stage, the market concentration is not as high as we imagined, and after Oriental Leaves and Suntory, there is no third or fourth product with absolute dominance." Hu Yi, CMO of Chali Group, has a similar opinion: "Most beverage categories have about four head brands, so we think [sugar-free tea drinks] have the opportunity to break through one or two more brands." ”
It's just that who will spend this "third" and "fourth" positions? It is not yet time for the market to give an answer.
Pure tea and blending, who can represent sugar-free tea?
The outbreak of sugar-free tea drinks is also the evolutionary iteration of tea drinks from high sugar and low sugar to sugar substitutes and sweetness. In the 1990s, when carbonated drinks dominated the market, Master Kong's "iced tea" unified "green tea" to break out of the siege and open up a new market for tea drinks. However, Euromonitor data shows that after 2014, the overall sales of China's tea beverage market declined. On the one hand, there is a lack of innovation in tea beverage products on the market; On the other hand, the new generation of consumers has begun to stop favoring "iced tea" with sweet taste and insufficient tea taste.
Beverage companies followed the trend and began to launch low-sugar products. During 2015 and 2016, the unified "Xiaoming classmates" and the "tea π" of Nongfu Spring were representatives of this stage. In 2017, Genki Forest's sugar-substitute tea drink "Burning Tea" appeared in the market, opening the "sugar-free era" of the tea beverage category.
Due to the use of sugar substitutes such as erythritol, many tea drinks from this period, although sugar-free, still had a sweet taste. In the past two or three years, more and more tea drinks have abandoned sugar substitutes and switched to "sweet" tea drinks that are closest to the taste of tea. It was also in this stage that the earliest sweet tea drink Oriental Leaf began to usher in a sales counterattack. In the process of "sugar reduction", the pricing of tea drinks has increased from the price band of 2 yuan to 3 yuan for "iced tea" to 4 yuan and above. With the improvement of people's consumption level and health awareness, more and more consumers can accept higher prices, which also makes products with this price have a larger market space. At present, most of the emerging sugar-free tea beverage products are priced at 4-7 yuan.
A survey by Yiou Think Tank found that 4-7 yuan is the mainstream price band of sugar-free tea products, and consumer acceptance has reached 77.4%. Sugar-free tea products of 7 yuan and above are mainly imported brands such as Kirin and Ayaying. In the price range below 4 yuan, it is mainly Master Kong, unified sugar-free black tea, and green tea. Hu Yi said: "With the price band of 2 yuan to 3 yuan, Master Kong and Unification have done very mature, and have the advantages of large-scale cost reduction and efficiency increase, and it is difficult for new brands to enter."
But in the high-end pricing of 5 yuan to 6 yuan, everyone has more room to do a good job with the product power and brand. In terms of products, making "pure tea" or "blended tea" has become two different choices. The best-selling head products Suntory oolong tea and oriental leaves are pure tea products, which also means that the Chinese people's acceptance of pure tea drinks is high, and the market has formed a certain consumption cognition and consumption habits, and has the resilience of continuous growth. However, there are not many types of pure tea with high public acceptance, only jasmine tea, oolong tea, and green tea. It is difficult to find several "universal" flavors from a relatively single original tea category. Moreover, even if the right taste is found, there will be countless competitors in a short period of time, and it is not easy to break through.
In contrast, blended teas are more "malleable" and easy to characterize. Common product portfolio forms include "tea + flower and fruit", "tea + sugar substitute", through certain blending, and the combination of additives, can match more flavors. The flip side of the coin is that consumer demand for "additive-free" is rapidly increasing.
In general, blended teas have more additives, and many products are paired with sugar substitutes. In contrast, pure tea ingredients are very simple, most of them only have four ingredients: tea, water, sodium bicarbonate and vitamin C. Vitamin C plays an antioxidant role, and sodium bicarbonate is to balance pH, both have no effect on taste. The key factors affecting the taste and taste of pure tea lie in the choice of tea, the way of extraction and how to preserve it, and tea itself is a category that is difficult to standardize.
In terms of tea, the quality of tea produced in different origins, different tea mountains, and even different years is different; In terms of extraction, the taste of the same tea brewed with 55 degrees or 60 degrees of water also has differences; In the shelf life, pure tea drinks that have been shipped for 3 months, 6 months, and 12 months may also differ in color and taste.
This makes enterprises not only need to find a stable price and stable quality of tea supply sources, but also need to quantify the caffeine, tea polyphenols, theanine contained in tea, and also need to put forward higher requirements for the storage environment to ensure the standardization of taste. This also makes pure tea drinks a simple and complex business. "It's simple because it's just an ingredient, there's nothing adjustable, and it's not simple because there's nothing else to hide [taste]." Shuyi said.
Pure tea products are difficult to be accepted by consumers as soon as they are listed. When Suntory oolong tea entered the Chinese market, it did not immediately become popular because of its bitter taste; After the oriental leaf was launched, the product and taste have also been adjusted many times. The sunk cost behind this is not "friendly" to emerging beverage companies. Relatively speaking, blended tea has higher controllability, relatively low requirements for tea quality, and easier standardization. At the same time, because raw materials and formulas are more controllable, with the help of upstream mature foundries, the production threshold can be reduced to a greater extent and the cost can be further reduced. In fact, many new sugar-free tea beverage brands start with "blended teas". For making pure tea or blending, Genki Forest has also made many adjustments.
The earliest form of "burning tea" under Genki Forest is "tea + sugar substitute". At the end of last year, Genki Forest upgraded "Burning Tea", removing sugar substitutes from all products and transforming into sugar-free tea without sweetness. But Genki Forest hasn't completely given up on sugar. Among the three new products released in the first half of this year, the spring tea featuring fresh green tea is a low-sugar tea drink.
Can I run out of the "Genki Forest"?
Pure tea and blended tea are not an either/or relationship, beverage companies often launch multiple products at the same time, to the market to accept the choice of "natural law". Whether it is pure tea or blended tea, there is no new "explosive" single product, which also makes the capital still hold a wait-and-see attitude. For investing in beverage brands, one of the most important concerns for investors is whether this track can run a new "vitality forest".
Analyzing the success of Yuanqi Forest in sugar-free bubble water, on the one hand, it chose a high-quality category of carbonated drinks, and this category was not overly concerned by giants; On the other hand, it grew up in the traffic dividend period of the Internet, and online marketing promotion quickly converted into sales; At the same time, the convenience store channel is in a growth stage, and even helped Genki Forest bypass the monopoly of beverage giants on traditional channels. But Genki Forest's success in sparkling water products is hard to replicate, and even Genki Forest itself has not been able to replicate it on burning tea.
At present, the traffic dividend period of the Internet and the channel dividend period of convenience stores have passed, and new brands have become more difficult in marketing and channels. In 2021, Shuyi also tried to drive sales by laying a large number of advertisements offline, but in exchange for huge losses. "Advertising of consumer goods requires years of 'throwing money', and without continuous investment, consumers will be forgetful." Shu Yi said, "But at the same time, your opponents such as Coca-Cola, Farmer, Master Kong, and Unity, their budget is on the order of 1 billion." Who can spend 1 billion for advertising for new brands? "In terms of channels, new brands rely heavily on convenience store channels.
Hu Yi revealed: "Traditional channels need to rely on distributors and teams to push to cover, and it is difficult for enterprises to control whether the products can be put in a better position in the refrigerator after they are laid out." The execution of convenience stores from the headquarters to the store is higher, as long as you talk to the headquarters clearly, the following implementation has a certain guarantee. However, the display space of convenience stores is limited, and with the emergence of a large number of new brands, brands have also started a "price war" in order to compete for the refrigerator position of convenience stores, and the channel cost of entering convenience stores has risen rapidly. It is understood that under benign circumstances, the channel fee ratio for entering convenience stores does not exceed 40%.
But in reality, many brands have a channel fee ratio of up to 100%. "We did 200% at the most exaggerated time of 2021." Shu Yi revealed. He calculated that a bottle of beverage sold at retail end for 5 yuan, the actual supply price is about 2.5 yuan, and the fee ratio of 200% means that for every 2.5 yuan of income, it costs 5 yuan. It is equivalent to losing 2 bottles for every 1 bottle sold. Even if the product enters the convenience store channel, you cannot sit back and relax. The elimination rate of goods in convenience stores is between 5% and 10% every month, and the number of products replaced in a year is about 70%. If the product cannot have a good sales volume, it is also very easy to be eliminated.
Why do new brands lose money and go into convenience stores? On the one hand, convenience stores have a stronger pulling force for new product sales than traditional channels, allowing their products to quickly radiate to consumers, and have a certain probability of quickly establishing market recognition. On the other hand, in the past few years, many consumer goods startups have written their sales achievements in convenience stores into their new round of financing plans and become one of the chips in their next round of financing. But investors have calmed down. Consumer investor Wang Kai said: "Most of the new beverage brands that have emerged in recent years have 'died' in convenience stores. "Investors will also have more concerns when they get the sales data of some brands in convenience stores, which is no longer a fixed plus for consumer goods startups."
The reason why the primary market has a conservative attitude towards sugar-free tea beverages is that "sugar-free tea has many industry giants and has run out some large items." Wang Kai said. Investment is also investment, but he believes that this category is unlikely to have a "cross-border cowman" like Tang Binsen like sugar-free sparkling water that year, and can still achieve a reversal on the track of giants. Since the second half of 2021, investors' enthusiasm for investing in the consumer sector has rapidly faded. In the absence of new capital coming in, many consumer brands are caught in the dilemma of broken capital chains.
In the past two years, Shu Yi has communicated with investment institutions many times to seek financing, and many institutions have taken the initiative to talk to him, but there is no news in the end, which makes him realize that relying on external funds to save the game is not reliable. In 2022, he established a new strategy that must be "profitable". Since then, tea has ceased to do offline advertising and marketing, and only retained the online promotion of several social platforms such as Xiaohongshu. At the same time, all paid channels will be withdrawn, and online self-operated channels will be launched.
Shu Yi said: "This is the only way I think new consumer brands can survive without big financing." "In the past year, the sales of tea have increased by 3 times that of 2021, and in April this year, it began to be profitable. In contrast, Chali, which has a good cash flow through the tea bag business, is more active in promoting bottled tea products. In terms of supply chain, Chali chose its own bottled tea production base, which will be officially put into operation in the fourth quarter of 2023.
They are still actively deploying convenience store channels, covering nearly 200,000 points across the country. Hu Yi said: "We are now in the first stage, and we have to think about how to increase its sales. It is a fact that convenience stores have a high cost ratio, but their output is also high, and there is no way to escape. "At present, tea needs to open up brand recognition and channel power.
Then, with the increase in the proportion of traditional and wholesale channels, cost reduction and efficiency increase will be achieved. In the third year of entering the FMCG industry, Shu Yi also has a new understanding of the industry, he said: "FMCG is a slow business by nature, and it is difficult to do without 5 or 10 years of precipitation. They have been sold for many years, lived in the market for many years, have been heard, seen, and slowly become a brand. "There is no need to create a vitality forest, no need to benchmark oriental leaves, for sugar-free tea drinks, how to survive in the market for a long time is the most critical thing."
At the request of the interviewee, Ah Ruo and Wang Kai are pseudonyms