Bloomberg's 'Brainstorm': Who Can Lead the Future of the New Tea Drink Industry

"How popular is 'new tea drinks' now?" Following Nescafé's tea listing on the Hong Kong Stock Exchange, becoming the first new tea drink stock, Momo Ice Cream has expanded its stores by 10,000 in a year. China Post has opened its own milk tea shop, Yoyao Tea, and after completing its latest round of financing, Xicha's valuation reached 60 billion yuan.

In recent years, with changes in consumer demand and technological iterations, 'new tea drinks' characterized by freshly brewed tea have become very popular among consumers. Starting from 2015, brands including Xicha, NESCAFÉ's teas, and Yidian have come into people's sight, and the term 'new tea drinks' has gradually gained momentum.

Data shows that the market size of new-style tea drinks in China was nearly 100 billion yuan in 2020, and it is expected that by 2030, the overall market size will exceed 200 billion yuan. In addition, new tea drinks are not only spreading across first- and second-tier cities but have also penetrated into third- and fourth-tier cities, becoming a daily beverage for 'townie youths'.

The 'China New Tea Drink Supply Chain White Paper 2022' points out that, under the strong attention and continuous influx of capital, new tea drinks have become one of the industries with the fastest consumer growth in recent years. When looking ahead to the future prospects of new tea drinks, many institutions have indicated that this is a high-growth track with a scale expected to exceed one hundred billion yuan in the future, and even leading players may have the opportunity to become industry giants rivaling Starbucks. What are the reasons for the continued popularity of new-style tea drinks? Has the rapid expansion of the industry also brought some hidden concerns? Who will lead the future of new tea drinks?

1. What development opportunities have the rise of new tea drinks brought to upstream and downstream industries?

2. Homogeneous competition intensifies, so what will new tea drinks compete on in the second half?

3. Popular products are not common, so how can new tea drink brands seize the golden period of their best-selling products?

4. Food safety issues occur frequently. How can new tea drinks turn the biggest pain points in the industry chain into opportunities?

5. As new tea drinks go global, how can we create a 'Chinese Starbucks'?

Huang Guohuang believes that what people see is a cup of milk tea that has initiated a new trend in tea drinks. The novelty of the new tea drinks lies in the introduction of fruit teas, which has led to a demand for aesthetic appeal. This 'newness' is no longer just about whether it tastes good or not, but involves an evaluation of aesthetics, and further integration with internet or mobile transmission tools has resulted in a cultural phenomenon that encompasses the sensory aspect as understood today.

Zhang Yilin stated that he started growing mangoes in 1991, from 100 acres to the current 60,000 acres. He believes that for a fruit grower, the most difficult part is 'perseverance.' In agriculture, this is the hardest aspect. Due to market reasons, it may be hard to sell early-season fruits as they are not tasty or priced high. On the supply chain of new tea drinks, persevering in maintaining the delicious taste is his most fundamental pursuit in growing mangoes.

Xie Huancheng believes that the technological content of the entire tea beverage industry will become increasingly high, and the threshold will also rise. Take food safety as an example; it has now progressed from planting to traceability to pesticide residue issues. Each batch must undergo random inspections before being distributed to various stores. For store food safety audits, a professional team runs around the stores every month. In addition, there are numerous supervisors who provide guidance to the stores daily.

Tan Zhiwen stated that the new tea drink can be broken down into two words: one is 'tea', and the other is 'drink'. The first half of the concept is about 'drink', which means a hit product. With faster launch, more ingredients, and better raw materials, stores are opening rapidly. However, while thinking about it, as everyone has more demands for tea drinks, whether it's health concerns or cultural pursuits, the second half of the concept should return to the essence of tea, becoming simpler, purer, and incorporating deeper cultural elements.

Zhan Desu believes that the second half of the new tea-drinking trend should focus on diversification and DIY. As a post-90s individual, from the perspective of being at the forefront and representing consumers, the post-90s generation is a 'transferred affectionate lover' type. They may choose Chaobaidao today and 7 Points Sweet tomorrow. The more likely thought among the post-90s is that they can choose product combinations based on their own personality.

Jia Pang stated that this year marks the first time in the new tea beverage industry that consumption demand has reached a scale of one hundred billion yuan. Frost & Sullivan also predicts that within the next three to five years, new tea beverages can maintain a level from one hundred billion to 150 billion yuan. Therefore, the current situation is definitely one of unsaturation in the new tea beverage market. It is also evident that consumers still maintain strong demand at the behavioral level of consumption needs. In fact, consumer frequency of consumption is still increasing, the unit price of consumption is rising, and there is a trend towards diversified consumption. However, it must not be denied that there are local saturation points in this industry.

Yu Mingyang believes that a large number of new tea drinks are actually based on pearl milk tea, with milk, tea, and fruits as the core. This improvement in the industry not only meets the production side's requirements for products but also satisfies the demand side's needs. Due to the consumption characteristics represented by post-90s and Generation Z, which can be summarized into four sentences—high aesthetics, zero waiting time, minimal participation, and strong cleanliness preferences. Therefore, from the supply side to the consumer side, new tea drinks are products that meet the needs of consumption upgrading. Moreover, with further consumption upgrades in the future, there will be new reshuffling in this industry.

Yang Yudong stated that the new tea beverage market is currently very active because the Chinese market is huge, and capital has been invested heavily into this sector. To some extent, the consumption habits of young people have fueled the popularity of this market. However, due to the industry's current low technical content and lack of unified standards, it can be seen that even leading companies have not found a sustainable profit model. Therefore, regarding this industry, more investment and analysis should be made from the perspective of market laws to improve its technical content and competitive barriers.