MoonFox Analysis | The era of myriad stores of new tea-based drink has arrived - The survival game for industry leaders continues

About us: Aurora Mobile (NASDAQ: JG) established in 2011, is a leading customer engagement and marketing technology service provider in China. Its business includes notification services, marketing growth, development tools, and data products. As its sub-brand, MoonFox Data is a leading expert in data insights and analysis services across all scenarios, aiming to help companies gain market insights and empower precise decision-making.

SHENZHEN, China, July 9, 2024 /PRNewswire/ -- In the rapidly changing consumer market, the new tea-based drink industry has quickly risen with its unique charm, becoming the new favorite among young consumers. With the sharp increase in the number of stores, new tea-based drink brands have entered the "era of myriad stores". According to data updated on May 8 by canyandata.com, the total number of milk tea-based drink stores nationwide has reached 418 thousand, with 168 thousand new stores opened in the past year. It is projected that by 2025, the market size of the national milk tea-based drink will rise to US $11 billion. However, behind this prosperity lies the intensifying internal competition within the industry. Compared to May last year, the net increase in store numbers this May was less than 30,000, indicating that over the past year, over 100,000 milk tea-based drink stores nationwide have closed. The survival game between brands has become increasingly fierce in this non-violent war. How to survive and thrive in this environment has become a challenge that every brand must face.

Monthly total changes in milk tea-based drink stores nationwide (unit: ten thousand)

Time	Number of stores
May 2023	39.5
Jun 2023	38.1
Jul 2023	38.7
Aug 2023	38.4
Sept 2023	39.1
Oct 2023	41.1
Nov 2023	41.1
Dec 2023	41.0
Jan 2024	41.3
Feb 2024	40.6
Mar 2024	40.3
Apr 2024	41.8

Data source: www.canyandata.com; Data cycle: May 2023 to April 2024

National milk tea-based drink market size changes (unit: CNY hundred million)

Time	Market size
2015	256.9
2016	296.7
2017	326.3
2018	368.1
2019	413.1
2020	410.7
2021	478.9
2022	544.9
2023	621.2
2024	708.6

Data source: Guoyuan Securities, www.canyandata.com; The data for 2021-2025 are estimated values

I. Competing in UV, focusing on the markets in lower-tier cities, and innovating gameplay, players in the new tea-based drink market have presented a comprehensive competitive stance

Data monitoring by MoonFox iApp shows that among the current mainstream tea-based drink applet in China, Mixue Ice Cream & Tea has consistently maintained a leading position in user base over the past year. In April this year, it recorded a MAU of 38.44 million, significantly outperforming other tea-based drink brands with a year-on-year growth of 77.4%. Meanwhile, competition for UV among second-tier tea-based drink brands is even fiercer. HEYTEA, Good Me, and ChaPanda have gradually surged ahead in the "battle for customers" in the tea-based drink industry. In April 2024, HEYTEA's applet had an active user base of 19.437 million, Good Me had 16.278 million, and ChaPanda had 14.804 million, with year-on-year growth rates of 241.2%, 54.9%, and 323.9% respectively. Their growth momentum is remarkable. In contrast, NAIXUE and ALittle Tea in the third tier recorded year-on-year growth rates of 0.4% and 26.5% respectively. It appears that top-tier and second-tier tea-based drink brands have already initiated their powerful UV siphoning effects.

Changes in MAU of mainstream tea-based drink applet (unit: ten thousand)

Name of tea-based drink applet	MAU in Apr 2023	MAU in Apr 2024
Mixue Ice Cream & Tea	2166.6	3844.0
HEYTEA GO	569.7	1943.7
Good Me Tea-based Drink Ordering	1050.6	1627.8
ChaPanda Ordering +	349.2	1480.4
NAIXUE Ordering	646.1	648.6
YH.TANG Mobile Ordering	251.9	532.9
ALittle Tea +	376.7	476.7

Data source: MoonFox iApp; Data cycle: April 2023 to April 2024

As first-tier city markets gradually saturate, tea-based drink brands are beginning to realize that simply pursuing user base and UV growth is no longer the only way forward. A strategy shift towards "focusing on the markets in lower-tier cities" has quietly emerged. Tea-based drink brands are beginning to turn their attention to the broader markets of second-tier and lower-tier cities, attempting to unearth new consumption potential through market penetration strategies. Taking top-tier tea-based drink as an example, data from MoonFox iApp shows that in April this year, the user proportions of Mixue Ice Cream & Tea, HEYTEA, and Good Me applet in second-tier and lower-tier cities have all increased compared to six months ago. For each brand, as they continue to expand into county-level cities, the incremental markets in lower-tier cities that brought UV dividends in the past have now transformed into another battlefield of intense UV competition.

City level distribution of Mixue Ice Cream & Tea applet users

City level	Oct 2023	Apr 2024
First-tier cities	8.56 %	7.65 %
New first-tier cities	23.52 %	22.62 %
Second-tier cities	23.25 %	22.74 %
Third-tier cities	22.08 %	22.34 %
Fourth-tier cities	14.27 %	14.99 %
Fifth-tier cities	8.31 %	9.66 %

City level distribution of HEYTEA GO applet users

City level	Oct 2023	Apr 2024
First-tier cities	20.70 %	18.61 %
New first-tier cities	22.74 %	23.34 %
Second-tier cities	21.44 %	20.91 %
Third-tier cities	18.78 %	19.99 %
Fourth-tier cities	11.00 %	11.50 %
Fifth-tier cities	5.34 %	5.64 %

City level distribution of Good Me Tea-based Drink Ordering applet users

City level	Oct 2023	Apr 2024
First-tier cities	5.20 %	5.19 %
New first-tier cities	20.25 %	18.06 %
Second-tier cities	27.85 %	28.34 %
Third-tier cities	24.90 %	25.78 %
Fourth-tier cities	15.59 %	15.53 %
Fifth-tier cities	6.21 %	7.10 %

Data source: MoonFox iApp; Data cycle: October 2023, April 2024

Under the background of widespread UV anxiety among brands, how to attract UV has become a core issue in tea-based drink marketing. Co-branding strategies have emerged as a key weapon for tea-based drink brands to launch new products and attract UV. Whether it's cross-industry collaborations or partnerships with popular IPs, co-branding always brings a sense of freshness and anticipation to consumers, driving them to try new products, share with friends, and create word-of-mouth spread. However, with the widespread application of co-branding strategies in the tea-based drink industry, we must acknowledge a phenomenon: as co-branding becomes a "routine" marketing action for major brands, its original novelty and uniqueness are gradually fading. Consumers are beginning to experience aesthetic fatigue with the endless stream of co-branding activities, and the freshness and curiosity that co-branding once brought are no longer as strong. This shift in consumer perception undoubtedly presents challenges to the co-branding strategies of tea-based drink brands. From the perspective of brand marketing, co-branding anxiety is also beginning to spread throughout the industry. Brands are intensifying their efforts, hoping to enhance their brand image and expand market share through co-branding collaborations.

Co-branding Status of Some Tea-based Drink Brands

Date	Brand	Co-branding IP
Apr 2024	CHAGEE	The Peony Culture Festival of Luoyang China
Apr 2024	CHAGEE	Zhang Jie
Apr 2024	NAIXUE	The Grand Budapest Hotel
Apr 2024	NAIXUE	Arknights
Apr 2024	CoCo	HelloKitty
Apr 2024	Auntea Jenny	Ode to Joy
Apr 2024	ChaPanda	Honkai: Star Rail
May 2024	Auntea Jenny	Howl's Moving Castle
May 2024	Auntea Jenny	The Legend Of Nezha
May 2024	ChaPanda	Tuntunzai
May 2024	YH.TANG	The King's Avatar
May 2024	NAIXUE	Sailor Moon
May 2024	NAIXUE	Teletubbies
May 2024	Good Me	Calabash Brothers
May 2024	LELECHA	Anpanman
May 2024	HEYTEA	Joy of Life

资料来源：公开资料整理

Data source: Compilation of public data

II.   Which way is the competing trend heading? Where is the next breakthrough for the tea-based drink industry?

Flocking to go overseas: For the tea-based drink industry, focus on the markets in lower-tier cities and co-branding are no longer novel concepts. The underlying issue is the domestic market for tea-based drink reaching its peak in UV. Consequently, as the mainland market becomes increasingly saturated, tea-based drink brands are actively seeking opportunities to expand into overseas markets. According to the prospectus of Mixue Ice Cream & Tea, the freshly made drink industry in Southeast Asia is projected to grow at a compound annual growth rate of over 20%, rapidly increasing from USD 16.3 billion in 2022 to USD 49.4 billion in 2028. This makes it the fastest-growing region globally. Based on this market forecast, Mixue Ice Cream & Tea decisively adopted an overseas expansion strategy. Since opening its first overseas store in Hanoi, Vietnam in 2018, the number of its overseas stores has approached 4,000, making it a leading freshly made tea-based drink brand in the Southeast Asian market. HEYTEA and CHAGEE have also joined the ranks of those expanding overseas, viewing other Asian countries as initial footholds for their "internationalization" efforts. Although ChaPanda started later, it took its first steps into the overseas market in January this year, successfully opening three stores in Seoul, South Korea, on April 26 this year.

Although the overseas market provides new growth opportunities for Chinese tea-based drink brands, the path to expand overseas is not always smooth. Many companies face issues of inadequate preparation when expanding overseas, relying on the local resources of franchisees for market development. This insufficient control by the headquarters over overseas operations may lead to deviations in strategy execution. In addition, consumer habits and local competition in overseas markets also pose challenges for Chinese tea-based drink brands. Furthermore, franchisees have become more cautious when choosing brands to franchise, considering franchise costs, expected returns, and operational risks. Some franchisees may be hesitant to franchise. For instance, HEYTEA's franchise fees, training fees, equipment purchase costs, and raw material costs in overseas markets are relatively high. This requires franchisees to achieve a high net profit margin during the initial phase of opening in order to break even.

Launching sub-brands: Beyond international expansion, tea-based drink brands strive to break through the homogenized competition by seeking innovation and transformation to capture market share. "Launching sub-brands" has become a significant attempt for them to explore new business areas and growth opportunities. As one of the well-known brands in the new tea-based drink market, Chayanyuese recently announced the launch of its new sub-brand, "Day and Night Poetry Wine Tea & Art Bistro", marking its official entry into the "tea + alcohol" product sector. Leveraging its expertise in the tea industry, Chayanyuese aims to explore new consumption scenarios combining tea and alcohol, thereby attracting consumers, especially the young people. This is not the first time that Chayanyuese has launched its sub-brands. It has previously launched multiple sub-brands such as Xiaoshenxian Tea House, Yuanyang Coffee, and Good More Ning, targeting different segmented markets including pure tea, coffee, and lemon tea. These initiatives aim to complement the main brand through sub-brands, thereby expanding the business scope. In addition to Chayanyuese, Mixue Ice Cream & Tea launched its coffee sub-brand "Lucky Coffee" as early as 2017, and HEYTEA introduced "Heytea Tea House" and "Magpie Coffee", etc.

For tea-based drink brands, the enthusiasm for "launching sub-brands" strategy mainly stems from several core driving forces: By creating a brand matrix, brands can establish diversified product lines to cater to various consumer tastes and demands, thereby enhancing market competitiveness; Secondly, filling category gaps is a crucial part of the continued development of brands. Introducing new categories or product lines through "launching sub-brands" can compensate for deficiencies in specific product categories, thereby enhancing overall market share. Furthermore, seeking new profit points is crucial for the sustained growth of brands. By introducing new sub-brands or product lines, brands can explore new market opportunities, achieve profit diversification, and ensure continuous growth. However, despite the opportunities for brand diversification and market expansion that a multi-brand strategy brings to tea-based drink enterprises, it also comes with challenges such as resource dispersion and increased management complexity.

The overseas expansion and sub-brand strategies in the tea-based drink industry are attempts by brands to break through internal competition and achieve growth. Whether in domestic or international markets, tea-based drink enterprises face numerous challenges. Looking ahead, enterprises need to achieve sustainable development by improving operational efficiency and reducing costs, rather than simply relying on increasing the number of stores.

III. Squeeze into the listing track, who can win the game of survival?

Against the dual background of rapid growth and intense competition in the tea-based drink industry, we have witnessed spectacular scenes of brands going public. Brands like ChaPanda, Mixue Ice Cream & Tea, Good Me, and Auntea Jenny have listed on the Hong Kong Stock Exchange, aiming to enhance their supply chain management, drive digital transformation, and expand brand influence through the power of the capital market. However, the harsh reality of the market quickly dashed the hopes of these aspirational brands. After the substantial drop in stock price following ChaPanda's market debut, along with the wait-and-see attitude of investors towards tea-based drink stocks, it has revealed a diminishing overall growth expectation in the tea-based drink industry. Competition within the industry is intensifying, and the disappearance of market scarcity advantages is becoming more apparent. Under the combined influence of these factors, the highly competitive market environment in the tea-based drink industry poses significant challenges for both listed and pre-listed companies.

Faced with this market situation, new tea-based drink brands are beginning to realize that relying solely on traditional business models and market strategies is no longer sustainable. They must seek new growth points and breakthroughs to cope with the increasingly intense market competition and ever-changing consumer demands. This is not only a new milestone in the development of the industry, but also a new starting point in the survival game among brands. In this entirely new arena, brands need to continually innovate, optimize their supply chains, and introduce digital technologies to enhance their competitiveness. At the same time, they also need to pay close attention to the health needs of consumers, develop healthier and more health-promoting tea-based drink products to meet the market's new changes. The future of the tea-based drink industry is full of uncertainties and challenges. Brands need to maintain keen market insights, promptly capture changes in consumer demand, and continuously adjust their development strategies. In addition, strengthening internal management, improving operational efficiency, reducing costs, and achieving sustainable development are also challenges that brands must confront. In this era of myriad stores, where opportunities and challenges coexist, only those brands that can continuously adapt to market changes, innovate boldly, and break through barriers can survive in the fierce market competition and become true industry leaders. Brands must recognize that only through continuous self-renewal and strategic adjustments can they establish an invincible position in this survival game.

MoonFox Data is a China leading expert in full-scene data insight and analysis services. With comprehensive, stable, safe and compliant mobile big data foundation as well as professional and precise data analysis technics and artificial intelligence algorithms, MoonFox Data has successively launched various products such as mobile application data (iApp - flagship version, applet version, vendor version, overseas version), brand insight data (iBrand), marketing insight data (iMarketing), financial alternative data, and provided professional research and consulting services through MoonFox Research Institute, aiming to use data to help enterprises gain insights into the market increments and empower the precise business decision-making.

Aurora Mobile-MoonFox Data consistently monitors industry development and regularly tracks corporate performance. The following is our research report on industry hotspots:

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