(Producer/Author: Oriental Securities, Xie Ningling)
1. Industry structure: high-end tea drinks lead, the market growth is right at the moment
.1, China soft drinks market: coffee is under pressure, tea drinks are in full swing, and tea drinks are in full swing
Tea, coffee and cocoa are known as the three major beverages in the world. It contains caffeine that stimulates nerve excitation and can make people mildly addicted, so the drinks made from them have been popular all over the world for a long time, among which tea and coffee are far more popular than cocoa in China. Tea, coffee and other beverages constitute the three parts of China's soft drink market. Calculated by retail consumption, the size of China's soft drink market increased from RMB 900.7 billion in 2015 to RMB 1134 billion in 2020, and is expected to reach RMB 1856.7 billion by 2025, with a CAGR of 10.4% from 2020 to 2025. Among them, the total size of the tea market increased from about RMB 256.9 billion in 2015 to about RMB 410.7 billion in 2020. The CAGR from 2015 to 2020 was 9.8%, accounting for 35% of the soft drink market size. It will increase to RMB 810.2 billion by 2025, and the CAGR from 2020 to 2025 is expected to be 14.6%. In 2020, the size of China's coffee market was only 65.5 billion yuan, accounting for 5.8% of the market size of soft drinks , and its popularity is much lower than that of tea.
During the epidemic, coffee brands have contracted and self-protection, and tea brands have expanded against the trend. In 2020, Luckin plans to close 80 stores in Beijing, COSTA announced the closure of about 10% of stores in China, Lian Coffee announced the closure of all offline stores, and the old coffee giant Starbucks also slowed down the pace of opening stores in the Chinese market. In sharp contrast, the brand of freshly made tea drinks, especially high-end freshly made tea drinks, has expanded against the trend during the epidemic. Naixue’s Tea added 180 new stores from the beginning of 2020 to February 2021, and Heytea added 200 new stores in 2020, forming a wave of opening stores.
.2. The market for making tea drinks: After three stages of development, it has broad growth prospects
Tea has a huge consumer group and a long history as a world-class beverage. There are more than 60 tea-producing countries and regions around the world, and the number of tea drinking exceeds 2 billion. Tea drinking culture originated in China. As early as the Three Kingdoms period, drinking tea has become one of people's daily habits. To this day, tea is no longer limited to a simple and traditional drinking method such as brewing boiled water. Its concept has been greatly extended, including freshly made tea, tea leaves, tea bags, tea powder and ready-to-drink tea drinks. In the 1980s, "foam black tea" began to become popular in Taiwan. This type of tea drink is made by mixing hot tea, syrup and ice cubes. It is named after the foam floats densely on the tea water after shaking. Later, a merchant added taro balls made of cassava flour to foam black tea, and pearl milk tea was born. After the 1990s, the introduction of automatic sealing machines made take-out and drinking pearl milk tea mainstream, and now the prototype of current tea drinks was born.
The development of freshly made tea drinks has gone through three stages:
990-1995 was the initial stage, and During this period, milk tea had just spread and was basically sold to consumers by self-employed street shops. The product itself is made of simple milk tea powder and water, and it is cheap.
996-2015 was the chain stage . With the popularity of freshly made tea drinks, a large number of chain brands were established, chain stores have sprung up like mushrooms all over the country. Chain brands have made more innovations in their products, the types of freshly made tea drinks are constantly enriched, and the quality of raw materials used for making tea has also been improved.
016 has been the new tea drink stage. high-end freshly made tea drink brands have emerged, attaching great importance to brand building, emphasizing the use of natural high-quality raw materials to make tea. Most stores are directly operated, attracting consumers with more refined and diverse store content.
In 2020, the market size of the current tea beverage in China was 113.6 billion yuan, and accounted for 27.7% of the total tea market in China. Its CAGR from 2015 to 2020 was 21.9%, far higher than the CAGR of tea, tea bags and tea powder in the same period: 8.1% and ready-to-drink tea CAGR: 4.9%. By 2025, the scale of the current tea beverage industry is expected to reach 340 billion yuan, accounting for 42.0% of the total tea market in China. Its CAGR from 2020 to 2025 is 24.5%. It will surpass tea, tea bags and tea powder with the fastest growth rate among the three segments, and become the largest segment in the Chinese tea market.
.3. High-end tea shops will grow rapidly
Tea shops are the main consumption channels for freshly made tea drinks, and can be divided into three levels according to the product price. In 2020, 60% of the consumption of freshly made tea drinks in China comes from freshly made tea drink shops. The current tea shop can be divided into three levels according to the affordable price of its tea drinks:
(1) The average product price is below 10 yuan: low-end tea shop;
(2) The average product price is 10-20 yuan: mid-range tea shop;
(3) The average product price is above 20 yuan: high-end tea shop.
High-end tea drinks store and the first two are the quality and social attributes of the product. The raw materials of tea drinks are fresh fruits, fresh milk and selected tea. The store has a more meticulous design space. The store is not only a channel for providing tea drinks, but also a social visitor space, attracting young consumers through a more immersive experience.
High-end freshly made tea drinks are expected to maintain rapid growth. In 2020, the market size of domestic tea shops has reached 66.6 billion yuan, and the CAGR from 2015 to 2020 was 23.6%. Among them, the market size of high-end tea shops was 12.9 billion yuan, accounting for 16.3% of the total market size of the current tea shops. The CAGR from 2015 to 2020 was 75.8%, which was far beyond the CAGR of low-end tea shops in the same period: 16.4% and the CAGR of mid-range tea shops in the same period: 21.2%. It is expected that the market size of high-end tea shops will continue to grow, reaching 52.2 billion yuan by 2025, accounting for 24.7% of the total market size of the current tea shops. The CAGR is expected to be 32.2% from 2020 to 2025.
.4. High-end tea shop: high market concentration, clear development direction
Heytea and Naixue are far ahead of the industry. currently has a high concentration in high-end tea shops, with CR5 reaching 55% and CR2 reaching 43.2%. Industry TOP 2 Heytea and Naixue's Tea have far surpassed other competitors in the industry with market share of 25.5% and 17.7% respectively. As of September 2020, Heytea had 600 stores ranked first in the high-end tea beverage industry, and Naixue's Tea followed closely with 420 stores. However, Naxue's tea stores cover 61 cities, making it the brand with the widest coverage in the high-end tea industry. Heytea and Fushimi Momoyama tied for second place with 54 cities. In addition, Naixue’s Tea has the highest average customer price in the high-end tea beverage industry, reaching 43.3 yuan.
Development direction of high-end tea shops.
(1) Shape a strong brand image, and consumers show their social identity through brand selection, thereby establishing their desired social image. Therefore, a good brand image helps high-end fresh tea shops to cultivate a loyal customer group.
(2) Product innovation and quality improvement. Continuously launching new products will help to continuously attract customers. Continuously improving existing products can consolidate the existing consumer group and improve product quality in terms of raw materials, processes, etc. to meet consumers' increasingly refined needs.
(3) Create a rich customer experience. designs the store environment outside of product , optimizes the experience of customers when consumption, and expands store functions to provide social or entertainment space, thereby attracting and retaining customers more effectively.
(4) Promote digitalization. Link consumers through the mobile terminal, create more touch points in consumers' daily lives, better member management through digital systems, and timely follow up on changes in consumer preferences. At the same time, using an intelligent operation decision-making system to strengthen supply chain management, streamline in-store operations and provide information for business decision-making will effectively improve overall operating efficiency.
2. Naixue's Tea: the leader of the new tea drink craze
Quality and experience are at the same time, creating an industry leader. Naixue insists on replacing tea powder with high-quality tea leaves, fresh milk instead of creamer, and fresh fruit instead of syrup to provide consumers with high-quality tea enjoyment; strives to create a comfortable, unique and more immersive social place for urban people with careful design and fashionable decoration. The company opened its first store in Shenzhen in November 2015, and all its stores adopt the self-operated model. As of September 30, 2020, the company had a total of 422 stores, of which 420 covered 61 cities in the country. It also had a store in the Hong Kong Special Administrative Region and Japan. The city coverage ranked first among high-end fresh tea brands, with a market share of 17.7%, followed closely behind Heytea.
.1. Development history: From Shenzhen to radiate across the country, it is very popular among capital
014 Peng Xin. Zhao Lin and his wife established Shenzhen Pindao Catering Management Co., Ltd., The first store opened in Shenzhen in November 2015, and in 2017 the store network began to expand outside Guangdong Province. Since its establishment, the company has experienced five rounds of financing, with a valuation of approximately RMB 13 billion.
.2. Equity structure: concentrated holdings, stable corporate governance structure
The founders of the company Zhao Lin and Peng Xin are the actual controllers of the company, and they hold 67.04% of the shares through Lin Xin Holdings. employee stock ownership platform Forth Wisdom Limited holds 8.32%. Tiantu institutions, Taimeng Investment Group, SCGC entities, Yonglego International and HLC hold 13.05%, 6.22%, 3.32%, 0.87% and 0.85% of the shares respectively.
.3. Executive resume: The team has experienced many battles and has clear division of labor. The CEO of
. Zhao Lin has worked in companies such as Burger King, Meixin , and has rich experience in the catering industry. General Manager Peng Xin is the initial promoter of Naixue’s overall concept of tea, and is responsible for the company’s product research and development, quality control and overall marketing strategy. The company's executive team has rich experience in the catering industry or information technology industry, from well-known companies in the industry such as ByteDance , DJI , JD , Jiumaojiu and other industries.
3. "Trendy New Drinks + Urban Social" demonstrates the brand's strength, and digitalization helps fine operation
.1. Quality first, continuous innovation, just for the fine and good tea
All freshly made tea drinks in Naixue are made of high-quality selected tea, imported fresh milk, fresh fruit and other preferred raw materials. can be divided into three types: fresh fruit tea, fresh milk tea and pure tea according to the added raw materials. Each cup of tea is made on site by Naixue clerk to ensure a customized experience , meeting different preferences for different customers about sugar, ice cubes, and ingredients additions. After continuous exploration, Naixue has accumulated a number of classic tea drinks that have been widely praised by consumers, and has launched seasonal tea drinks according to different seasons, providing consumers with the best tea experience with selected quality and careful creativity.
Classic tea drink is a core item that can withstand the test of the market for a long time among the freshly prepared tea drinks launched by the company in the past. is calculated based on the number of customer orders before September 30, 2020. The three best-selling classic tea drinks are Domineering Cheese Strawberry, Domineering Orange and Domineering Cheese Grapes. In the first nine months of 2020 alone, the three classic tea drinks sold a total of more than 15 million cups, contributing a total of 25.3% of the sales of pre-made tea drinks during the same period.
Seasonal tea drink is a seasonal drink launched by the company according to different seasons of fruits. For example, when imported Zhili cherries are on the market in winter and spring, cheese cherry tea is provided and tropical fruit tea is provided in summer. According to the analysis of customer orders in the first nine months of 2020, the three best-selling seasonal tea drinks are Domineering Cheese Peach, Domineering Bamboo and Miss Cocoa Treasure Tea. The three major seasonal tea drinks sold a total of 5.2 million cups during the same period, providing the company with abundant seasonal traffic support.
Naixue first proposed the consumption concept of "a cup of good tea, a sip of soft European package ". cross-sells freshly made tea drinks and handmade baked products, which enriches the consumer tea drink experience while effectively increasing the average customer price. The price of its tea drink products ranges from 13 yuan to 30 yuan, and the price of baked products ranges from 8 yuan to 48 yuan. As of February 2021, the average price of Naixue’s current tea drinks was 27 yuan, and the average price of handmade baked products was 23 yuan, forming a core menu containing more than 25 classic tea drinks and more than 25 baked products.
attaches importance to new product development and promotes new traffic frequently. The company's existing product R&D team is composed of 23 experienced employees, led directly by General Manager Peng Xin, and summarized an efficient product R&D and innovation process.
On average, the company has launched a new drink every week, with about 60 seasonal products since 2018. In addition to "tea drink + European bag", the product list is constantly enriched. Currently, the company has launched a variety of souvenirs and retail products in tea shops and online channels, including tea gift boxes, ready-to-drink tea drinks, tea bags, packaged desserts and casual snacks. By expanding product categories and establishing more contact points with consumers, deeply integrating with consumers' daily lives, the company will make Naixue a brand new lifestyle brand, while increasing traffic to the brand effectively increases same-store revenue.
.2. Deepen supply chain control and focus on all-round quality control
Naixue has extremely high requirements for raw materials and only uses high-quality tea, fresh milk and fresh fruits. In order to continuously obtain stable and high-quality raw materials, the company has set up a special procurement team at its headquarters to be responsible for centralized supply chain management and cooperate with a group of well-known suppliers for long-term cooperation. As of September 2020, the company has established partnerships with more than 300 raw material suppliers, with an average duration of more than two years of cooperation with the top ten suppliers. The company also plans to establish multiple central kitchen in different cities in China. The central kitchen will store raw materials and make pre-made baked products for tea shops around it. This will reduce store supply costs and improve store operating efficiency.
Raw material quality control. The company has established a qualified supplier list system. Suppliers who cooperate with the company must strictly abide by the customized standards of raw materials and undergo regular inspections. The company has formulated targeted procurement policies for different types of raw materials. The company purchases high-quality tea directly from well-known third-party tea gardens. For example, the company cooperates with high-quality tea gardens in Taiwan through exclusive authorized agents to ensure the supply of Alishan Chuhao. Fresh fruit procurement reduces the problems caused by the short shelf life of fruits through direct cooperation with local farmers and global imports. The company has started to cooperate directly with the juice factory since April 2020 to customize freshly squeezed juice that meets the requirements of freshly made tea drinks. Fresh milk will be delivered directly to the tea shop every 2-3 days.
Logistics warehousing quality control. While establishing an internal logistics team, the company has established cooperative relationships with more than 30 third-party logistics companies to create strong and reliable cold chain logistics capabilities to ensure that raw materials are delivered to the store in a timely manner with quality and quantity. As of February 2021, the company has eight rental warehouses in China, of which the warehouses located in Shenzhen are directly operated by the company, and the remaining warehouses are outsourced to third parties to operate. The company also requires that every vehicle used during the transportation of raw materials must be thoroughly disinfected and equipped with automatic thermal control equipment and GPS to facilitate the company to monitor the temperature and humidity conditions during the transportation of raw materials. Generally speaking, raw materials with a longer shelf life (such as packaging materials and pre-packaged food) are first transported to the warehouse for centralized inventory management, while raw materials such as fresh fruits with a short shelf life will be delivered directly to the store. After the store receives raw materials, a special quality control team will conduct quality inspections on the raw materials and follow up on the daily storage and use of the raw materials. The company has established strict standards and solutions for warehousing and raw material management, and monitors the shelf life of raw materials through a digital inventory system to ensure the freshness of the products sold in the store.
product production quality control. company has formulated complete product production process and quality standards, and requires all store clerks to strictly abide by it. All clerks must go through several weeks of training courses before taking up their posts to master product production methods and standards. During the tea making process, automatic tea brewing machines and other equipment will be used, and the tea base will be changed every 4 hours to ensure the consistent quality and taste of the product.
.3. Create a strong social tea drink urban living room. The increase in opening a store is worth looking forward to
Social space is the selling point, aiming at Starbucks. Peng Xin, the founder of Naixue’s Tea, said in an exclusive interview with 36 Kr-Future Consumer at the beginning of this year: From the first day of Naixue, it has not been positioned as a catering brand, but a consumer brand with experience and fashion elements. Naixue, which emphasizes the experience, has the closest business logic to Starbucks, and uses exquisite decoration and wide space to enlarge the store's social space function, attracting consumers through mildly addictive products and scenes with social attributes.
Naixue attaches great importance to creating a sense of scene experience. The typical store size of the company is between 180-350 square meters and can accommodate 50-120 customers. The design of each store is integrated with unique artistic elements, and is controlled by a professional team in terms of space layout, tables and chairs, decoration, lighting and background music, etc., to create the most exquisite modern urban life experience environment. At the same time, Naixue insists on "chain not copying" in store design. Different stores only retain 40% of the similarity and conducts brand-new designs based on different themes in different cities, so that customers can get a fresh experience in each store. There are a large number of seats in the store, which allows customers to sit down and enjoy tea slowly, while also conducting social, business negotiations and other activities.
Naxue is the brand with the widest range of stores in the high-end freshly made tea beverage industry. As of September 2020, Naxue has 420 stores in 61 cities in China, and as of February 2021, the company has 507 stores. In addition, the company plans to open 300 and 350 new stores in first-tier and new first-tier cities in 2021 and 2020. However, these numbers are still significantly different from the "third space" of Starbucks . As of February 2021, Starbucks had more than 4,800 stores in 200 cities in mainland China, and the number of stores is more than 9 times that of Naixue. Naixue still has a lot of room for catching up in the number of cities covered by cities. Considering the differences in store area and other aspects between the two, even if Naixue’s tea stores cannot fully reach the level of Starbucks’ stores, its growth space is still considerable.
There is a lot of room for improvement in the number and density of stores. From the perspective of regional distribution, Naixue stores are mainly distributed in coastal provinces and Hubei, Sichuan, Shaanxi and other regions. Outside the mainland, there is one store in Hong Kong and Japan. From the perspective of urban distribution, Naixue opened stores mainly in first-tier and new first-tier cities. As of February 2021, Naixue opened 184 stores in first-tier cities, accounting for 36.3%; 177 stores opened in new first-tier cities, accounting for 34.9%, and first-tier and new first-tier stores accounted for 71.2%. During the same period, Starbucks opened 1,825 stores in first-tier cities, accounting for 38.0%; 1,819 stores in new first-tier cities, accounting for 37.9%. Naixue's store density in various cities is much lower than that of Starbucks, and the location of Naixue's existing stores is concentrated in major business districts, which lacks coverage of business districts and residential districts compared with Starbucks.
High-quality commercial properties are scarce, and they compete for the leading business circles to take advantage of the future. As of December 31, 2020, among the top 50 shopping malls in China's annual sales, 28 tea stores with Naixue, 32 Heytea stores, and Lele Tea only has stores in 9 of them. Large business districts have extremely strong traffic diversion capabilities. Arrange stores can easily obtain a large amount of customer flow and quickly expand the brand influence. However, the inventory of high-quality commercial properties is limited. These properties will also select well-known brands to join forces during the investment process. Naixue's own brand influence can make it easier to acquire stores in scarce areas and form strong positive feedback.
mainly promotes PRO store type to enhance social attributes. In order to highlight its own brand image and optimize the store experience, the company launched a new store-type Naixue PRO. The first two Naixue PRO stores opened in Shenzhen in November 2020. As of February 2021, the company has opened 14 Naixue PRO stores in 7 cities in China, including 8 first-tier cities, 5 new first-tier cities, and 1 second-tier city. Naixue PRO will become the company's main store type. In the store opening plan for opening stores in 2021 and 2022, 70% of new stores in first-tier and new first-tier cities are Naixue PRO.
is close to life and is more flexible. Naixue PRO store is mainly located in high-end office buildings and high-density communities, so as to be closer to social and leisure life scenes, and bring Naixue’s products closer to consumers. Naixue PRO has a more flexible layout and scale to cater to the fast-paced life of urban residents. For example, a special area has been set up in the Naixue PRO store to provide customers with in-store pickup and takeaway order services, so that customers can place orders in advance without waiting in line. Naixue PRO abandoned the current baking model of "front store and back factory" in standard stores, and removed the bakery and replaced it with a central kitchen to provide pre-made baking products such as cupcake , cake roll , etc. Pre-made baked products can be provided to customers only by simply processing by the clerk, which can greatly save customers' waiting time and improve the operating efficiency of Naixue PRO stores. After removing the bakery, the area of each store of Naixue PRO is between 80-200 square meters, which allows Naixue PRO to have more store location selection and saves store construction costs.
coffee helps to enrich the experience. In order to emphasize the positioning of the urban living room, Naixue PRO store has begun to provide coffee outside tea drinks and pastries to meet the needs of business people. According to Peng Xin, the current sales proportion of coffee products in "Naixue's Tea PRO" can reach about 20%. In addition, each Naixue PRO store has a retail area, selling a variety of easy-to-crawl snacks, such as freeze-dried yogurt blocks, biscuits and fries, to enrich customers' leisure experience in Naixue PRO store.
polymorphic store, exploring new scenarios. In addition to standard stores and Pro stores, Naixue has also conducted diversified exploration of store types, enriching Naixue's brand image by integrating various artistic, cultural and life elements into the store design. Naixue Dream Factory is positioned as a large experience store with multiple scenes. The first store of this type opened in Shenzhen in November 2019. Naixue Dream Factory has a retail space of over 700 square meters. The store is seamlessly connected by five areas. It has a wide range of Naixue’s tea products to choose from, such as freshly made tea drinks, baked products, alcoholic beverages, ready-to-drink tea drinks and snacks, and a retail gift shop equipped with a claw machine and other popular gaming equipment. At the same time, Naixue Dream Factory is also the company's important birthplace of innovative products, and new products and new promotional concepts will be the first to be tested at Naixue Dream Factory.
Naixue Bla Bla Bar is designed as a chic cocktail house with a menu containing a range of creative cocktails. Naixue Bla Bla Bar is located in important business districts in major domestic cities, such as Beijing Huamao Center and Shenzhen Ping'an Financial Building. Naixue Bla Bla Bar is directly opened next to Naixue’s tea store. It not only transforms the tea drinker group and complements the tea drink business, but also uses wine to layout the social scenes of young people’s nightlife to complete the scene. As of September 30, 2020, the company has operated a total of 22 Naixue Bla Bla Bars nationwide. Naixue’s Gift Store is a type of store opened by the company to explore a more creative and interactive tea experience. This store is equipped with claw machines, Naixue’s tea derivative product lottery machines and other popular game equipment. The first Naixue’s gift shop opened in Xiamen in November 2018.
.4. The main brand seizes the mind, and sends card to intercept it, magnetically attracts the target group
brand soft power wins the product premium. The current tea beverage industry has a high degree of homogeneity of products. If you want to cultivate a loyal consumer group, you will inevitably make a fuss outside the product. This is also the reason why Naixue is eager to build a lifestyle brand. When consumers consume tea beverages, they not only buy tea beverages themselves, but also the lifestyle and social cognition represented by the tea beverage brands. High brand awareness can enable the company to enjoy a higher product premium. According to the "2020 China New Tea Beverage Industry Development White Paper", the top 2 high-end tea drinks - Heytea and Naixue have brand awareness of 42% and 32%, respectively. The average price of the top two cups in the industry is 25-30 yuan, 22-26 yuan, and the top two high customer unit price: 52-56 yuan, 45-50 yuan, respectively.
marketing combination punch to dig deep into the brand moat. company uses various brand promotion and marketing activities to establish a brand image, expand customer scope and enhance customer participation. For example, we jointly develop innovative co-branded products with well-known lifestyle brands such as Douyin , Lining , Under Armour , VOSS and Dove to develop innovative co-branded products to increase brand awareness; actively attract customers through various innovative marketing activities and special promotions on various social media platforms such as WeChat, Xiaohongshu and Weibo. For example, on March 29, 2020, Naixue's Tea cooperated with Via and sold out 71,000 730% off set coupons in 3 seconds; on the evening of April 1, 2020, Luo Yonghao Douyin live streaming Naixue's Tea, 45,000 Zhang Naixue's customized tea card sold out in 1 second. As of 24 o'clock that night, Naixue sold nearly 100,000 items with sales of about 9 million.
cover: low-end fill. Taiga focuses on younger consumer groups, including students and young office workers who are more sensitive to prices. Taiga is positioned as a mid-to-low-end tea drink, with product prices ranging from 7-26 yuan. Currently, the average price of Taiga products is 16 yuan lower than the average price of Naixue’s tea products 27 yuan. The location selection of Taigai stores is concentrated in densely populated areas such as shopping malls, schools and large residential areas. The store size is between 20-100 square meters, and the stores use a unified design to reduce costs. In addition, Taigai creates virtual characters on social network platforms such as Weibo to narrow the psychological distance with young consumers. Through the Taigai brand, the company can occupy the mid- and low-end market, form a high-end matching with Naixue’s tea brand, and quickly make efforts to deploy the low-end tea beverage market faster if necessary in the future.
.5. Digitalization helps fine operation and optimize member management
Strong technical team supports digital transformation. company focuses on using digital technology to improve operational efficiency to improve its competitiveness in the same industry. The company's digital transformation process is led by a professional IT team, led by 9 senior industry experts, who have accumulated an average of about ten years of experience in domestic and foreign Internet giants ( Amazon , Alibaba , JD.com, Tencent , etc.). The company launched Teacore, an integrated information platform in October 2020. The system seamlessly integrates online and offline transaction information. The company can analyze customers' consumption habits and preferences, provide assistance for product innovation and improvement, and can also generate personalized customized menus to facilitate customers to place orders. As of February 2021, all of the company's stores have deployed Teacore systems. The company also has a digital store inventory management system, which can track and analyze the inventory level of each store and the validity period of raw materials in real time, allowing the company to prepare stores in a timely and sufficient manner, dispose of expired raw materials and limit overall waste. In addition, company management can continuously monitor the store's operating performance through internal point-of-sale LANs. The company will create an intelligent clerk dispatching system, which can automatically arrange personnel shifts and allocate orders according to the sales model of each store.
enters the mobile terminal and enables digital member management. In order to improve the convenience of interaction between consumers and Naixue and provide consumers with personalized services, the company launched Naixue’s Tea Mini Program Mall in August 2018, and in September 2019, Naixue’s Tea Membership System and digital member management system have gradually formed, and have achieved a comprehensive integration with the tea shop network. Through Naixue's mobile application or mini-program, consumers can easily join Naixue's tea membership system, and can also find the nearest Naixue store or place takeout and pick up orders directly through their mobile phones, use multiple payment methods to make payments, and receive real-time order status updates. Members can earn points after spending in stores or mobile terminals, and the points can be used to redeem various products for free. Depending on the amount of spending members within six months, it can be divided into six levels, and members at each level can enjoy different privileges. For example, members at levels 2-6 will receive a free drink voucher on their birthday. After the mobile applications of
were launched, the number of company members surged, with growing from 9.3 million at the end of 2019 to 29.2 million in February 2021, of which the number of active members increased from 2 million at the end of 2019 to 5.8 million at the end of 2020, an increase of 190%. The proportion of online orders has also increased significantly, from 4.4% in 2018 to 23.9% in 2020. In the first three quarters of 2020, the proportion of member orders was 49.4%, and the repurchase rate of active members gradually increased. The proportion of repurchase members in the number of active members increased from 25.6% at the end of 2019 to 29.8% at the end of 2020.
4. Analysis of operating capacity: Expand and increase revenue, stable cost
.1. Operating income: High-speed expansion buffers the impact of the epidemic
Expand against the trend during the epidemic. As of February 2021, Naixue’s tea stores reached 507, an increase of 55% from the end of 2019. Judging from the store data in the third quarter of 2020, Naixue’s tea stores are mainly concentrated in first- and second-tier cities. The company’s stores in first-tier, new first-tier and second-tier cities are 155, 148, and 98, accounting for 36.7%, 35.1%, and 23.2%, respectively, accounting for 95% of the total. As of February 2021, the number of Taigai stores was 63, distributed in 8 cities across the country, a decrease from 83 in 2018. This is because the company's management believes that Taigai's deep digging of the existing regional market potential is more beneficial to the company as a whole than rapid expansion.
New store buffers the impact of the epidemic. 020 Q1-Q3 revenue was 1.985 billion yuan, an increase of 24.7% over the same period in 2019. Under the impact of the epidemic, Naixue’s tea store revenue still maintained growth, mainly due to the accelerated pace of opening stores, and the revenue from new stores has reduced the impact of the epidemic. Taigai's total of 111 million yuan in the first three quarters of 2020, a decrease of 20.3% from the same period in 2019.
.2. Operating cost: The cost structure remains stable
In the first three quarters of 2020, the average daily orders of Naixue's tea stores were 465 orders, a decrease of 29.8% from the same period in 2019; the average daily orders of Taigai stores were 203 orders, a decrease of 6.5% from the same period in 2019. The decline in the average daily order quantity of a single store is mainly affected by the epidemic. The average daily order volume of single stores in second-tier and other cities is higher than that in first-tier cities, and the new first-tier cities are due to the new store effect and smaller store density.
In the first three quarters of 2020, the average customer unit price of Naixue’s tea stores was 43.3 yuan, a decrease of 0.91% from the same period in 2019. According to the city level, the average customer unit price of first-tier, new first-tier, second-tier and other cities was 44.1 yuan, 42.8 yuan, 42.0 yuan and 46.5 yuan respectively, which changed +3.3%, -1.4%, -11.4%, and -10.9% respectively compared with the same period in 2019. The significant decline in the average order price of second-tier and other cities may be due to the significant impact of purchasing power due to the epidemic. In the first three quarters of 2020, the average price of Taiwan covers was 28.9 yuan, a decrease of 2.7% from the same period in 2019.
.2. Operating cost: The cost structure remains stable
The operating costs of the company's stores mainly include material costs, employee costs and rental costs.
material cost is the company's main cost, and includes raw material costs such as tea, fresh fruits, fresh milk, fresh juice, and packaging material costs. In the first three quarters of 2020, the company's material costs accounted for 38.4% of revenue, an increase of 2.6% from the same period in 2019. This is because local governments exempted the VAT from revoking the economic impact of the epidemic, resulting in an undeductible input VAT of RMB 96 million recognized as material costs for the same period. If the impact of this part of the change is excluded, the company's material costs accounted for 35.8%, which is consistent with the same period in 2019. In the first three quarters of 2020, the proportion of raw material costs accounted for 29.0% of revenue, and the cost of packaging materials accounted for 9.4% of revenue. The company's continuous optimization of the supply chain and the acceleration of new product launches can effectively deal with the risks brought about by future rising raw material prices.
Employee costs share decreased. In the first three quarters of 2020, the proportion of employee costs to revenue was 28.6%, a decrease of 0.4% from the same period in 2019. This is because local governments implemented a policy of deferring employee social insurance payment during the epidemic and the company implemented flexible work arrangements, resulting in a temporary decline in average wages and welfare levels.
rental cost proportion has dropped slightly. Company rental expenses and property management expenses are equal to the sum of the right of use assets depreciation and other rents and related expenses. Based on this calculation, the proportion of rental costs in the first three quarters of 2020 to revenue was 15.3%, a decrease of 0.3% from the same period in 2019. The decline in rental costs is due to the company's stores expanding to areas outside the core business districts, which are lower than the core areas, thus reducing the proportion of rental costs.
.3. The impact of the epidemic, the operating profit margin has declined.
Overall and same-store profit margins have both declined. Affected by the outbreak of the epidemic, store closures and customer flow decreased, in the first three quarters of 2020, Naixue’s tea store’s overall operating profit margin was 11.3%, a decrease of 7.3% from the same period in 2019; Taigai stores’ overall operating profit margin was 12.6%, a decrease of 3.9% from the same period in 2019. In 2019, the overall operating profit margin of Naixue’s tea stores was 16.3%, a decrease of 2.6% from 2018. The reason is that the opening of a large number of tea stores in Xin Naixue has caused a large amount of preliminary investment costs. The overall operating profit margin of Taigai stores in 2019 was 15.6%, the reason for the increase over 2018 was that Taigai stores opened 51 new stores in 2018, higher than the 14 stores in 2019. The preliminary investment in new stores in 2018 lowered the overall operating profit margin. If you only look at mature stores, Naixue’s same-store operating profit margin in 2019 was 25.3%, a slight increase of 0.4% from 2018.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
Selected report source: [Future Think Tank Official Website].
