From “refusing to fight the price war” to “suspending joining”, Xi Tea has also been “unable to move”

Photo source: Visual China

Blue Whale News, February 10 (Reporter Zhang Jinglun)Faced with the rolling of the tea drinking track, Xicha once again stood up and said no.

On February 10, Xicha released an email to all internal staff with the theme of “Not participating in digital games and large-scale content, returning to users and brands.” The email pointed out that against the background of high homogenization of product brands, oversupply in the number of stores, and a general decline in operating efficiency, the industry continues to expand its scale, which may be more due to its obsession with growth and capital. This is neither a user’s needs nor a partner’s needs, or even a harm to partners. Faced with this situation, Xicha decided to reject meaningless in-store size changes and temporarily stop accepting business partnership applications.

In an internal email, Xicha also said that 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 development of the new tea and beverage industry is still in its early stages. In the end, it must achieve brand connection and resonance with users, not just the short-term popularity and noise. Next, we will focus on store experience and brand content, and work together and support existing Xi Tea business partners to better serve users.

Blue Whale News reporter noticed that after selecting me to become a partner in the Xi Tea Business Partner Assistant Weixin Mini Programs, it will pop up that we have temporarily stopped accepting business partnership applications.

It is worth mentioning that during the Spring Festival, the sales data of new tea drinks are very eye-catching. Among them, the Spring Festival sales of Xicha multi-store increased by more than 300%, and stores in some counties, towns, and scenic spots have become the dark horses in sales of Xicha during the Spring Festival. In addition, sales in Naixue, Bawang Chaji and Chabaidao stores also increased significantly. The Spring Festival consumption boom confirms the huge potential of new tea drinks in the sinking market. Why did Xi Tea announce the suspension of joining at this time?

In fact, as early as September 2024, Xi Tea had already fired its first shot against internal curl. Xicha mentioned in its internal letter that next, it will not make homogeneous products or simply low-cost internals. It will launch more differentiated products and brand activities. At the same time, it will not pursue short-term store opening speed and quantity, and pay more attention to the quality of store stores and store operations.

Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, said in an interview with Blue Whale News that the scale of new tea and beverage stores has a dual impact on the industry. The advantage is that the expansion of store size can increase brand awareness and market share to a certain extent. However, the drawbacks are more significant, such as excessive competition in the industry, waste of resources, decline in profits, and decline in the quality of products and services, which is not conducive to the sustainable development of the industry.

In the past few years, the new tea drinking track has been surrounded by the word scroll.

First, it went through a crazy stage of staking around the ground. In terms of scale, Mixue Ice City’s prospectus shows that as of the end of September 2024, it has exceeded 45,000 stores, making it the brand with the largest number of stores in the tea and beverage industry. Guming, which is about to be launched, has also seized the consumer dividend of the sinking market. As of the end of September last year, the number of stores reached 9778. Closely followed by Chabaidao and Shangshang Aunt, with the number reaching 8385 and 8437 as of June 2024.

However, since 2024, many brands in the tea and beverage industry have slowed down the speed of opening stores, and the industry’s overall store opening strategy has shown a polarized trend. Behind the adjustment of store opening strategies, industry reshuffle is accelerating. According to data from Narrow Gate Eye Food as of December 15, 2024, the total number of new tea beverage stores has decreased by nearly 17,800 in the past year. During the same period, nearly 128,000 new tea beverage stores have been opened. This means that more than 140,000 new tea stores have closed in the past year.

In the stock market, major brand companies also have difficulties. Due to the low barriers in the tea beverage industry, the business models, product tastes, and customer unit prices of the leading new tea beverage brands have further converged. For example, the popularity of fruit and vegetable teas in the industry stems from the introduction of Xi teas. After Xi Tea won the championship and the slimming bottle became popular, many brands such as Naixue and Chabaidao also entered the competition, further intensifying competition.

Therefore, in this knockout match, various brands used eighteen martial arts skills to fight price wars, expand sinking markets, explore overseas markets, and continuously carry out joint marketing, striving to survive until the end.

In 2024, the 9.9 yuan promotion will affect the entire tea and beverage industry. From the industry’s perspective, although the price war can attract customer flow and increase sales in the short term, it will also bring many negative impacts in the long run. For example, endless price competitions have resulted in the reduction of the profit margins of restaurant companies and the difficulty of stores sustaining them.

This situation can be seen from the financial report of Naixue, the first stock in new tea drinks. In the first half of 2024, the average price per order in Naixue direct stores decreased from 32.4 yuan in the same period last year to 27.5 yuan. In terms of store profits, the store operating profit margin of Naixue’s directly operated tea stores was 7.8%, a decrease of 12.3 percentage points from the same period in 2023.

Marketing is also a new direction for many new tea brands. Statistics show that six new tea brands, including Shanghai Aunt and Guming, will hold a total of 175 IP joint activities in 2024, covering film and television, food, games, animation and other fields. However, high-frequency co-branding corresponds to high sales expenses. In the first half of 2024, Naixue’s tea advertising and promotion expenses were 113 million yuan, a year-on-year increase of 52.1%. A similar situation exists in Chabaidao. In the first half of 2024, Chabaidao’s distribution and sales expenses reached 105 million yuan, an increase of 140.2% over the previous year.

After the entire industry has experienced fierce battles such as roll prices, roll thousands of stores, roll sinking markets, roll health concepts, roll IP co-branding, and roll out to sea, how to continue to maintain the sound of new tea drinks will be an important topic for tea lovers in the next stage.

Moving forward in a highly convoluted market, no brand can sit back and relax, and fierce competition and elimination will always exist. Nowadays, will the anti-involution measures of tea-loving Buddhism cause it to fall behind in the competition?

Zhan Junhao believes that from the perspective of brand positioning, Xicha’s anti-inclusion strategy emphasizes differentiation, which helps it maintain its uniqueness in the competition. Although its high-end positioning is not at favorable prices, if it can continue to provide high-quality products and services, it will not face the risk of being abandoned by consumers. On the contrary, it will be able to consolidate its brand position and resist market squeeze from competitors.

The involution of the existing market is not only an all-round competition, but also a face-to-face battle in a bayonet manner. In addition to price wars and scale wars, how to continue the second half is also a question that companies need to think about.