There are hidden worries behind the expansion of the tea industry

Recently, a number of tea companies have released their own half-year financial reports, and on the whole, revenue and profit are not optimistic
compared with the same period of the previous year.
In recent years, there have been continuous emergence of online red tea drinking companies, which have a certain degree of impact on the industry, and behind the rapid progress of investors, there are also some tea companies that have poor management
.

At present, there are 329,000 "milk tea" related enterprises in China, and in the past 5 years, the annual registration volume of enterprises has grown rapidly, and nearly 80% of enterprises have been established in the past 5 years
.
The data of Tianyancha also shows that 0.
32% of these enterprises have been subject to legal proceedings, 12.
38% have experienced abnormal operations, and 0.
59% have been administratively punished
.
According to incomplete statistics, in 2021, China's milk tea-related enterprises generated a total of 2,259 pieces of executor information
.

Whether tea makes money is a question
for many investors and prospective franchisees.
In fact, according to the financial report, even the industry's leading companies have very limited profit margins, and profitability is not easy
.
After all, the price of a single cup of tea is not high, and the store needs a huge flow of
customers to make a profit.
The premise of obtaining a large number of customers is to extend the opening hours as much as possible and locate the stores in prime locations in the mall or street as much as possible, which means higher labor and rent costs
.

In the actual expansion process, the company hopes to continuously obtain the injection of franchise funds and seize more market space, naturally will continue to encrypt the distribution point in the prime position to accelerate the opening of stores, and such distribution points will dilute the profit of each single store, and eventually make the overall profit margin of the enterprise continue to decline
.
Under such circumstances, tea companies are easy to fall into the cycle of "development, expansion, and bottleneck", and if there is a break in the flow of funds during the bottleneck period, the result is not difficult to imagine
.

There is another aspect that cannot be ignored, that is, the threshold of the tea industry is actually not high, all kinds of tea drinking milk tea, nothing more than milk, coffee, water, fruits and tea are produced by various permutations and combinations, limited technical content, low
competition barriers.
This makes the degree of homogeneity between peer competition high, not only difficult to innovate products, but also easy to fall into a price war
.
In the face of homogenized products and services, consumers have more alternatives to choose from, and the possibility of random consumption is very large, not only brand loyalty is limited, but also consumers' own bargaining power is high
.

In fact, many tea companies are also trying to get rid of the current competitive state of "involution", so they have begun to develop products and services with high value-added and high technical content, such as some tea companies choose to sell tea and other derivative business models
.
But the actual effect is limited, after all, young consumers who buy a cup of milk tea are often not the consumer groups of high-end tea, and the latter consumer groups are usually not frequent customers
of milk tea shops.

Enterprises should be aware that tea consumption is a random small consumption, and in terms of consumption behavior, most consumers will not make a special trip to a tea shop like a restaurant visiting a store, but incidental consumption in addition to running errands and other consumption
.
This requires milk tea shops to integrate themselves into the surrounding office and consumption formats as much as possible, and gradually expand online business, while reducing operating costs, improving the loyalty of consumer groups around the store and improving profitability, rather than blindly expanding store locations
.

In fact, this method is already being done by the colleagues of tea shops, well-known chain coffee companies, such as reducing the business space of office buildings and expanding takeaway business
.

(Zhao Ang)

China Food News (October 17, 2022, Edition 07).

(Editor: Luo Chen)