Frost & Sullivan: Ready-to-Drink Tea: The Future's Competition Lies in Strong Supply Chains, Health-conscious Concepts, and Emotional Resonance

My view is that the development of the supply chain in the ready-to-drink beverage industry is undergoing an evolution from 'having' to 'excellent' and then to 'unique'.

Basic supply chain capabilities are gradually becoming industry standard, especially for leading companies, but on the other hand, this may indeed lead to homogenized competition in mid-range products; however, through deep integration and innovation of the supply chain at the source level using technology, it will become the core key for leading brands to build true differentiation and win the market.

Overall, supply chain and product innovation are not contradictory. The focus of the supply chain is to improve efficiency, ensuring cost efficiency during product updates and iterations. As leading brands build their strong supply chains, it will indeed have a significant impact on small brands in terms of costs, which is an inevitable law of industry development. Some distinctive brands may still create some explosive products and new features in the future, but due to a lack of supply chain capabilities, if they cannot monopolize raw materials and other links, it is inevitable that large brands will use their supply chain advantages to launch similar products.

At the same time, we believe that when considering this issue, it is worth noting what consumers' needs are, whether they are for continuous differentiated products or after finding their favorite products, focusing on these signature products. We also see that some specific brands' strategy is to focus on their core flagship products and not innovate for the sake of innovation, but they can still attract a loyal core consumer base.

The underlying driving logic behind this is mainly divided into two parts.

Internally, it is driven by efficiency and cost. Industry competition has shifted from the number of stores to single-store profitability and operational efficiency. A complete supply chain is the foundation for reducing costs and increasing efficiency while maintaining quality, which will inevitably lead to convergence in basic capabilities;

Externally, it is driven by the upgrading of consumer demand. Consumers pursue healthier, fresher, more diverse, and more experiential beverages. This forces brands to trace upstream. To meet these advanced needs, they must rely on differentiated supply chain capabilities.

Therefore, based on the trend of supply chain evolution, consumers will not only be more likely to drink basic beverages with stable quality and high cost-effectiveness in the future, but they will also have the opportunity to taste more unique, healthy, and experiential new beverages brought about by deep supply chain innovation. Referring to the coffee industry, after the integration of specific origin labels and special fruits, it is still expected to become one of the representative directions of industry innovation.

From industry observation, the choice of raw materials for ready-to-drink beverages in the future is not simply a binary choice but moving towards a new stage of deep integration of 'natural value orientation' and 'industrial technology empowerment'. Using industrial technology to ensure efficient supply of natural raw materials represents the development direction of the industry.

Consumers' pursuit of health functions has made natural raw materials an unshakable value core. We see that 'real milk and real fruits', ingredients that are both food and medicine (such as goji berries), and the concept of sugar reduction have become key to brand competitiveness. Behind this is consumers' high sensitivity to ingredient transparency and health attributes.

However, pure agricultural product forms are difficult to meet the stringent requirements of brands at the store level for stability, efficiency, and scale. Therefore, the industry is leveraging advanced food industrial technology to achieve industrialized expressions of natural raw materials. For example, through technologies such as freeze-drying and modern extraction, high-quality fresh fruits and tea are transformed into standardized raw materials (such as freeze-dried tea powder and cold extract) that are stable in flavor, convenient for transportation, and storage. This not only retains natural flavors and nutritional components but also ensures consistency and efficient operation across thousands of stores. Ultimately, consumers will enjoy beverages with both health attributes, stable taste, and innovative flavors. The winners in the future will be those brands that can maximize the presentation of natural raw material values using industrial technology.

Looking at the current dynamics of the futures market and the industry side, consumers will indeed feel a certain pressure of price increase when buying ready-to-drink coffee in the future, but currently, there has been no widespread increase.

The factors behind this are as follows:

Firstly, cost pressure continues to be transmitted. Coffee futures prices reached a high at the beginning of 2025. Although they have recently corrected, affected by the climate and planting cycles of major global producing areas, the medium- and long-term cost center of coffee beans has been raised, making it difficult to return to the pre-increase price level in the short term

Secondly, there is price differentiation among different types of brands. Leading brands with strong supply chains and long-term agreements (such as Luckin Coffee and Starbucks) will buffer the pressure through large-scale procurement and digital operations. At the same time, considering their huge store and consumer base scales, an obvious price increase may have an impact on sales, and these brands tend to make invisible price adjustments, such as reducing discount intensity or guiding consumers to new products with higher profits. However, for small and independent coffee shops with limited procurement scales, a direct price increase may be the most direct means of survival.

Therefore, consumers may find in the future that they will have fewer opportunities to enjoy extremely affordable (below 10 yuan) freshly ground coffee, but the price increases for mainstream products in the general market range are controllable; while paying a higher premium for specialty coffee or special blends with high-quality beans or complex ingredients will become more common, and the prices of niche specialty coffees may experience a certain degree of increase.

My view is that the competition in the ready-to-drink beverage industry in the future will completely transcend simple price wars and turn into a value war across four core dimensions: deep supply chain, cultural innovation, global layout, and digital operations.

Firstly, the supply chain is the foundation: The focus of competition has upgraded to source locking of high-quality raw material producing areas globally and extreme optimization of distribution efficiency and freshness, which determines the upper limits of quality, cost, and stability.

Secondly, product innovation needs to be combined with cultural empowerment. Successful new products in the future need to deeply integrate regional culture or provide clear health functions (such as probiotics and natural herbs) to provide consumers with emotional and value experiences that go beyond thirst quenching.

Furthermore, brand globalization. Going global is also an output of cultural soft power. Brands need to choose a differentiated path, such as Bawang Tea Girl creating an Eastern aesthetic space in high-end markets in Europe and America, deeply binding their brand image with the East, and supporting positioning and premium through the brand.

Finally, there is digital competition. Through AI and big data for precise operations, marketing through digital tools, product innovation guidance, and building a private domain traffic pool for the brand to improve repurchase rates and product competitiveness.

My view is that the core of new tea drink brands in mobilizing consumer emotions is to upgrade from 'function satisfaction' to 'emotional resonance'. Whether a strategy is effective or not depends on whether it is sincere and systematic.

Effective emotional mobilization is rooted in an excellent product experience, a resonant cultural narrative, and a user relationship that is treated sincerely. Brands need to become 'value co-creators' and 'cultural interpreters'.

Short-term effective strategies usually involve creating immediate surprises and social topics of conversation, such as limited-time collaborations with popular film IPs or celebrities, launching high-profile peripherals, or launching viral challenges. However, if these strategies are executed improperly, such as marketing without supply chain support, rigid collaborations that do not match the brand's tone, and short-term price wars that damage brand value, they are very likely to fail and even backfire on the brand.

The strategy that can truly settle users and build a long-term brand mentalities is to internalize emotional value as part of the brand. This is reflected in three aspects: First, the product is emotion, such as through unique naming (such as 'Bo Ya's Farewell'), healthy concepts (without trans fats), and familiar flavors (such as nostalgic gardenia flowers), making the product itself a soothing, confident, or healing emotional carrier. Second, cultural resonance, where the brand becomes a symbol for consumers to express their cultural identity and self-identity. Finally, user co-creation, sincerely listening to feedback and quickly iterating (such as Bawang Tea Girl launching the low-cause series of teas according to user demands), establishing a sense of belonging where consumers are valued and maintaining a high repurchase rate through long-term strategies to win hearts.