On April 23, 2024, "Tea Baidao" was officially listed on the Hong Kong Stock Exchange, becoming the "second stock of new tea drinks", and it is also the first new tea beverage company to successfully land on the Hong Kong Stock Exchange in the past three years. The opening price was HK$15.74 per share, down more than 10% from the issue price of HK$17.5 per share. The closing price on the first day was HK$12.8 per share.
Brand logo, image source: Chabaidao
In 2008, the first tea Baidao was born in Chengdu. Today, its stores have spread to 31 provinces and cities across the country, achieving full coverage of all provinces and tier-level cities in China. According to the prospectus, as of the latest practicable date, Chabaidao had a total of 8,016 stores in China.
With the continuous growth of the scale, Tea Baidao has also reached more consumers. In 2023, the total retail sales of Chabaidao stores will reach approximately RMB16.9 billion, with 1.016 billion cups of tea sold in a year. At the same time, in the past three years, the revenue and net profit of Chabaidao have continued to grow. In 2023, Chabaidao's annual revenue will be 5.704 billion yuan and its net profit will be 1.151 billion yuan.
Tea Baidao products;Image source: Weibo @茶百道ChaPanda
It is undeniable that with the rapid development of the new tea market in recent years, the competition between brands has become more and more fierce. In 2023, the market size of China's ready-made tea shops will reach RMB247.3 billion, of which the top five brands together will account for about 40.2% of the market share (in terms of retail sales), while Chabaidao will rank third with a market share of about 6.8%. [1]
So in the view of Chabaidao, what are the key factors for the rapid growth of its business? In the prospectus, the brand gave the answer.
Chabaidao said that its franchise model is the key to the rapid growth and success of the business. As of December 31, 2021, 2022 and 2023 and the latest practicable date, there were 5,070, 6,352, 7,795 and 8,010 franchised stores in the Chabaidao store network, respectively, accounting for more than 99.0% of the total number of Chabaidao stores in operation as of the relevant dates. In 2023, operating revenue from franchisees accounted for 99.2% of total revenue.
Breakdown of revenue by distribution channel, Image source: Screenshot of the prospectus
At the same time, Chabaidao also strategically selects cities to operate a small number of directly-operated stores, using them as brand representative stores to bring consumers an immersive experience. At present, there are a total of six directly managed stores in Chamomochi.
In addition, Chamodo plans to steadily expand its store network in overseas markets. In January 2024, Chabaidao's first overseas store will land in Seoul, South Korea. Since then, Chamodo has also opened several stores overseas.
Chabaidao Seoul store, South Korea;Image source: Xiaohongshu @Chabaidao Korea
Although the current business model of tea Baidao relies on franchise to achieve certain success, this business model also implies risks.
The prospectus mentions that the network of tea Baidao stores mainly includes franchise stores operated by third parties, and the performance of franchise stores has a significant impact on the operating performance of tea Baidao.
Failure to maintain product quality, safety and hygiene standards in stores can also have a material adverse impact on Chabaidao's reputation, financial condition and results of operations. [1]
This risk was also exposed in this year's 315 report. Some media pointed out that the two stores of Chabaidao in Wuhan and Changsha violated the company's regulations and changed the label of the taste period of raw materials without authorization. In response to this situation, Chabaidao apologized and self-inspected all stores, and also said that it would promote the "Transparent Tea Baidao" project and pay attention to the food safety situation of stores.
Tea Baidao will promote the "Transparent Tea Baidao" project;Image source: Weibo screenshot
For Chabaidao, the supply chain capability also determines the direction of the brand to a certain extent. According to the prospectus, the vast majority of Chabaidao's revenue comes from the sale of goods and equipment to franchisees, as well as royalties and franchise fees collected from franchisees. [1] If the cooperation with a third-party supplier is interrupted or the main raw materials fluctuate significantly, the company's operation will be significantly affected.
In this case, Tea Baidao continues to strengthen the construction of the supply chain. For example, in 2023, the "marriage" of Cha Baidao and Bawang Cha Ji has attracted widespread attention, and even rushed to the hot search on Weibo. The industry also interpreted the cooperation as feedback from the two brands on the market's "supply chain is king".
The "marriage" of Tea Baidao and Overlord Tea Ji rushed to the hot search;Image source: Weibo screenshot
On November 23, 2023, Sichuan Rongshang Jiahe Technology Co., Ltd. was established. Sichuan Shuxin Tongyuan Enterprise Management Consulting Co., Ltd., a subsidiary of Chabaidao, holds 25% of the shares, and Guochao Information Technology (Dongtai) Co., Ltd., a subsidiary of Bawang Chaji, holds 20% of the shares.
This isn't the only collaboration between the two new tea brands. On November 29 of the same year, Sichuan Tea Benyuan New Material Technology Co., Ltd. was established, and the subsidiaries of Tea Baidao and Bawang Tea Ji held 33% and 67% of the shares respectively, and jointly participated in the packaging material company.
In addition to win-win cooperation, Chabaidao itself is also continuing to increase its supply chain. The brand invested 10 billion yuan to build the tea Baidao intelligent production and processing base and supply chain headquarters project, which will be put into operation in June 2023 and is expected to have an annual output value of 5-1 billion yuan. [2]
This year, Tea Baidao established a tea production company in Fuzhou. Its base mainly produces beverage-based tea to supply tea stores, and is expected to be completed and put into operation in April 2024, with an output value of more than 150 million yuan. [3]
In addition to expanding the store network and strengthening the supply chain capabilities, Chabaidao is also upgrading its brand image.
In 2023, Tea Baidao will release a new brand positioning of "good tea as the base, making fresh". At the same time, the brand launched a new "Ding Ding Cat" image of "a panda drinking tea", and the English name was changed from "ChaBaiDao" to "ChaPanda".
The visual image of Tea Baidao has been upgraded, and the image source: Tea Baidao
Tea Baidao, which wants to make "a panda drinking tea" into a super brand symbol, is still attaching importance to the common sustainable development of enterprises and society.
In May 2023, Chabaidao signed an agreement with the Chengdu Giant Panda Breeding Research Base to adopt an 11-month-old male giant panda for life in the form of donation and adoption, and named it "Chacha".
The brand hopes that through this move, more consumers or brands will actively participate in the public welfare undertakings of caring for giant pandas, and more people will be able to pay attention to global ecological protection and biodiversity.
Tea Baidao adopts a giant panda;
With the emergence of the "second share of new tea drinks", the competition in China's new tea drink market will also accelerate and upgrade. According to Frost & Sullivan's report, the compound growth rate of the mainland's ready-made tea shop industry from 2018 to 2023 is as high as 25.2%, much higher than the overall growth rate of 4.4% in China's soft drink industry in the same period.
At the same time, for freshly made tea brands, "involution" is far more than that, and they still have broad room for growth in the future - data shows that the compound growth rate of ready-made tea shops from 2024 to 2028 is expected to be as high as 15.4%. [1] What new stories will Tea Baidao bring to consumers in the future?
Reference Sources:
[1] Tea Baidao prospectus, April 15, 2024
[2] Tea Baidao: Deep Cultivation of Supply Chain Construction, Performance Growth Against the Trend, September 27, 2022, Guangming.com
[3] Tea Baidao established a tea production company, which is expected to be completed and put into operation in April this year, January 22, 2024, The Beijing News
This article is the original of FBIF Food and Beverage Innovation, author: Riri, please contact for authorization for reprinting.