What is the impact of the new tea head brand's price reduction against the trend?

[Economic Observation] What is the impact of the new tea head brand's price reduction against the trend?

　　When coffee brands such as Starbucks and Ruixing, as well as tea brands such as Chayanyuese, Chabaidao, CoCo, and Yidian, have raised their prices, HEYTEA, the leading brand of new tea drinks, unexpectedly announced a price cut.

　　On February 24, HEYTEA announced that it has completed the comprehensive price adjustment of its products since January this year. It will no longer launch new beverage products above 29 yuan this year, and promises that existing products will never increase in price this year.

　　Comparing the menus, it can be found that the price adjustment of HEYTEA covers the vast majority of its products in the whole category, including cheese tea, fruit tea, milk tea, pure tea, and coffee. Up to $10.

At present, except for a small number of special products, the price of HEYTEA drinks has been lower than 30 yuan.

Among them, the price of "Pure Green Tea" and "American Coffee" after price adjustment is only 9 yuan.

　　In the tide of price hikes in the industry, HEYTEA's price cut against the trend is indeed surprising.

According to industry analysts, the current competition in the new tea beverage market is fierce, and HEYTEA's move aims to create a "personal design" with "high quality and not expensive" in order to gain more market share.

At the same time, HEYTEA’s move will inevitably squeeze the living space of second- and third-tier brands. Once a price war starts, it will accelerate the reshuffle of the industry.

　　New tea drinks, also known as freshly-made tea drinks, refer to Chinese-style freshly-made tea drinks that use natural and high-quality ingredients such as high-quality tea leaves, fresh milk, and fresh fruits, and are combined with more diverse tea bases and ingredients.

The new tea drink inherits and develops China's tea drinking culture, conforms to the taste preferences of Chinese consumers, and more closely captures the needs of "Generation Z" consumers, and is very popular among young people.

　　In December last year, the "2021 China Chain Catering Industry Report" jointly released by the China Chain Store & Franchise Association and China Renaissance pointed out that new tea drinks are the most potential sub-categories in the tea-related consumer market.

However, the competition in the new tea beverage market is fierce. There are fast-growing players in the high-end, mid-end and mass markets, and each market presents different characteristics.

　　Since May last year, the prices of second- and third-tier new tea brands, including Chabaidao, CoCo, and Yidian, have increased collectively.

Entering 2022, brands such as Chayan Yuese have also begun to raise prices.

The price increase seems to have become a tacit consensus in the new tea industry.

The main reason for the price increase of some brands is the increase in the price and cost of raw materials, including fruit and tea production equipment, takeaway packaging, etc.

　　In this context, what is the confidence of HEYTEA's price adjustment against the trend?

HEYTEA said that thanks to its brand potential, scale advantages, and deep cultivation and accumulation in the supply chain, it has the ability to adjust the price of products without changing the materials and quality of the products.

　　According to reports, with the development of scale, HEYTEA not only has the strength of large-scale procurement, but also goes deep into the upstream, and deeply participates in the planting and production of upstream tea gardens and orchards through self-construction and joint construction of bases, which not only ensures high quality The continuous and stable supply of raw materials also optimizes the procurement cost.

HEYTEA has also greatly improved the overall operational efficiency of the supply chain through digital investment in the supply chain and the establishment of an efficient cold chain logistics network.

　　The effect of the price reduction of HEYTEA is immediate.

According to media reports, after saying goodbye to the "30 yuan file", many HEYTEA stores experienced "exploding orders".

　　In this regard, Zhu Danpeng, an analyst of China's food industry, believes that HEYTEA's current high-quality and mid-price strategy is a "dimension reduction attack" for the industry, and it is a strategy for the entire new tea market to enter a mature stage.

Under the influence of the price reduction of HEYTEA, other second- and third-tier new tea brands are likely to choose to reduce prices, because if they do not reduce prices, their market share will be seized.

However, if the price is lowered, it will be difficult to compress the existing cost, and the overall profit will be difficult to guarantee.

Therefore, this will accelerate the industry reshuffle.

Only those brands that can control costs and quality well and have strong supply chain management capabilities will have a greater competitive advantage.

　　Yang Zhaokui