Will the next Starbucks appear in the field of "new tea" when tea is hot?

Can the market size of the tea industry accommodate the next Starbucks?

What is the key to the birth of the next Starbucks in a new tea shop?

Although we use the above space to demonstrate the scale and potential of China's tea market, the existence of the market does not necessarily mean that there will be monopoly oligarchs in this industry-there are also many industries with a huge market, such as the Chinese catering industry. will be unable to produce giants in the industry because of its dispersion and other special attributes.

So, can the next Starbucks be born in the new tea industry? Will the market eventually be fragmented or concentrated? Can there eventually be a winner-takes-all monopoly similar to that of the Internet industry?

Through analysis and inference, we believe that the answer to the above question is likely to be related to the following four core elements:

A) supply chain (that is, the core determinant behind whether the product tastes good)

In order to create a tea product as hot as Xi Cha, is the formula of the product important? It's very important. Continuous product research and development capability is the foundation of every catering brand, and the birth of signboards or explosions can also bring obvious repurchase for the brand.

But compared with the formula, we believe that the supply chain is the real barrier to the stability of tea products. There are three reasons for this:

1) for similar drinks with different formulations, consumers' recognition is not high (as can be seen from the blind test cases of Coca-Cola and Pepsi), 80% of consumers can drink the difference between good tea and bad tea, but can not tell the difference between different teas.

2) A good recipe can support a store with a good business, but it is easy to be imitated. A strong supply chain can support large-scale brands, and the supply chain cannot easily imitate.

3) similar to coffee beans, tea has changed from a tea garden to a tea drink in the hands of consumers, which is a process of turning agricultural products (000061, bought) into industrial products. Tea has gone through the process of stir-frying, roasting, kneading and drying, and the taste stability of tea bottom is completed in the process of industrial production.

In other words, only a stable back-end supply chain can achieve stable product quality and experience when facing consumers.

So, what are the supply chain barriers of tea brands?

1) scale effect can bring bargaining power.

It is understood that Naisuelu tea and sister brand Taicai tea raw materials come from all over the world, including black tea from Sun Moon Lake, Pu'er at the palace in Yunnan, Alpine Oolong in Alishan, and Maojian in Sichuan. The cost of buying tea raw materials for Xi tea is 400 yuan / jin, which can be regarded as the middle and high-end level even in the traditional tea industry. My tea reveals that the cost of the original leaf tea they purchase from the tea factory is about 100-150 yuan / jin.

In the case that the back-end cost is generally raised in order to reflect the quality of tea drinks, the bargaining power brought about by the scale effect is very important. According to Xi Tea, at present, more than 50 stores of Xi Tea use about 20 tons of tea every month, and it is this large collection demand that brings back-end bargaining space for Xi Tea.

2) quality control needs to start from the source of tea.

As tea is affected by climate and planting environment, and the problems of soil metals and agricultural residues in China are serious, it is necessary to carry out quality inspection and quality control from the source.

For example, the practice of liking tea is to sign exclusive agreements with upstream tea gardens and tea farmers, and to invest in soil improvement, planting and tea-making processes. Xu Hexin, founder of the tea brand Xiaocha group, said that the long transformation cycle is mainly to improve the planting quality of the soil and reduce agricultural and metal residues.

But it is not easy to improve the soil. According to Zhang Min, director of logistics and support for Xi Cha, the improvement cycle of a piece of soil is as long as five years. Therefore, the earlier the start, the better to gain the first-mover advantage in the supply chain.

3) the proportion of custom blended tea determines the imitation threshold of taste.

Custom-made tea refers to the in-depth cooperation with the source tea garden and tea factory to get the ideal tea through the control of the tea planting process and the whole tea-making process (the degree of baking and the degree of sweetness).

And the blended tea here is slightly different from Lipton tea bag or flower-fruit blended tea-usually we can divide the blended tea into three kinds, the first is Lipton tea bag or milk tea stall use blended tea, the aim is to achieve taste stability and reduce the cost (with low-end tea and middle-grade tea); the second is the popular blended tea in Europe and America, which uses flowers, fruits and spices to increase the diversity of taste. The third is the blending of tea with better raw materials, similar to premium coffee with beans to balance the taste and achieve the stability and uniqueness of taste.

According to the introduction of Xiaocha, the traditional tea industry will not use higher-cost tea for blending, because selling tea alone can sell it at a better price. According to Xi Tea, they will mix better tea leaves, such as roasting several different black teas together, or combine oolong tea with other tea brands to form a unique taste.

A key point for the industry is that each company has different types and proportions of blended tea, which produces a unique taste of its tea drinks, which is the key to the difficulty of competitors to imitate.

4) the new trend of consumption is often obtained from the upper reaches of the supply chain.

Milk cover tea, fruit tea, soft European bag. These new trends, which eventually become popular among consumers, are not predicted out of thin air.

Usually, the upper reaches of the supply chain respond to market trends earlier, so focusing on industry trends on the food side may be able to get some inspiration for new products, Dex Chief Executive Su Mingrui said in an interview. For example, instead of milk and tea combination of fruit with tea, is the transformation and recognition of ingredients. How to obtain such information, on the one hand, depends on the depth of communication between the company and suppliers, and on the other hand, it depends on the diligence of each founder in doing his or her homework and his ability to be sensitive to changes in the industry.

From this, we can see that the ability of large-scale collection, the ability of quality control at the source, the ability of blending tea proportion, and the ability to obtain new consumption trends from the upstream are the core elements to judge whether a company has built its tea supply chain.

B) the third space (a winning factor as important as the product, and space can often bring huge increments to the product)

"third Space" is one of the business philosophies emphasized by Starbucks founder Schultz. It is through the introduction of "third Space" that Starbucks has become a successful coffee chain brand that has caused a craze in the United States from a niche retail store that only sells boutique coffee beans.

The concept of "the third Space" originated from The Great Good Place, a monograph by American sociologist Ray Oldenburg. The so-called "third space" is a place where individuals can rely on and complete their way of life, which is different from the existence of the first space and the second space formed by the family and the workplace.

Ray pointed out that teahouses and even taverns are possible carriers of the third space, so the specific category of drinks is not the core factor in the construction of the third space, and the third space is not a patent of the cafe. As a commercial concept, the third space is likely to be transferred to tea consumption.

As a matter of fact, the new-style tea drinks of "Standard Starbucks" have more room for consumers to sit down, and environmental experience has become the basic equipment, whether it is because of the taste of tea, the color of tea, and the joy of tea.

For example, after Xicha first adopted the big store model in Xiaolan store in Zhongshan and achieved success, "space" became the standard form of Xicha. Before that, Xicha had never been so successful. And another tea shop brand Cooking takes space as its selling point from the very beginning.

So why do we think that "third Space" is crucial to leading young people's consumption of new tea drinks?

On the one hand, when people have aesthetic fatigue to the combination of "coffee + the third space", the new tea + new space can appear in people's field of vision as a fresh carrier and win a certain degree of attention. to build a differentiated new brand from scratch; on the other hand, the consumption demand in the complex scene of upgrading the traditional format and integrating social elements is also a new consumption trend of the younger generation.

Miura, a Japanese writer who has studied the sociology of consumption for many years, mentioned in his book "the fourth era of consumption" that when a society slowly transitions from the third consumption era to the fourth consumption era (China is in this stage), people's consumption behavior is not just to get satisfaction from owning goods, most of the time people hope to reach a connection with others through consumption. Through consumption to socialize and connect with others, so as to achieve greater consumer satisfaction in the process of establishing a relationship with them.

The third space of Naishuangcha tea (almost every store is designed by a different designer)

This trend is also particularly evident in today's offline format changes-nowadays, many offline shopping malls have begun to change from commodity-centered design ideas to "scenarios", in which the weakening of consumption elements makes the social attributes of specific business units more obvious, and consumption is no longer a simple purchase of goods. The Thai mall The Commons is typical of this kind of business, "first the community, then the shopping mall", where the elements of social and activity are further strengthened.

Scene consumption means that the scene atmosphere can meet more perceptual psychological needs of consumers, which leads to consumer behavior and increases user stickiness. In this kind of consumption, the function of goods (the quality of tea), people's impression of the function of goods (satisfaction of demand) and emotion (psychological satisfaction of scene atmosphere) can all become the factors of strong psychological relationship between merchants and consumers.

Obviously, the "tea + the third space" created by the new tea drinks makes the new tea drinks have the opportunity and ability to move closer to scene consumption and social consumption, so as to obtain new increments.

C) the possibility of globalization

If the supply chain and the third space we discussed earlier are the factors that determine the rapid rise of the new tea industry, then the globalization we discuss next is the key to the birth of companies with a market capitalization of tens of billions and hundreds of billions of dollars in the new tea industry.

As a matter of fact, when we discuss the new domestic tea industry, it is easy for us to limit the scope of discussion to China and forget to look at the whole world because of the inseparable relationship between tea culture and China.

But we must not forget that the success of the Coca-Cola Company, which has a market capitalization of about 1800 billion US dollars, and Starbucks, who has a market capitalization of nearly 90 billion US dollars, is largely due to their global business model.

In the case of Starbucks, in 2010, the United States accounted for nearly 80% of its global revenue, while its revenue from the Asia-Pacific region accounted for only 4% of its total revenue. At that time, Starbucks had only 220 self-owned stores in China. But during the six years from 2010 to 2016, Starbucks' revenue from the global non-American market continued to rise. six years later, Starbucks' share of revenue from the US market fell by 10%. The share of annual revenue from the Asia-Pacific region has increased to 14%. At this time, the number of Starbucks stores in China has increased to about six times that of six years ago, or 1272.

Revenue of Starbucks from fiscal year 2010 to fiscal year 2016

Development of Starbucks stores from fiscal year 2010 to fiscal year 2016

Starbucks' total revenue has also doubled in six years, from $10.7 billion to $213, reflecting the power of its global business model.

But can "tea" drinks with strong Chinese elements develop globally like Starbucks and successfully infiltrate in countries without oriental colors? I think a lot of people may have to put a big question mark when they see this.

Interestingly, there is a good chance that the answer to this question is yes-why? In fact, in our interviews with a number of tea industry entrepreneurs in the past, they all mentioned the growing trend of tea consumption overseas.

Moreover, a group of very interesting research data show that in the tea market in the United States, young people are very receptive to tea. People under the age of 30 drink tea in the same proportion as coffee, and 27% of young people say they only drink tea rather than coffee. At the same time, 70% of people over 65 prefer coffee (which also proves that the tea market of foreign young people can be cultivated at a later stage. It is even more feasible at home. In addition, according to the American Tea Association, the size of the American tea market has more than quadrupled in the past 20 years.

The trend is evident not only in the United States, but also in Canada, where tea consumption is expected to increase by 40% in 2020 compared with today, and health awareness is a key driver of this growth, according to a report on food trends.

However, up to now, there is not a large-scale tea chain in the European and American market, which also leaves a window of opportunity for the start-ups in China's new tea industry.

On the other hand, Teavana now accounts for less than 3% of Starbucks' earnings, while Argo Tea, a local tea chain, had 36 stores near the Chicago business district and about 75 stores on campus in 2010. In Britain, which loves black tea and has a long afternoon tea habit, no large-scale tea chain brand has been born.

Therefore, we believe that the global tea consumption trend is a great benefit for entrepreneurs in China's new tea industry, and if we can seize this opportunity, we are likely to become a successful global brand like Starbucks and Coca-Cola.

D) the trend of macro consumption habits

After clarifying the elements of the rise of the new tea industry and the opportunities for globalization, we would like to discuss the last question: will this rise be a flash in the pan or sustainable?

To demonstrate this problem, we think the best starting point is to study where the consumption habits of the new generation of young people will go, and whether the new tea is in line with the development trend of their consumption habits.

As the main consumers at the present stage, the post-80s, 90s and post-00s groups grow up in the period of rapid economic development in China. At this stage, after people's basic needs are met, the satisfaction of quantity is no longer the internal driving force of consumption, and "quality" has become a new growth point. Therefore, "from quantity to quality" is not only a trend of changes in consumer demand at the present stage, but also a "catalyst" for the development of new tea. A survey conducted by Guangfa Securities (000776, Buy) shows that the post-80s, 90s and 00s will bring about a 65 per cent increase in consumption.

Xicha offline store

However, on the one hand, the main consumers, on the other hand, the income growth of young people can not reach the social average level. According to the data, in 2005, the monthly salary of college graduates was 104% of that of urban workers, and by 2015, college graduates were only 83% of the monthly salary of urban workers. Because the disposable income has not yet reached the level of the urban middle class, without reducing the quality, "light extravagance" has become a good choice. The new tea drinks match the needs of this group in terms of product upgrading and demand matching:

In terms of product upgrading, the most important feature of the new tea is that it upgrades the quality of the tea, abandoning the "seasoning drink" that most milk tea shops will choose, and switching to the "flavor cooking" made of original tea or similar coffee. The quality of traditional tea has been upgraded.

In terms of demand matching, the first is the improvement of taste, which weakens the bitter taste of traditional tea by adding low-fat milk and fresh fruits which are popular with the younger generation. In terms of pricing, the new tea brands are slightly lower than Starbucks'20-38 yuan price range, but slightly higher than milk tea drinks, taking into account the psychology of young consumers who want to get a better experience through a lower premium. Similar to Starbucks' popularity.

The strengthening of the concept of space also enhances the service experience of users. at this stage, people are more concerned about the consumption process than the consumer goods themselves, and the goods are transformed into a medium. A typical scene is that when buying "online celebrity milk tea", the happiest moment may be the moment of taking a photo and posting it on moments.

Another noteworthy figure is that service consumption accounted for less than 40% of the average annual consumption of Chinese households in 2014. Service consumption refers to services and experiential consumption, including cultural and entertainment, education, health care, tourism, life services and other services. For comparison, American and Japanese households spend more than 60% of this part.

After the phenomenon of younger teas, in addition to the above-mentioned trend of consumption escalation, health is also the cause.

In 2014, Nielsen, a consultancy, conducted a health survey of people of different ages in 60 countries around the world and found that young people under 20 and between the ages of 21 and 34 are very concerned about health problems, and they are more willing to pay high prices for health products than others.

In China, Nielsen China survey shows that in 2015, "health" is one of the topics that Chinese consumers are most concerned about, while "health care" jumped from the seventh most concerned topic in 2012 to the fourth on the 2015 topic list. paying attention to health has become a consumption trend, and this trend will naturally be projected into the field of food consumption.

At present, in the tea market, the mainstream products can be divided into three categories: artificial teapot, "original leaf tea" brewed with cover bowl, standardized "flavor cooking" made by siphon coffee machine (SteamPunks), and "seasoning drink" made with tea powder, milk and sugar water.

The former two are the main types of new tea, and the seasoning drink blended with tea powder is the choice of most traditional street shops. For consumers, for the sake of quality and health, the emergence of new tea means a higher level of consumption choice different from the milk tea era.

In addition to the comparison with the same kind of seasoning drinks, compared with other drinks, tea drinks are naturally associated with health, not only with ingredients, but also with production methods and drinking habits. Therefore, in the comparison with coffee, new tea drinks can also score one more point on the index of "health".

Action on Sugar, a British research group, has released a report saying that the sugar content of the hot drink "1gamma 3" currently on the market is higher, even higher than that of a can of cola, with Starbucks accounting for seven of the top 10 on its list.

Due to the different ways of drinking coffee (with milk, sugar) and tea (clear drink), the same cup of tea and a cup of coffee can provide different calories, and tea naturally has a "health advantage". It is consistent with young consumers' attention to health issues.

Therefore, health is also an important internal driving force of tea consumption. In the traditional tea consumption in the past, limited by the conceptual framework of "traditional tea culture", tea consumption was not so "approachable" for a long time, and with the popularity of the concept of health in the field of consumption, the new type of tea, which combines health, quality and fashion elements, obviously meets the upgraded consumption needs of the younger generation of consumers.

Finally, the fourth consumption era states that when the consumer society enters the fourth consumption era from the third consumption era, people's consumption demand for products with local culture will become more and more exuberant. This is because after people have crossed the period of worship of western culture and the materialism of "buying", people's consumption is no longer just to satisfy the desire to own the thing itself. but more want to establish the relationship between people and people, people and things, people and society, at this time, people's attention and concern for local culture will be greatly enhanced. Thus consume more brands with strong local cultural symbols (MUJI is a typical example).

There is no doubt that tea is a commodity with Chinese culture, and there is a strong brand of local culture behind it, and with the improvement of Chinese cultural confidence, Chinese people (including ethnic Chinese living overseas) will greatly increase their consumption of tea in the future. this is also in line with the trend of the consumer society changing to the fourth consumption era. Therefore, in the long run, tea is also in line with the trend of consumption in the next five or even ten years.