On December 22, 2023, the first share of China's Pu'er Tea IPO, Pu'er Lancang Ancient Tea Co., Ltd. (06911) (hereinafter referred to as "Lancang Ancient Tea"), was officially listed on the main board of the Hong Kong Stock Exchange, becoming the first share of a mainland tea company listed in the major capital market, with an issue price of HK$10.70 per share and 21 million shares for sale. The Company's Hong Kong Public Offering was oversubscribed with valid applications of approximately 13.23 times the total number of Offer Shares initially available for subscription, while the International Offering was also oversubscribed by approximately 1.32 times. The successful listing of Lancang Ancient Tea announced that China's tea industry has officially entered the era of branding, capitalization and scale.
A cup of "ancient tea" continues to write a new story
Lancang Ancient Tea is one of the very few tea companies in China with experience in raw material management, product development, production, end-customer reach and membership services, and is a national key leading enterprise in agricultural industrialization, and the third largest Pu'er tea company in China in terms of revenue. The products are mainly Pu'er tea, covering black tea, white tea and flavored tea.
China is the world's largest tea producer and largest consumer market. According to Frost & Sullivan, China's tea market reached RMB331.8 billion in 2022 and is expected to reach RMB441.2 billion in 2027, of which Pu'er tea will reach RMB24.4 billion in 2027. The statistics predict that from 2022 to 2027, the growth of Pu'er tea, black tea, white tea and flavored tea will be more impressive, of which the compound annual growth rate of Pu'er tea will reach 7%, and the tea industry and market segments will maintain strong vitality.
Zhitong Financial APP learned that the history of the Lancang ancient tea brand can be traced back to Jingmai Mountain in 1966. The company's founder, Ms. Du Chunyi, began to learn Xi tea making at the age of 16 in the Jingmai Tea Training Class, and has a tea-making career of more than 57 years, and was awarded the Master of Pu'er Tea Inheritance Craft by the Yunnan Provincial Department of Agriculture and the Ministry of Human Resources and Social Security in 2018, and was appointed as a consultant by the Pu'er Municipal Government in 2019 to provide advice on the development of the tea industry. Under the leadership of Du Chunyi, with the polishing of production skills, the product has been selected as one of the top ten famous teas in Yunnan Province for four consecutive years, and was re-ranked to the top of the list in 2021, and was rated as one of the top ten green food enterprises in Yunnan in 2022.
Some market analysts believe that the current tea industry is still relatively fragmented, most tea enterprises are still relatively regional, commercial operation is relatively slow, and large-scale development has become a "bottleneck", similar to the liquor industry more than ten years ago. Now, with the help of the liquor industry, which has stepped out of regional constraints and the trend of head is accelerating, the liquor industry has already completed the realization of the first phalanx brand benefits, giving birth to many leading enterprises such as Kweichow Moutai, Fenjiu, Wuliangye, etc., with a revenue scale of more than 10 billion yuan, driving the phenomenal growth of the overall market for all to see. It can be seen that the increase in market share through capital support and the listing of tea enterprises is the inevitable result of the long-term development of the tea industry.
Today, Lancang Ancient Tea has broken the limitations of categories and regions and successfully "broken the circle" to enter the Hong Kong capital market, which will help its brand enhance and accelerate the integration of the tea industry, and is also expected to tell the story of Chinese tea with a more international perspective in the Hong Kong capital market.
Build a multi-product line omni-channel pattern
With "Lancang Ancient Tea" as the core brand, Lancang Ancient Tea has developed and constructed three product lines: 1966, Tea Mama and Yanleng to cater to the various needs of different consumer groups. Among them, 1966 focuses on classic Pu'er tea, which is the cornerstone of Lancang's ancient tea's performance, and most of its cornerstone products such as ripe tea Wujin, 0085 and raw tea 001 have undergone nearly 20 years of iteration, achieving the classic "Lancang flavor" of Lancang ancient tea, which is deeply loved by Pu'er tea lovers and senior tea lovers. Aiming at the consumer mass market, Tea Mama is a product line launched by Lancang Ancient Tea in 2014 focusing on health care, covering Pu'er tea, white tea, black tea, flavored tea and other categories, including ready-to-drink pocket tea cakes, tea bags, portable cups of tea and other packaging forms, suitable for different consumption scenarios, will become the company's second growth point. In addition, Lancang Ancient Tea launched a new rock cold product line for new middle-class consumers last year, and is committed to building it into a product line with high quality, stylish packaging and convenient drinking.
(Du Chunyi, chairman of Lancang Ancient Tea, donated the listed customized product "999 Wujin" to the Hong Kong Stock Exchange)
The success of Lancang Ancient Tea is inseparable from its exquisite tea-making technology. Zhitong Financial APP learned that in addition to accumulating considerable advantages in the fermentation and blending process of Pu'er tea, Lancang Ancient Tea also launched small green mandarins to the market in 2015, becoming the first tea company to standardize the manufacturing process of traditional tangerine peel Pu'er tea. In recent years, Lancang Ancient Tea has continued to innovate in the original process, taste and product form, so that Lancang Ancient Tea can meet the changing needs of various types of customers, and at the same time expand into the FMCG market.
In terms of channels, Lancang Ancient Tea has given full play to its brand advantages, and has formed a diversified sales channel with distribution as the mainstay, direct sales as a supplement, and a combination of online and offline. At present, it has 559 offline stores across the country, including 23 self-operated stores and 536 franchised stores, and as of the first half of 2023, 70% of dealers have cooperated with Lancang Ancient Tea for more than three years, and the dealer relationship is very stable. In online channels, Lancang Ancient Tea has entered various online platforms including Tmall, WeChat, Douyin, Kuaishou and JD.com, and the brand system has cooperated with popular celebrities and well-known anchors in vertical industries to successfully reach more end consumers and expand brand exposure. According to live broadcast statistics, the cumulative live GMV of the brand system in the past six months has exceeded 50 million yuan. In addition, Lancang Ancient Tea has also developed large-scale customer channels, including large supermarket chains and platform-operated online stores.
The supply of high-quality raw materials has also become an important advantage for Lancang Ancient Tea to stand as a leading enterprise in the industry. As of the first half of 2023, the company has about 3,700 tons of mao tea and tea in production, mainly from the three major Pu'er tea producing areas of Pu'er, Lincang and Xishuangbanna, which can respond to the evolving market demand in a timely manner and ensure the long-term stable production of products. According to the Frost & Sullivan report, the company was the largest buyer of Jingmai Mountain ancient tea tree hair tea during the reporting period. In September this year, China's "Pu'er Jingmaishan Ancient Tea Forest Cultural Landscape" was officially inscribed on the World Heritage List, becoming the world's first tea-themed World Cultural Heritage Site so far. The company believes that the popularity of its brand image and products will be further enhanced, especially the Pu-erh tea products under the Jingmai series, which will stimulate the sales of Pu-erh tea products.
On December 22, 2023, coinciding with the "winter solstice", Lancang Ancient Tea was successfully listed on the Hong Kong Stock Exchange, realizing the "icebreaking" of the domestic tea industry in the capital market, representing that the business model of China's leading tea enterprises has matured and has been recognized by the capital market. The proceeds from the listing of Lancang Ancient Tea after deducting the issuance expenses will be used to establish a modern logistics and warehousing center and improve the existing production workshop, establish sales channels, brand building and product marketing, make strategic investments and acquisitions in the tea industry, upgrade information technology infrastructure, and strengthen R&D capabilities. With the help of capital, Lancang Ancient Tea is expected to accelerate its development to a large-scale, brand-oriented and modern model, further open up the company's brand awareness, give full play to the Matthew effect, and enhance the market space of leading tea enterprises.