Source: Retail Business Review
On April 23, Tea Baidao was listed on the Hong Kong Stock Exchange, becoming the "second share of new tea drinks" after Nai Xue's tea. At the same time, Tea Baidao has also become the "first share of franchised tea drinks" to land on the Hong Kong Stock Exchange, and it is also the largest IPO of Hong Kong stocks in 2024 so far.
The issue price of Chabaidao is HK$17.5 per share, the opening price is HK$15.74 per share, and the issue market value exceeds HK$20 billion. However, the first day of tea Baidao's listing was not smooth, and the stock price continued to fall after the opening, once falling by more than 30%.
This may also put some pressure on the players who are "queuing" behind. In the new tea beverage track, in addition to Tea Baidao, Mixue Bingcheng, Gu Ming, Shanghai Auntie, etc. have also submitted listing applications one after another. In 2024, new tea drinks will collectively break through the IPO, or there will be a situation of listing in a bunch.
Selling 1 billion cups a year, the market of tea Baidao
Tea Baidao has continued to grow in revenue in recent years.
According to the prospectus, in terms of revenue and gross profit of Chabaidao, from 2021 to 2023, the revenue of Chabaidao will be 3.644 billion yuan, 4.232 billion yuan and 5.704 billion yuan respectively, with a compound annual growth rate of 25.1%, and the gross profit will be 1.301 billion yuan, 1.456 billion yuan and 1.964 billion yuan respectively, and the gross profit margin will be 35.7%, 34.4% and 34.4% respectively in the same period.
In terms of net profit, it is even more remarkable.
From 2021 to 2023, the adjusted net profit of Chabaidao will be 900 million, 970 million and 1.26 billion yuan respectively, with a compound annual growth rate of 18.2% in net profit, and the adjusted net profit margin in 2023 will reach 22%, which is much higher than the level of its peers.
In 2023, the total retail sales of Chabaidao stores will reach approximately RMB16.9 billion. According to Frost & Sullivan's report, in terms of retail sales in 2023, Chabaidao ranks third in China's freshly made tea shop market, with a market share of 6.8%.
However, it is worth noting that from 2021 to 2023, the average daily retail sales of each store of Chabaidao will show a downward trend. In 2021, 2022 and 2023, the average retail sales of each store of Chabaidao will be 2.728 million yuan, 2.331 million yuan and 2.388 million yuan respectively, the average daily retail sales of each store will be 7414.1 yuan, 6927.3 yuan and 6887.2 yuan respectively, and the average sales volume of each store will be 163,200 cups, 138,900 cups and 143,500 cups respectively.
In terms of the number of stores, Chabaidao's latest listing document disclosed that as of April 5, 2024, it had a total of 8,016 stores (including 6 directly operated stores) in China, covering 31 provinces and cities across the country, achieving full coverage of all provinces and cities in China.
The franchise model has become a major driver for Chabaidao to run fast. From 2021 to 2023, there will be 5,077, 6,361, and 7,801 stores in Chabaidao, respectively, and nearly 3,000 new stores will be added in two years.
In addition, the prospectus of Chabaidao also mentions that 5% of the funds raised will be used to promote the self-operated coffee brand "coffee ash" and set up a network of coffee shops across China. In the next three years, 15 coffee shops are planned to be opened, and the coffee brand will adopt both direct operation and franchise models, including large coffee shops of more than 50 square meters and small coffee shops of less than 50 square meters for quick pick-up and takeaway.
Franchise model, sink the market, open a store and fight closely
Let's look at the industry as a whole.
Judging from the performance of the report cards released by major new tea brands in the past year, the popularity of the new tea beverage market can be said to have reached a wave of climax. On the other hand, "sinking market" and "joining the store" have become the killer features of the brand, and the opening of new tea stores has entered a period of close hand-to-hand combat.
"From the perspective of the market, the sinking market does have a large incremental space. However, there will be a difference between the playing style of first- and second-tier cities and the sinking market. At present, the practice of brands is to open stores in mature areas and encrypt them, while the sinking market is more to cover white areas. There are also new opportunities for new tea brands in the domestic market in terms of volume scale and price, while leading brands are aiming at overseas markets. Now for the participating players, it is even more important to pay attention to their stamina. A consumer investor told us.
Since the new tea beverage brand exceeded 10,000 stores in 2020, the competition has entered the "era of 10,000 stores". Behind the rapid opening of stores, brands are collectively aiming at the sinking market and the franchise model.
And how much space is there for the sinking market?
According to GeoQ Data, as of early December 2023, there are more than 32,000 tea shops in the county. In the past year, from January to early December 2023, more than 9,000 new chain tea stores have been opened in counties across the country.
According to the CIC report, as of December 31, 2022, the store density of ready-made tea shops in third-tier cities and below was only 247 stores per million people, far lower than the 460 stores per million people in first-tier cities. In terms of terminal retail sales, the market size of ready-made tea shops in third-tier cities and below is expected to grow at a compound annual growth rate of 24.6%, from 73.2 billion yuan in 2022 to 273.9 billion yuan in 2028, the fastest growth rate among all cities at the line level, and it is expected that by 2028, third-tier cities and below will account for 51.5% of the total size of China's ready-made tea shop market.
From the perspective of the opening of stores of various brands in the sinking market.
For example, Chabaidao has the highest proportion of stores in new first-tier cities, accounting for more than 25% in the past three years, while fourth-tier cities and below have expanded the fastest, from 945 stores in 2021 to 1,732 in 2023. It can be seen that Tea Baidao has attacked the sinking market in a big way.
According to the data as of the end of the third quarter of 2023, the number of stores in third-tier cities and below accounted for the largest proportion, reaching 56.9%. Shanghai Auntie also said in the prospectus that between 2022 and 2027, the ready-made tea shop market in China's third-tier cities and below is the largest and fastest-growing segment, with huge growth potential in the future.
is also based on the franchise model, and there is a dark horse in the sinking market, sweet lala. As of September 2023, the number of contracted stores has reached 7,000, and the official revealed that the total number of stores is expected to exceed 8,000 this year, with sales of more than 2.5 billion yuan.
In the entire new tea market, there are no more than two paths for store expansion, focusing on direct stores and opening up franchises.
The franchise model is running fast, so that these brands start to fight closely.
Take Mixue Ice City as an example. As of September 30, 2023, more than 99.8% of Mixue Bingcheng's stores are franchised stores, with more than 16,000 franchisees, and the vast majority of Mixue Bingcheng's revenue comes from the sale of goods and equipment to franchisees.
Another example is that Shanghai Auntie has also adopted a franchise model. Founder Shan Weijun once explained the business choice of Shanghai Auntie, he believes that there are two opportunities in China's tea industry, one is Zhou Heiya's model, the single store is very efficient, the other is the unique duck neck model, the single store is not so high, but there are 10,000 stores, and China's third- and fourth-tier cities are releasing their consumption power, Shanghai Auntie decisively chose the latter.
Similarly, Heytea and Naixue also opened up to join last year, and from direct sales to joining, it is also a key move to increase market competition.
According to the 2023 annual report released by Heytea, by the end of 2023, the number of Heytea stores has exceeded 3,200, including more than 2,300 business partnership stores, with a year-on-year increase of 280%.
The report also specifically mentioned that it has opened more than 2,300 new business partner stores, and more than 90% of the business partner stores are located in local high-quality business districts. Among the business partnership stores mainly ranging from 50 square meters to 89 square meters, the highest sales of a single store in a single day exceeded 5,300 cups, and the sales of many stores exceeded 1 million yuan in the first month. More than 65% of Heytea's business partners have opened 2 or more stores, and many partners have opened more than 10 stores in their respective regions.
Nayuki's speed is much slower. At present, Naixue has opened more than 200 franchised stores, and many franchised stores have a turnover of more than 450,000 during the Spring Festival holiday. According to the data provided by Nai Xue's tea, its franchised stores in Yilunbuir, Longyan, Shangqiu and other places have a monthly turnover of 700,000 yuan. Specific to the city, the performance of Naixue franchise stores in Urumqi Tianshan, Fujian Putian, Zhejiang Taizhou and other places has doubled.
With the expansion of the consumption circle after the price reduction of mid-to-high-end brands such as Heytea and Naixue, and the opening of the franchise model to hit the sinking market, the competition in the whole track will become more intense.
"The new tea drink is playing a battlefield of ice and fire. It cannot be said that the head brand is firmly seated, but in fact, it is also facing great challenges. And some coffee brands have also begun to join the new tea track, such as Cudi Coffee launched the 'Tea Cat' to enter the new tea track, and the new dark horse brands have the opportunity to overtake in corners. Industry insiders said.
Of course, overseas markets have also become a new place of competition.
At the same time as the domestic market is seriously involuted, tea brands are aiming at overseas markets to tap new increments. Especially for the Southeast Asian market.
Throughout 2023, new tea drinks will be more active in overseas markets. Mixue Bingcheng expanded its overseas territory to Sydney, Heytea opened its first European store in London, England, 7 Fentian announced its departure to Canada, and Chabaidao's first overseas store landed in Seoul, South Korea.
Take Mixue Ice City as an example. The number of stores in Vietnam and Indonesia has reached 1,300 and 2,300 respectively. According to its announced plan, it will open 1,000 stores in Japan by 2028.
In terms of the number of stores, Mixue Bingcheng is already the fifth largest chain in the world, and belongs to the same echelon as McDonald's, Subway, Starbucks and KFC. It is reported that its annual turnover in overseas markets in 2022 will exceed 1 billion yuan.
Mixue Bingcheng can be said to have tasted the sweetness of opening stores overseas. Of course, other brands are also following suit, blowing a wave of wind to the sea. Since August last year, Heytea has successively entered the United Kingdom, Australia, Canada, the United States and other countries, and opened its first stores in iconic cities such as London and New York, becoming the first new tea brand to open stores in the United States. Tianlala announced that it expects to open 500 stores in Southeast Asia and expand to markets such as North America, Europe and the Middle East.
In December 2023, Nai Xue's first Thai directly operated store opened in Bangkok, and its layout in Southeast Asia and even the global market has accelerated. It is reported that after only half a month of opening, Nai Xue has become a popular local check-in restaurant in Bangkok.
"Retail Business Review" believes that the rapid deployment of new tea brands overseas is a replication of the mature model and strategy of domestic polishing overseas, and from the performance of several major brand stores in the early stage, the market acceptance is still very high, especially in the consumer market in Southeast Asia. Going overseas will also be a strategic keyword for brands in the next 3-5 years. Of course, this also tests the integrity of the supply chain of brands and their ability to adapt to overseas markets.
In addition to the low-price war, what competition does the new tea drink rely on?
According to the "2023 New Tea Drink Research Report" released by CCFA, after three years of dormancy, the market size of new tea drinks is expected to reach 149.8 billion yuan in 2023, with a growth rate of 44.3%, but in 2024 and 2025, the growth rate may drop to 19.7% and 12.4%, and the trend of incremental transfer to stock is obvious.
Another signal is that the new tea drink has now entered a low-price war.
According to data from CIC Consulting, at present, among the top five freshly made tea brands in China, the price range of the main products ranked second to fifth in the industry is basically 10-20 yuan, and relying on the industry's largest and most complete self-built supply chain system, the product price range of Mixue Bingcheng is 2-8 yuan.
One problem that needs to be faced is that the new tea drink has been seriously involuted, as mentioned above, players at all levels have spent more effort to expand, and new competition points have emerged in the domestic market.
To improve the efficiency and profitability of a single store, the support of science and technology is needed behind the fast running of the franchise model. For example, the smart equipment that Heytea has put into use in stores, the accuracy and efficiency of Heytea stores have been improved simultaneously, and the efficiency of fresh fruit preparation has been increased by up to 15 times.
And Nai Xue is also constantly iterating on its own model. Peng Xin revealed that in 2023, Naixue will not only focus on "digitalization", but also on "digital intelligence". Its "smart tea machine" has been fully put into use in more than 1,000 stores, and the fastest can complete the production of a cup of tea in less than 6 seconds, increasing the store production capacity by about 40%.
"Intelligence and digitalization are also the key battles for new tea brands. In particular, chain enterprises with tens of thousands of stores can reduce costs and increase efficiency of stores. The profits of the new tea drink will be deducted from these places, and finally reflected in the price. If the quality is similar, consumers in the sinking market are still very sensitive to price. Enterprises that can't support it will not have a competitive advantage. Industry insiders said.
Then there is the innovation ability of the volume supply chain and products, and the ability of the volume to continue to create explosive products, so as to continuously meet the freshness of consumption and bring high repurchase.
At the same time, new marketing, live streaming, and co-branded new IP gameplay are the passwords for new tea drinks to create explosive models.
For example, Tea Baidao won the first place in many industries such as "National Group Buying List with Goods", "GMV of Tea Beverage Live Broadcast" and "Brand Special Conversion Rate" in Douyin live broadcast. Among them, on March 10, 2023, the GMV of its Douyin live broadcast exceeded 100 million yuan in a single day, and the number of fans increased by about 230,000 in a single day, setting a new GMV record for the special live broadcast of the Douyin life service brand. At the same time, the number of members of Chabaidao has grown rapidly, and the number of registered members has exceeded 100 million. In the fourth quarter of 2023, the number of active members reached 20.4 million, and the repurchase rate of members reached 35%, which is higher than the industry average.
"Retail Business Review" believes that the current new tea drink track is also a stage of real competition for internal strength. While joining the fast run, it is necessary to balance rapid expansion and lean management, so that the running posture can be stable. With the listing of tea Baidao, coupled with other brands in the queue, it also means that the chain rate of new tea drinks will be higher and higher in the future.