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“Refuse meaningless store size registration and temporarily stop accepting business partnership applications.& rdquo; At the beginning of the 2025 New Year, Xicha released an internal open letter titled “Not Participating in Digital Games and Scale Inversion, Returning to Users and Brands”, announcing its corporate strategy for 2025. In the strategy released this time, Xicha said it would suspend joining.
After experiencing a wave of franchises in recent years, Xi Tea has become the first brand in the new tea beverage industry to announce a suspension of franchises.
After experiencing the huge impact of the epidemic on the market, increasing scale and promoting sales have become urgent needs for the entire industry. In this context, mainstream brands have basically abandoned the development model of comprehensive direct sales and started a franchise model.
Among them, Xi Tea has become the most typical beneficiary. Public data shows that after the opening of franchises, the number of newly opened stores for Xicha will increase from 51 in 2022 to 2687 in 2023. Naixue Tea, which has also been released to join, has increased its number of new stores from 299 in 2022 to 582 in 2023. As of September 2024, the total number of stores has reached more than 4300.
Now, with the suspension of Xicha joining, it may also indicate the development of the new tea beverage industry and reach a new node.
Rapid expansion under joining
From the opening of joining in November 2022 to the suspension of joining now, Xicha has achieved rapid expansion in the past three years.
The first batch of franchise stores opened by Xicha are mainly for second-tier and third-tier cities, with a franchise fee of about 500,000 yuan.
In March 2023, Xicha will further liberalize the franchise area and launch preferential policies for business partnership fees to lower the franchise threshold. In June 2023, Xicha announced that the number of franchise stores has exceeded 1000, and plans to add 1000 stores every year in the future.
Public information shows that as of the end of 2023, the number of Xicha stores has exceeded 3200, including more than 2300 business partnership stores, and the store size has increased by 280% year-on-year. These newly opened stores are mainly concentrated in second-tier and third-tier cities, and even sink into county-level markets.
The rapid growth in the number of stores has brought significant economies of scale, giving Xicha stronger bargaining power in terms of supply chain and raw material procurement. It is reported that Xi Tea will achieve profit in 2023.
By 2024, the number of Xicha stores will further increase, and by the second half of 2024, the average performance of newly opened Xicha stores will be significantly higher than that in the first half of the year. The number of members exceeded 150 million, a year-on-year increase of 50 million.
So far, Xicha has opened more than 70 stores in 7 overseas countries: Singapore, the United Kingdom, Canada, Australia, Malaysia, the United States, and South Korea, as well as China, Hong Kong and Macao.
“The numbers game has come to an end
However, with the intensification of market competition, involutions have also become a severe challenge that the new tea and beverage industry cannot avoid.
Among them, the most significant challenge is the gradual increase in store closures. According to GeoQ Intelligence’s “Blue Book on the Development of Chain New Tea and Beverage Stores in 2024”, the number of stores opened in 106 chain new tea and beverage brands in 2024 was approximately 31641, and the number of closed stores exceeded 20000, which is increasing year by year. From a regional perspective, the overall store closure rate in first-and second-tier cities is about 11% to 26%, while in third-tier cities and below with more than 30 stores, the store closure rate reaches as high as 60%.
The density of stores continues to rise and products tend to be homogenized, which greatly dilutes the passenger flow of all stores, resulting in a gradual decline in revenue and profits until losses. The rapid expansion has become a thing of the past.
In addition, the gradually downward price has also put a lot of pressure on major tea brands.
Data from Hua ‘an Securities Research Report shows that in the past few years, the proportion of per capita consumption below 10 yuan in the tea and beverage industry has increased from 7% to 30%, while the proportion of more than 20 yuan has dropped from 33% to 4%.
In this regard, Xicha said in an internal letter that the digital games in the new tea beverage industry have come to an end, and meaningless prices, revenue, and scale are seriously consuming users ‘love for new tea drinks. The extensive homogenization of product brand experience and excessive scale expansion have seriously consumed users ‘love and seriously harmed the foundation of the entire industry.
For the new tea and beverage industry, slowing growth is the biggest crisis. According to data from China Chain Store and Franchise Association, although the scale of my country’s existing tea and beverage store industry maintains growth, facing 2025, the growth rate of the new tea and beverage market is expected to slow down from 44.3% in 2023 to 12.4% in 2025.
As Xicha described in its internal letter, the new tea beverage is still in its early stages of development, and the industry still lacks industrial depth and cultural thickness. The fundamental thing is the lack of real deep connection with users. rdquo;
After experiencing a blooming period, the new tea and beverage market is facing systemic challenges and requires in-depth self-examination and reflection. This may be painful, slow, and no longer exciting, but it may also be the only way to maturity.(This article was first published on GuShiio.com Stock Market Smart APP, author| Xie Xuan, Editor| Fang Yu)
