After Nai Xue's tea, the second new tea drink brand in China was launched.
On April 23, Sichuan Baicha Baidao Industrial Co., Ltd. (hereinafter referred to as "Chabaidao") was listed on the main board of the Hong Kong Stock Exchange, becoming the "second share of new tea drinks".
Source: Tea Baidao's official WeChat
According to the prospectus, the issue price of Chabaidao was HK$17.5, 148 million shares were issued, and the valuation reached HK$25.9 billion.
However, the reporter noticed that the first day of the listing of Tea Baidao broke down, and it fell by more than 30% after the opening. As of the close of trading on April 23, the share price of Chabaidao was HK$12.80 per share, down 26.86% from the issue price, and the total market value shrank to HK$18.91 billion.
On the same day, the topic of "Tea Baidao fell to 3 years of net profit in one hour after listing" also quickly rushed to the first place on Baidu's hot search list.
The number of stores in the country is about 8,000, and the Internet celebrity tea drink sold 1 billion cups of milk tea last year alone, why did it break when it was listed?
"Generally speaking, the share price of a newly listed company can be affected by a variety of factors. The specific reasons for the stock price breakdown on the first day of listing are unknown, which may be related to factors such as market sentiment and expectations, its high dependence on franchisees, food safety issues, and the fierce competition in the tea industry affecting investor confidence. Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said in an interview with a reporter from China City Daily.
The franchise model has driven the rapid expansion of the business territory
According to the prospectus of Tea Baidao, the new tea drink refers to the on-site preparation of raw materials such as tea, fruit and milk, supplemented by various condiments such as pearls and coconut fruit.
In 2008, the first tea Baidao was born in Chengdu, Sichuan, founded by Wang Xiaokun and Liu Weihong. According to public information, its first store was opened near Wenjiang No. 2 Middle School in Chengdu, targeting students. Since Chengdu is the hometown of giant pandas, Chabaidao is also mainly based on panda IP in packaging design.
According to the prospectus data, in 2023, the total retail sales of tea Baidao stores will be about 16.9 billion yuan, and a total of 1.016 billion cups of tea will be sold, with an average retail sales of 27.4 yuan per order. From 2021 to 2023, the net profit of Chabaidao will be 779 million yuan, 965 million yuan and 1.151 billion yuan respectively, with a total profit of about 2.9 billion yuan in three years.
Similar to Mixue Bingcheng, the main way for Chabaidao to expand its scale is to rely on franchise stores.
In 2018, Tea Baidao was opened to join the whole country. In the years that followed, the business territory of Chamodo began to expand rapidly. From just over 180 stores in 2017, the number of stores has reached 7,801 in 15 years by the end of 2023. It is worth mentioning that there are only 6 directly-operated stores, and the number of directly-operated stores accounts for less than 1%.
In terms of the specific number of stores, according to the prospectus, from 2020 to 2023, there will be 2,240, 5,070, 6,352 and 7,801 franchised stores respectively, accounting for more than 99% of the total number of tea Baidao stores in operation as of the relevant date. During the same period, there were 2, 7, 9 and 6 directly operated stores in Chabaidao.
To a certain extent, this also reflects the "way of making money" of Tea Baidao: mainly relying on chain franchises to obtain market profits.
According to the prospectus data, the vast majority of Chabaidao's revenue comes from the sale of goods and equipment to franchisees, as well as the royalties and franchise fees collected from franchisees. In 2023, franchisees will contribute 99.2% of Chabaidao's revenue. The revenue of directly operated stores accounted for only 0.5%, and the gross profit accounted for only 0.2%.
Source: Tea Baidao prospectus documents
A reporter from China City Daily noticed that at present, several major tea chain enterprises have been opened to join. In November 2022, Heytea announced that it would open up franchises in non-first-tier cities, in April 2023, Lele Tea also joined the "open franchise" camp, and on July 20, 2023, Nai Xue's tea, which has always advocated direct sales, also announced the launch of the "Partner Program" and opened the franchise model.
"The stock price of Chabaidao broke both reasonable and expected. FMCG industry analyst Kang Dingping analyzed in an interview with a reporter from China City Daily that on the one hand, because there is no substantial moat in the tea Baidao, such as in terms of price, it is not comparable to Michelle Bingcheng; and in terms of brand and quality, it cannot surpass Hey Tea, and capital is unwilling to give a higher valuation; on the other hand, food safety problems are frequent, and if FMCG companies cannot control the quality problems well, capital confidence will undoubtedly be damaged.
The franchise model is a mixed bag
Thanks to the opening of the national franchise, Chabaidao has achieved rapid expansion of business territory and continuous increase in revenue at low cost.
However, the franchise model is a mixed blessing for the brand. With the rapid expansion of the franchise territory, the risk challenges of enterprises in terms of franchisee profit expectations, supply chain support capabilities and quality control management of key raw materials have followed.
In addition, in terms of standardization and regulatory compliance, Chabaidao also wrote in the prospectus that with the expansion of the scale of new tea shops, it has become more difficult to ensure that all stores can standardize their operations, especially in terms of food quality, food safety, hygiene and service quality, and it is not easy to ensure that the same tea drink in hundreds of stores has the same taste.
During this year's "3.15" period, some media reported that two stores in Wuhan and Changsha of Chabaidao violated the company's regulations and changed the label of the taste period of raw materials without authorization.
A reporter from China City Daily noticed that as early as 2021, Chabaidao has repeatedly had potential food safety hazards such as incomplete staff health certificates and suspected expired raw materials in the sampling inspections of the market supervision department.
In February 2021, the Market Supervision Bureau of Fengxian District, Shanghai raided some bubble tea shops in Fengxian Baolong Plaza. In March of the same year, the Market Supervision Bureau of Chenzhou City, Hunan Province, raided some bubble tea shops in the urban area of the city, and found that there were problems such as employees not applying for health certificates, damp kitchen floors, and exposed garbage in garbage cans; In May of the same year, Tea Baidao (Hunan Changsha Century Jinyuan Store) was exposed to the suspected expiration of raw materials in the surprise inspection of the Market Supervision Bureau.
"In addition to the competition in store size, supply chain and brand building, new tea drinks should also pay attention to food safety issues. Zhu Danpeng, vice president of the Guangdong Provincial Food Safety and Security Promotion Association and food industry analyst, said in an interview with a reporter from China City Daily that the supply chain of the new tea beverage industry is long, and the more participants in the main body, the more uncertainties in the production and operation process, and the specific operation is also linked to the quality of industry practitioners. As the scale of the industry expands, it will become more and more difficult to control.
Kang Dingping believes that the franchise model is beneficial, and this asset-light operation model can help Tea Baidao quickly lay out the market, so that Tea Baidao can better complete the national layout at low cost. However, the franchise model also has drawbacks, that is, the quality control of the whole chain cannot be well carried out by the tea Baidao, which leads to the franchise stores in order to save costs and expenses, and manipulate the quality, such as using expired ingredients, or changing the shelf life of ingredients at will, etc., in the long run, such as affecting the reputation of tea Baidao in the hearts of consumers.
Fight price, fight co-branding, new tea drink market competition is fierce
According to the "2023 New Tea Beverage Research Report" jointly released by the China Chain Store & Franchise Association and Meituan, the scale of the mainland's new tea beverage consumption market has steadily stepped into 100 billion yuan (100.3 billion yuan) in 2021 from 53.4 billion yuan in 2018, but the growth rate has slowed down significantly since then, and the entire market has entered a period of consolidation.
Source: "2023 New Tea Drink Research Report"
In this context, the competition in the new tea market is becoming increasingly fierce.
In 2022, Lele Tea will withdraw from the Xi'an market, and Chayan Yuese will close 87 stores in Changsha...... Price wars and scale wars have started between brands.
According to the big data of red meal, as of December 2023, the per capita consumption price of more than eighty percent of tea brands is less than 15 yuan, of which 10~15 yuan accounts for the highest proportion, 51.4%. The proportion of brands with a per capita consumer price of more than 20 yuan is only 3.6%.
A reporter from China City Daily noticed that in terms of product pricing, tea Baidao is in the middle price band, and the price range of fresh fruit tea and milk tea is 8~23 yuan, which is slightly lower than Naixue's tea.
However, since 2022, Hey Tea and Nai Xue's tea have made price adjustments to focus on the sinking market. Taking Nai Xue's tea as an example, a number of products bid farewell to the "3 prefix" after the price was lowered, with a maximum reduction of 10 yuan, and at the same time promised to launch at least one new product below 20 yuan every month. The price is approaching, which further exacerbates the pressure on Chamoto.
Source: Red Meal Big Data
In addition to cost-effective and price factors, cross-border co-branding has gradually become an important attempt for the new tea beverage industry to market out of the circle, increase traffic and further drive the increase in cup volume.
According to incomplete statistics, in 2023 alone, Heytea will co-brand FENDI, "Barbie", Tea Baidao co-branded "Sauvignon Blanc", Sword Network 3, Undetermined Event Book, Nai Xue's tea and Lele Tea co-branded "Detective Conan".
Taking Chabaidao as an example, on July 9, 2023, the day of the announcement of the linkage with the undetermined event book, Chabaidao's Baidu index soared to 5458, becoming the second highest peak that year after "submitting a listing application to the Hong Kong Stock Exchange".
Source: Baidu Index
Compared with price and marketing, the competition in the new tea drink market is fierce, but the track is still pouring new players. Not only are Luckin and Starbucks, both freshly made drinks, eyeing each other, but Cudi has also established a second brand "Tea Cat" to directly "kill" into the milk tea industry.
Under the competition, listing may become an effective antidote to "involution". According to incomplete statistics from the Red Meal Industry Research Institute, in 2023, there will be a total of 8 tea brands that have reported IPO trends.
Source: Red Meal Big Data
In Kang Dingping's view, as the competition for new tea drinks enters the second half, the pattern of "oligopoly competition" has basically been established, so it is difficult to maintain a rapid growth momentum whether it is tea Baidao, Hey Tea, or Mixue Bingcheng. In addition, under the influence of price wars, it is difficult for enterprises to continue to improve their gross profit margins, and may even decline. In such a situation, companies will seek to go public, so as to obtain the help of capital, even if they cannot be like a tiger with wings, they can find a safe haven, and even allow shareholders to reduce their holdings and cash out.
With the advent of the health boom, getting rid of the labels of "high sugar" and "high heat" may become a new challenge
In recent years, as consumers' health awareness continues to increase, whether they can get rid of consumers' traditional impression of "high sugar", "high calorie" and "unhealthy" is also a new challenge for new tea drinks.
For example, Heytea discloses the traceability information of formula raw materials, nutritional ingredients and true quality raw materials on the product page, and the transparency of product ingredients not only shows the health quality of the brand, but also gives consumers a "reassuring pill";
Source: Red Meal Big Data
However, in this context, Chabaidao was involved in the forefront for a while.
In July last year, the high-priced Internet celebrity yogurt brand Mo Yogurt continued to be caught in a public opinion storm because it was suspected that the raw materials contained "non-dairy creamer". Affected by the incident, a number of media outlets subsequently reported that a number of milk tea products of Tea Baidao still contain non-dairy creamer. According to a report by Future.com, the clerks of a number of tea Baidao stores in Beijing revealed that in addition to the "real fresh milk tea" series, the rest of the regular milk tea products contain non-dairy creamer. Ordinary milk tea series consumers can add 3 yuan to replace it with fresh milk raw materials, that is, it does not contain non-dairy creamer.
According to the data, non-dairy creamer, also known as creamer, is a new type of product with refined vegetable oil or hydrogenated vegetable oil, casein and other main raw materials. This product has a special role in food production and processing, and is also a modern food. In the process of food processing, non-dairy creamer may further produce trans fatty acids due to hydrogenation reaction, which is difficult to be metabolized by the human body.
According to the Food Safety Law, there shall be a label on the packaging of prepackaged food, and the label shall indicate the ingredients or ingredient list and other information. However, for the popular freshly made milk tea products in the market, the regulations do not put forward the requirement to indicate the ingredients. On the other hand, because the creamer is easy to store and cheaper than fresh milk, it brings a cost advantage to catering businesses, and it is often difficult for brands to completely distinguish themselves from it.
According to the "White Paper on China's New Tea Supply Chain 2022" released by Frost & Sullivan, in 2022, the market size of non-dairy creamer in the new tea beverage dairy product segment will be 3.38 billion yuan, which is still higher than that of pure milk and industrial milk products, with the latter two market sizes of 2.63 billion yuan and 2.94 billion yuan respectively. However, the report also predicts that by 2024, the market size of pure milk will surpass that of non-dairy creamer.
"The tea market is very competitive, and brands need to constantly innovate and improve product quality to stay competitive. Bai Wenxi said that the listing of Chabaidao indicates that the capital market has begun to recognize the franchise-based catering brand, which may encourage more similar enterprises to go to the capital market.
■Source: China City Daily reporter Zhang Auntie, intern reporter Ou Fan