01, Hey Tea is cheaper than Mixue Bingcheng
Unexpectedly, one day Heytea was sold cheaper than Mixue Bingcheng.
On May 6, just after going to work during the May Day holiday, Zheng Juan, a consumer in Beijing, received a link in the WeChat community of Heytea. Take the classic product "Zhizhi Jinfeng Tea King" as an example, the original price is 15 yuan, buy one get one free, which is equivalent to 7.5 yuan a cup, and the original price of 8 yuan "pure green tea Yanhou" is only 4 yuan a cup after using the coupon, which is cheaper than Mixue Bingcheng.
As a loyal user of Heytea, Zheng Juan immediately made a decision, "Quickly grabbed it." "After grabbing it, I placed an order and went straight to the mall downstairs to pick up the goods.
After asking the clerk, she learned that this was a limited-time event that Heytea did for its 12th anniversary. "City Boundary" found that the description of the Hey Tea coupon stated that more than 10 products in the tea tea, light milk tea, and thick milk tea series can participate in the buy one get one free activity. Compared with Luckin, which is also making a big price cut, there are only 5 models in the 9 blocks and 9 zones.
▲ (Heytea store advertises buy one get one free.) Photo source/city boundary)
In fact, the price reduction of Heytea is not new. Originally, it was the quintessential example of high-end tea. According to the "White Paper on the Development of China's New Tea Beverage Industry" released by Sullivan, in 2020, the unit price of Heytea will reach 52 yuan to 56 yuan, far exceeding the average customer unit price of 35 yuan in the industry.
At the beginning of 2022, the topic of "Hey Tea Farewell to 30 Yuan" appeared on the hot search. There is consumer feedback that Heytea has begun a comprehensive price reduction. The price adjustment range ranges from 1-10 yuan, and the price adjustment of a single product is up to 10 yuan. Among them, the price of pure green tea and American coffee is only 9 yuan.
In that price reduction marketing, Heytea emphasized to the outside world, "Heytea has never been a high-priced tea. The words reveal the meaning of saying goodbye to the past self.
From 30 yuan, to 10 yuan, and then to a few yuan for a cup, Heytea completely took off its noble coat. This shocked Zheng Juan, the first batch of fans, and she couldn't forget the experience of queuing for 40 minutes at the Sanlitun Hey Tea store, just to take pictures and post them to Moments after getting the milk tea, and she couldn't forget the days when she spent 36 yuan to buy a cup of fleshy cherries.
It is reported that at that time, a group of purchasing scalpers with a monthly income of more than 10,000 yuan were also born, and the souvenirs given by Heytea to the media were directly a Heytea skip-the-line coupon.
Subsequently, Zheng Juan felt that the high-quality characteristics of Hey Tea were weakening, and before Xi Persimmon Duoduo had just been listed, she rushed to buy it back and taste it, feeling that it was a bit too much water, and the persimmon meat was not as much as the same kind of drink in Manji desserts. "Now it has joined the buy one get one free camp, and there is a feeling that the goddess of coldness has become a village flower."
For the change in the taste of Heytea, Zheshang Securities analyzed the reasons in a report, and the sharp price reduction of Heytea at the beginning of 2022 is due to the compression of the cost of labor + raw materials, such as the transformation of chestnut puree and taro puree made by store employees into canned chestnut puree and frozen taro puree made by the factory; The use of canned food instead of fresh fruit can save about 30% of the cost.
A former HeyTea employee also revealed on Zhihu that the tea base of all tea drinks before Heytea was freshly quenched and tasted better, and later the tea leaves were filtered out after being boiled in a large pot, and cooled quickly with ice cubes, and then put in the refrigerator for preservation. "If you are a regular drinker of Hey Tea, and have drunk Hey Tea in 2016 and Hey Tea now, you should feel the change in taste."
"In the early years, the office spent a few hundred yuan to drink a happy tea, which was the standard for leaders to win people's hearts." Beijing white-collar Yangmei said that last year, Heytea and Fendi jointly became popular, and she and her colleagues also praised the two families. Unexpectedly, just a year later, Heytea sold a single-digit cup.
Yangmei can't help but sigh that among the many tea drinks, Hey Tea has finally been rolled into an "ordinary person".
02. Advance to revenue and scale
According to Zhu Danpeng, an analyst in China's food industry, Heytea's price reduction is a dimensionality reduction blow to cater to market changes, and in the new tea industry, it has a certain competitiveness in brand operation, market operation, and new promotion.
"The high-end image of Heytea has been established, and the price has gradually been adjusted to be more pro-friendly, which can obtain a large number of users who used to yearn for it but are reluctant to drink it." Lin Jun, a restaurant observer, told City Boundary.
In fact, in 2022, only one month after the price reduction of Heytea, the other two high-end new tea beverage brands have also started the price reduction mode. Nai Xue's tea announced a significant price reduction of 10 yuan for classic products, and some products start at as low as 9 yuan. Lele Tea controls the price of some drinks below 20 yuan, of which the lowest price of pure tea freshly extracted jasmine green is priced at 8 yuan.
The three companies have cut prices in order to expand more customers for their own stores. According to a new tea industry report by Dining Treasure Book, in 2021, the market share of new tea drinks in mainland China with a unit price of less than 20 yuan will be 8% higher. Nai Xue's tea bluntly said in its 2021 financial report, "We feel that consumers hold their money bags tighter." Clearly, the low-end consumer market is more attractive than ever.
For Heytea, this desire to try to exchange price cuts for revenue is even stronger.
Heytea is not on the market, and there is no public sales data. According to the estimates of Venture Capital, in 2018, the sales of Heytea were 1.6 billion yuan, 3.5 billion yuan in 2019, and rose to 4.2 billion yuan and 5.353 billion yuan in 2020 and 2021. In 2021, the 30-year-old founder Nie Yunchen was also selected into the "Hurun Report" with a wealth of 10 billion yuan.
But in 2022, the situation is no longer optimistic, and Heytea's sales will only be 4.694 billion yuan. And Mixue Bingcheng, which has been taking the cost-effective route, showed a strong ability to make money as soon as the prospectus was disclosed. In 2022 alone, Mixue Bingcheng sold 13.6 billion yuan, more than 3 times that of Heytea, and its net profit also reached 2.013 billion yuan in the same period.
What bothers Heytea even more is that the scale of the store has encountered a bottleneck. In 2018, Heytea had 163 stores, 390 in 2019, and in 2020, Heytea entered the crazy mode, opening nearly 300 stores in one go, reaching 695 by the end of the year. However, in the following 2021 and 2022, the number of Heytea's stores stagnated at more than 800. The reason is that the insistence on the concept of direct sales limits its development.
In a report, Northeast Securities compared Heytea with rival Nai Xue's tea, and used this to deconstruct Heytea's later price reduction measures and the motivation for opening up franchises.
The report writes that in 2020, the scale of Heytea stores will be far ahead, and Nai Xue, as the second high-end tea drink, will seize the last window period of the new consumption boom and choose to go public in 2021, taking the lead in breaking the balance. With the support of sufficient cash flow, Naixue's tea accelerated the expansion of stores, quickly narrowed the gap with Heytea, and completed the overtaking of the number of stores in May 2022.
At the same time as Naixue's tea high-speed store expansion, Heytea is limited by cash flow pressure, and the pace of store opening in 2022 has come to a standstill, and the gap in the number of stores has been gradually widened. In this context, Heytea took the lead in announcing price reductions in February 2022, and announced the opening of franchises in November of the same year to realize the value of brands and suppliers. And in April 2023, Nayuki's tea was left behind again.
According to the narrow door dining eye, as of now, the number of Heytea stores is 3,676, and in 2022 alone, Heytea has opened 2,396 stores, which is 4 times the number of stores opened in the previous three years. Although Nai Xue's tea later followed up with the franchise strategy, the number of stores was not as good as that of Heytea, with 1,855. In terms of per capita consumption, Hey Tea is 17.51 yuan, which is more down-to-earth than Nai Xue's tea of 20.38 yuan.
And in terms of store distribution, Heytea is no longer confined to Beijing, Shanghai, Guangzhou and new first-tier cities, and the total proportion of stores in second-tier and below cities has reached nearly sixty percent.
Price reduction, joining, sinking, a series of combination punches, Heytea can move forward again. However, since the first batch of Heytea franchisees tested the waters, according to Jiemian News, Nie Yunchen has frequently swiped complaints on social media about "franchised stores become ugly", "it becomes difficult to drink after price reductions" and "franchise operations are chaotic". To this end, Nie Yunchen also asked some franchisees to change the signboards of the stores.
In Yangmei's view, Heytea has been a bit chaotic in the past two years, and it has repeatedly reduced prices for the sake of volume, which is a kind of price drop. The opening of the franchise may cause product quality and control problems, and then cause "backlash" to it. But in the face of growth, these issues have become less important.
03. There is not much time left for Heytea
Some consumers have turned from admiration to disappointment with Heytea. In the capital market, the aura around Heytea has gradually disappeared.
Recalling that in 2016, Heytea received 100 million yuan in financing at the beginning, including IDG. Since then, Heytea has completed 4 rounds of financing, and there is no shortage of well-known capital such as Sequoia, Tencent, Hillhouse, and Black Ant. In July 2021, Heytea set a new financing record for China's new tea beverage industry with $500 million, and its post-investment valuation reached a staggering 60 billion yuan.
At that time, many industry insiders believed that this might be the last wave of financing before Heytea went public. As a result, the last round of guesses was correct, but there was no movement in the listing. During this period, Heytea repeatedly reported listing rumors, all of which were denied by the company. On the contrary, peers such as Nai Xue's tea and tea Baidao IPO first, and those that were not listed, such as Mixue Bingcheng, Gu Ming, Shanghai Auntie, and Bawang Tea Ji also submitted prospectuses.
On the other hand, Heytea, the most promising brand, seems to have become the loneliest one. According to Lin Jun's observation, in the annual report before the opening of franchise in 2022, Heytea only mentioned the highest sales of single stores, but did not mention the average data. This may indicate that Heytea's directly operated stores have passed the era of high profits, and the hematopoietic capacity is insufficient, and such a situation cannot be reasonably explained to investors. The cash flow contributed by the franchise business can continue to transfuse the direct business. ”
Liu Hui, co-founder of Super Daddy and angel investor, told "City Boundary" that after investors invested in Hey Tea, they did not expect the black swan of the epidemic, so the valuation was pushed to 60 billion before it was listed.
The second largest high-end brand, Nai Xue's tea, a competing product certified by the market, has dropped from more than 20 billion Hong Kong dollars to more than 10 billion Hong Kong dollars after listing, and now it is only 5 billion Hong Kong dollars. So the question for investors is, no matter how strong Heytea is, can it be 10 times that of Nai Xue's tea if the market value remains unchanged after listing?
It is not difficult to understand why most voices in the market believe that Heytea's shift to scale-oriented is likely to increase its valuation and prepare for listing. "Affected by capital pressure, under the condition that direct sales have been restricted, Heytea must be open to joining." Liu Hui said.
In fact, tracing the tide of tea drinks on the market is a watershed stage when the tea industry begins to decline. Tianyancha App shows that in 2019 and 2020, the financing frequency of new tea drinks was 40 times and 50 times respectively, and it increased to 89 times in 2021, and the corresponding financing amount reached a peak of 17.819 billion yuan. Since then, it has begun to cool down, with 31 financings in 2023, with a publicly disclosed amount of 1.35 billion yuan, less than one-tenth of that in 2021.
The "2021 New Tea Beverage Research Report" released by the China Chain Store & Franchise Association also proves that the new tea beverage market is experiencing a phased slowdown, with the growth rate of the market being 26.1% in 2020 and falling to about 19% in 2022. And in the next 2-3 years, the growth rate may fall to 10%-15%.
"Many tea brands are pinning their hopes on the best dividends and completing their mission to go public." Lin Jun sighed, "Heytea has always been upright, and missed the opportunity to expand and sprint the capital market. By the time you wake up, it's too late. ”
At present, how exaggerated is the competition in the milk tea track? According to the narrow door dining eye, the milk tea beverage track has been flooded with 3,169 brands, and the total number of stores has reached 418403, and it continues to grow. Based on a population of 1.4 billion, there is one bubble tea shop for every 3,300 people.
In Liu Hui's words, "Tea is an industry without core barriers. It is difficult to tell the differentiation of products, not only Heytea is facing this problem, but the whole industry is facing this problem. "How did Heytea break out of the Red Sea? When will the company go public? Heytea has never given the outside world a definite answer, but I'm afraid there is not much time left for it.
What's more, what is in front of Heytea is the fact that the stock price performance of Nai Xue's tea and tea Baidao is unsatisfactory after listing. Liu Hui said that the foundation of chain enterprises is still stores, one is the speed of new stores, and the other is the operating ability of old stores, the latter is more testing brand power and system support capabilities, and the two companies have not handed over a good answer after listing. Zhu Danpeng said that from the current market environment, capital prefers to chase technology stocks.
(Zheng Juan, Yang Mei, and Lin Jun are pseudonyms in the article)
Author | Chen Chang
Edit | Chen Fang
Operations | Liu Shan