Produced by Tiger Sniff Commercial Consumer Group
Author: Qi Ludan
Editor|Miao Zhengqing
Title picture|Xiaohongshu @ is my sister
Just like the water stains on rice paper, the territory of every company in the tea circle is expanding at an accelerated pace.
And the "dark horse" overlord Cha Ji who came to the top undoubtedly added "variables" to the tea track that has been rolled into the Red Sea.
In 2023, the 7-year-old Bawang Chaji ushered in explosive growth, with more than 2,300 new stores added during the year, with an average of 6 new stores opened every day. 2,300 new stores, equivalent to three times the total number of stores in the past five years. After this wave of store opening sprint in 2023, as of May 2024, the total number of stores at home and abroad will reach 4,092.
It is worth noting that before 2023, the growth rate of Bawang Chaji has begun to take shape. In 2017, the first store of Bawang Chaji opened in Wuyi Road, Kunming, Yunnan. In the five years from 2017 to 2022, the total number of Bawang Chaji stores opened was 780, mainly focusing on blank market areas such as Yunnan and Southwest China. But in 2023, Bawang Chaji will usher in explosive growth and gradually expand to the whole country:
Taking Beijing as an example, in August last year, Bawang Chaji opened a 3.0 store on the first floor of Beijing Heshenghui Shopping Mall: a 200-square-meter storefront, with 4 product production lines and 40 clerks, the current average daily cup production is more than 1,000 cups, and the monthly revenue once reached 1.5 million yuan, much higher than the daily average of 300 cups in the tea industry. The high turnover attracted more franchisees, and in just half a year, Bawang Chaji expanded to 42 stores in Beijing. And Beijing is just a microcosm of the expansion of Overlord Chaji.
Born in Yunnan in 2017;
In 2019, he went out of Yunnan and went abroad;
In 2021, it has raised two rounds of financing, and the B round of financing exceeded 300 million yuan
In 2023, it is rumored to have received investment from the American hedge fund Cotue (which also invested in Heytea, Gu Ming, and Manner), with a post-investment valuation of about 3 billion yuan, and the number of stores surged in the same year
Listing news will break out in 2024
According to the data of Dining Treasure Book, in terms of the number of stores, among the major tea brands, Bawang Tea Ji is currently ranked ninth after CoCo (4,114) and Heytea (3,676). In terms of growth rate, the annual growth rate of its number of stores is the sixth highest growth rate of tea brands in 2023, second only to Mixue Bingcheng (5,500+), Tianlala (2,900+), Shanghai Auntie (2,700+), Gu Ming (2,600+) and Hey Tea (2,400+). However, in terms of the ratio of new stores to the total number of stores in the year, in 2023, Bawang Chaji will rank second with 56%, and Heytea will be about 65%.
(Image source: NCBD Dining Treasure Book "2023-2024 China Tea Industry Annual Development Report")
According to Reuters, Bawang Chaji will be listed in the United States as soon as the middle of this year, and is expected to raise 200 million to 300 million US dollars (about 1.45-2.17 billion yuan), which will be listed by Citibank and Morgan Stanley. As of press time, Bawang Chaji has not commented on this.
Since the beginning of this year, 6 tea chain brands, including Bawang Chaji, have "lined up" for overseas IPOs, including Chabaidao, which has been listed on the Hong Kong stock market, Mixue Bingcheng, Gu Ming and Shanghai Auntie, who submitted the prospectus of the Hong Kong Stock Exchange, and Cha Yan Yuese, which has repeatedly reported the news of IPO in Hong Kong.
In the view of Shen Meng, founder of Xiangsong Capital, the acceleration of IPOs is related to excessive competition in the industry in the past two years:
The tea track has changed from a high growth period to a mature stage, and no matter how it is modified, it cannot hide the low threshold of the tea market, and it can only rely on the scale to achieve growth. At present, the innovation of subdivided categories has peaked, consumer loyalty is limited, and there is an excessive bubble in excessive competition, and there will be at least one round of harsh de-bubble process in 2024, so that the listing will have more reasons and resources to stay in the market to continue to compete, otherwise it may become difficult under the squeeze of shrinking consumer demand and tightening capital investment.
"When the opportunity comes, you have to step on the accelerator to the end, because there is a chance to step on the accelerator this year, and it may not be there next year", Wang Hongdong, the founder of Dining Treasure Book, said to Tiger Sniff.
Why the rush to open a store?
In 2023, Bawang Chaji will open more than 2,000 stores in just one year, and during the same period, the same level of "1,000 store growth" of newly opened stores are Mixue Bingcheng, Tianlala, Shanghai Auntie, Gu Ming and Hey Tea.
An industry analyst told Tiger Sniff: "For the rising star Bawang Chaji, if you want to 'go to the table', there is not much time to explore." ”
In 2017, when Bawang Tea was born, several ready-made tea brands that had emerged had begun to take shape with a sense of scale. Heytea began to seek the national market around 2021 and opened more than 800 stores, along with Nai Xue, who started in Shenzhen at the same price, and a little bit that almost monopolized the 15 yuan price band at that time.
Another tea analyst told Tiger Sniff that consumer goods want to occupy the market, either to become a super channel or a super brand. It's like a beverage on a container, where consumers can only see Coca-Cola, which appears most frequently. For non-rigid category of tea, opening stores everywhere without being eaten up by scale is indeed one of the solutions to establish brand mentality.
Luke, an investor who has participated in a leading tea brand, told Tiger Sniff that when the number of stores reaches a certain scale, the scale growth rate will gradually accelerate: "For example, Luckin opened from 1,000 stores to 3,000 stores very quickly, because of the support of capital, from 3,000 stores ~ 5,000 stores, the growth rate was not as fast as before, but from last year to the beginning of this year, Luckin's stores suddenly increased from 8,000 to 18,000." ”
Stronger brand potential can attract more franchisees to open more stores→ more front-end stores to drive greater traffic, bring greater bargaining space and cost advantages to the back-end supply chain, squeeze out higher gross profit margins→ attract more franchisees, fill more store locations→ scale growth, and once again pull up brand potential energy
"From the perspective of consumption, we believe that the supply chain is not a super barrier, and the final barrier is likely to come from two aspects, one is to achieve the digitization and automation of the whole link, and the other is the scale. The investor added.
It is worth noting the competition for resources around franchisees.
Since the beginning of this year, in order to stake land, the snatching of franchisees by various brands has become more and more obvious. There are head brands to join the investment threshold from 1 million yuan to 580,000 yuan, and another brand has launched new preferential policies after opening up to join, and brands such as Shuyi Xiancao have launched 0 brand fees, 0 cooperation fees and 0 service fees, and each has lowered the threshold to join in order to strengthen the scale barriers.
On the one hand, the Matthew effect of the tea industry is becoming more and more obvious, and the overall growth rate of the industry has slowed down, but the head tea brands have risen rapidly; On the other hand, the pressure of queuing up for IPOs has further contributed to the tension of each company's expansion.
(According to Meituan data, from 2020 to 2022, the number of tea brands with "5,000-10,000" stores has increased significantly in the industry, and the proportion of the number has increased from 2.53% in 2020 to 8.69% in 2022)
Wang Hongdong, the founder of Meal Treasure Book, told Tiger Sniff: In the past two years, many bubble tea shops have opened, but more stores have been closed, and stores in most cities have decreased to varying degrees, and in 2023, the number of stores in Shenzhen, Shanghai, and Dongguan will be reduced by more than 2,000, including many old players such as CoCo and a little bit. "In the future, the concentration of heads will become higher and higher, and small brands are likely to be squeezed out of the market, and it is possible to stay at the table only by going public for financing, continuing to expand the scale, and forming a scale advantage at the brand and supply chain end." He said.
It is necessary not only for the brand, but also for the channel
The track is getting more and more crowded, and it is clear that there needs to be more efficiency in order to get ahead.
"In fact, Overlord Chaji is not 'penetrating' a city, it is actually occupying some high-potential energy fields." said the above-mentioned investor.
The expansion model of tea drinks is dominated by street stores surrounded by rural areas, with small stores and low product prices, such as Mixue Bingcheng (28,815 stores) and Gu Ming (9,249 stores), which usually need to be opened with high density and use channels to "penetrate" a city; The other is to hold high and occupy the "commanding heights" of the city, open big stores at the core points of the core business district, and open up popularity through the flow of people with a high degree of concentration. Its founder, Nie Yunchen, believes that it is easy to open the market through channels for rigid products, while tea drinks that are not just needed are more dependent on becoming a pure super brand.
The mainstream store type of Bawang Chaji is obviously more focused on the latter.
"Bawang Chaji urgently needs a strong brand potential to attract franchisees to achieve expansion, and shopping malls are a natural high-potential energy field, and at the same time, high-potential energy will be quickly transmitted from top to bottom," added investor Luke.
From 2022 to 2024, Bawang Chaji will successively win the best iconic core points in high-tier cities such as Guangzhou Grandview Plaza, Chengdu Chunxi Road, and Changsha Guojin Street. In order to win some good positions, in addition to direct sales and franchises, Bawang Chaji also operates through joint operations, such as Grandview Plaza in Guangzhou.
"When entering Guangzhou, the franchisee had already opened a small and average location franchise store in the local area, but it did not cause a particularly big response, so later won the core position of Grandview Plaza in Guangzhou through joint ventures," industry insiders said to Tiger Sniff.
According to the narrow door dining eye, about 37% of Bawang Chaji's stores in the country are in shopping places, and 70% are on the first floor of shopping malls (Heytea is 44% and 90% respectively), and the number of stores in new first-tier and second-tier cities accounts for 53%, and the proportion of first-tier cities is continuing to expand. At present, Bawang Chaji only accepts the first floor of the shopping mall or the point of the commercial street in the franchise investment, and the area is required to be more than 80 square meters, and the decoration cost of the 3.0 store type reaches 7,500 yuan per square meter, so as to strengthen the brand image of high-end positioning.
In addition, after the epidemic, the "idle rate" of "venues" and "buyers" both increased, which further boosted the opening of shopping malls.
An investment manager told Tiger Sniff: In the case of a general decline in retail sales in the business district, the vacancy rate of shopping malls is high, and merchants have more room for negotiation, such as using large decoration subsidies, rent-free periods and other policies to attract brands to settle in, and catering, as a drainage format, has filled a large number of retail vacancies. In 2024, the proportion of catering formats in shopping malls has increased from about 10%-20% to more than 30% year-on-year. In addition, the "idle" middle-class people after the epidemic are also willing to look for brands to join as a second career. Therefore, although the initial investment of franchise large stores is relatively high, considering the specific environment last year, both supply and demand sides (shopping malls and franchisees) have obtained a window period for opening stores.
An investment promotion staff told Tiger Sniff that this year's equipment costs have doubled, and the investment amount of 80 square meters of store type is more than 800,000 yuan, which is higher than most tea brands, but it is still a seller's market: "The pass rate of the initial examination is very low, and super franchisees with catering experience are preferred, but if they can open a store at the beginning of last year, they have basically paid for themselves," he added.
Higher single-store efficiency
Since the beginning of this year, Heytea and Naixue have launched intelligent tea-making machines to simplify the production of front-end stores.
For example, Starbucks performed better last year because it opened more than 1,000 stores in the sinking market, but then as the spots gradually become saturated, the competition for brands will be 'face-to-face'," said Wang Hongdong, founder of Dining Treasure. Taking Beijing Hopson Hui shopping mall as an example, there are about 20 stores of various types of drinks in the mall, and there are 12 beverage shops on the same floor of Bawang Chaji alone.
But the big store type of Bawang Chaji means more rent, higher labor costs, and higher risks, how can the single-store model be more efficient?
Investor Luke believes that the first is bloodshed (taking the lead in investing heavily in private domain operations to improve the repurchase rate); The second is to make up the knife (take the lead in the whole process of mechanized production, reduce labor and replication costs).
First of all, under the rapid growth, the tea industry is in dire need of store managers and tea makers, one of the reasons is that milk tea has a high degree of non-standardization, so it requires complex production and training processes. From the perspective of the most mainstream fresh fruit tea, the machine can only optimize a single step such as tea extraction, fruit cutting, mixing and stirring, but the manual work of combining each link cannot be omitted, for example, the training period of a senior tea maker of a fresh fruit brand is more than 6 months.
But for rapid commercialization and scale-up, standardization and reproducibility are top priorities.
·“ When Starbucks is doing product research and development, the first thing to consider is whether the raw material can be industrially procured, whether it can be standardized for distribution across the network, and even return to the store, whether the operation of this employee is simple and convenient enough, including the configuration of machinery and equipment, and the work of the bar is standardized, and there will be no other things. You think about this thing, and finally feed it back to R&D, and the conclusion is forget it, don't do it. The article on Tiger Sniff Miaotou once mentioned.
The practice of fresh milk tea is very simple: fresh milk + tea + sugar, and the raw materials are all standard products, which means that the production process is more mechanized, which is one of the reasons why many brands have used raw leaf fresh milk tea as the main product in recent years.
According to the observation of Tiger Sniff, Bawang Tea Ji is the whole process of machine production, that is, without manual deployment, the machine can produce the finished product with one key, each production line is responsible for one step per person, 4 people can complete the production, and the cup time is more than ten seconds, a clerk of Bawang Tea Ji told Tiger Sniff that its induction training is only about 1 week, which greatly reduces the entry threshold for reciting hundreds of milk tea formulas at every turn:
System 1: machine scanning code
Preparation 2: Add ice and shake machine
Preparation 3: pour the cup, wash the cup
4: sealing, buckle cover
Kitchen/mobile post (2 people): make tea, replenish raw materials to the machine
According to official data, the three explosive products in the "Original Leaf Fresh Milk Tea" series of Bawang Tea Ji continue to account for 70% of sales, of which the large single product Boya Juexian accounts for 30%. Since the beginning of this year, in addition to Bawang Tea, Jasmine Milk White (made in Shenzhen), Chahualong (made in Shaanxi), Ma Wuwang (born in Nanjing) and other brands that focus on national style fresh milk tea have a very high hot search index in Meituan, and Hey Tea and Tea Baidao have also launched similar categories. After experiencing iterations such as pearl + creamer (unhealthy) and milk cover fresh fruit tea (complex production), the tea drinking circle that periodically produces explosive products has flocked to the original leaf fresh milk tea, a large single product that takes into account the concept of standardization + health.
(Image source: Meituan)
"To put it bluntly, consumers still want to drink something better at the same price. At the same time, the point of health has stepped on this year's consumer psychology", Luke concluded, "In fact, since the beginning of this year, the frequency of new milk tea has decreased significantly, and everyone has pushed a lot of so-called popular products and classics, and from the perspective of innovation, it is indeed a little exhausted." ”
In addition, in the eyes of investors close to Zhang Junjie, the founder of Bawang Chaji, he has strong learning ability and boldness, in addition to the relocation of headquarters, opening big stores, and bold marketing, he also took the lead in spending a lot of money to lay out private domain marketing. According to Tiger Sniff's observation, Bawang Chaji, who takes the high-end route, has specially set up an off-site reception to guide the conversion of private domain traffic.
"Luckin has a complete set of corporate WeChat processes for operating its own private domain group, including how to issue coupons in the group, how to give rewards and various activity benefits, which is a complete set of process for attracting new users and retaining them and waking up sleeping users. If done right, a single store can increase sales by about 20 percent on average," says the investor.
"But this thing is very money-burning, some brands of IT engineers used to spend tens of millions a year, forced by cost pressure, and now it has dropped from 1,000 people three years ago to three or four hundred people, which is actually a very expensive thing, and even the first 3-6 months of income will not be too obvious, it is more of a long-term increase in positions, it depends on whether the boss is willing to spend these money upfront."
It is worth noting that a store manager in Beijing told Tiger Sniff that among the more than ten franchise stores managed by a branch in Beijing, three of the better stores in Dawang Road and other areas had a turnover of more than one million yuan last year, but this year it has dropped to about 800,000 yuan, "probably because the distance is too close," the store manager said.
According to the statistics of the China Chain Store & Franchise Association, as of the end of 2022, there are about 6,700 shopping center projects in China, and at present, the number of stores that have been opened by Bawang Chaji has reached about 4,000. In the core business districts of some cities, there are two Bawang tea girls on the same floor of the same shopping mall.
"We, as investors, have really missed the overlord tea girl, whether it is subjective or passive. Because of the model based on shopping mall stores, the growth space for opening stores is very limited, and there can be a growth of seven or eight times before entering the game before the scale of 1,000 stores, and it may be ten or twenty times in terms of profit growth, but after opening three or four thousand stores, it is necessary to find a second growth curve, whether it is a different store type, business format, or different products," Luke said.
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