Table of Contents
Executive Summary
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- The market
- Value and volume growth show divergent trajectory
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- Figure 1: Value sales and annual growth rate of tea houses market, China, 2016-20
- Figure 2: Volume units and annual growth rate of tea houses market, China, 2019-20
- Impact of COVID-19 on tea houses market
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- Figure 3: Short, medium and long-term impact of COVID-19 on the tea houses market, December 2020
- Companies and brands
- “Dessert-ization” trend stimulates the market
- Adoption of upgraded and niche ingredients to pursue premiumisation
- The rise of Chinese elements incorporated in tea drinks
- The consumer
- Popular tea drinks secure prevalence, while niche selections appeal to specific demographics
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- Figure 4: Purchased tea drinks, September 2020
- Frequent drinkers decline at both online and offline channels
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- Figure 5: Purchase frequency, September 2020
- RMB16-30 has wider appeal while one third accepts over RMB30
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- Figure 6: Upper price limit, by city tier, September 2020
- Out-of-home occasions are still crucial, while in-home consumption heats up
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- Figure 7: Consumption occasion, September 2020
- Uncork the potential of plant-based ingredients
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- Figure 8: Preferred ingredients of longan and adlay added into plant-based milk drinks, by family structure, September 2020
- High spenders show stronger dependence and sophistication towards tea drinks
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- Figure 9: Attitudes towards tea drinks and tea houses – “agree”, by upper price limit, September 2020
- What we think
Issues and Insights
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- Enhance brand attachment to stand out amid the highly-saturated market
- The facts
- The implications
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- Figure 10: HEYTEA and Nayuki’s flagship stores
- Lower tier markets will become the next growth engine
- The facts
- The implications
- Emphasize tea drinks’ BFY function to engage demographics vertically
- The facts
- The implications
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- Figure 11: Chun Feng Tea House’s functional and beautifying tea drinks
The Market – What You Need to Know
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- Value sales drop while number of stores pick up
- Brands under rising pressure to enlarge consumer base
- Future growth of value sales lies in premiumisation
Market Size
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- Value sales will drop to around RMB50 billion amid the COVID-19 outbreak
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- Figure 12: Value sales and annual growth rate of tea houses market, China, 2016-20
- Steady volume expansion despite the COVID-19 outbreak
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- Figure 13: Volume units and annual growth rate of tea houses market, China, 2019-20
Market Factors
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- Rising in-home cooking arouses uncertainty for tea drinks spending
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- Figure 14: Impact from COVID-19 on consumers’ spending priority, China, 27 November – 4 December, 2020
- Investment continues flowing to unique brands
- Potential for trade-up with a sizeable portion of consumers willing to splurge
Key Players – What You Need to Know
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- Upgrading product portfolios to increase consumers’ spending
- Evolving drinking experience with the help of eisbock milk
- “China chic” becomes a main feature of tea drinks
Market Share
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- Behemoths cement leading positions, while rising players tap into unexploited markets
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- Figure 15: Store numbers and volume share of the top brands, China, 2019-20
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- Figure 16: Store count of top brands, China, 2020
- Figure 17: Store count of Good Me and Yi He Tang, China, 2020
Competitive Strategies
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- Transform simple tea drinks into sophisticated desserts
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- Figure 18: Examples of tea drinks upgraded into desserts
- Collaborate with multiple business formats to gain recognition
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- Figure 19: Examples of tea houses’ collaborations with Chinese baijiu spirits
- Figure 20: Examples of tea houses’ collaborations with animation IPs
- Provide value-added services aligning with brand image
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- Figure 21: Tongrentang Café
- Develop emotional resonance to communicate with consumers
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- Figure 22: HEYTEA’s branding content for its seasonal tangerine-based tea drinks
Who’s Innovating?
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- The debut of eisbock milk
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- Figure 23: Eisbock milk series new launches of HEYTEA and Le Le Cha, China 2020
- Brands resort to nostalgia to popularize “China chic” tea drinks
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- Figure 24: Tang Zhi’s milk drinks sprinkled with Mylikes chocolate confectionary
- Figure 25: China chic tea drinks
- Highlight the ethnic characteristics of niche regional milk tea
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- Figure 26: Xinjiang milk tea and Inner Mongolia-style Milk T
The Consumer – What You Need to Know
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- Saturated market with stable penetration level
- One third of consumers willing to spend over RMB30 on tea drinks
- Consumers fall for fruits to spice up flavours
Purchased Tea Drinks
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- Penetration of fresh tea drinks remains static
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- Figure 27: Purchased tea drinks, September 2020
- Females contribute more to the market growth than males
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- Figure 28: Purchased tea drinks, by gender, September 2020
- Consumers with kids skew towards milk/plant-based milk drinks
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- Figure 29: Purchased milk drinks and plant-based milk drinks, by family structure, September 2020
- Frequent drinkers lean towards milk drinks
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- Figure 30: Purchased tea drinks, by purchase frequency, September 2020
- Play with marketing tactics in promoting pure tea to engage consumers
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- Figure 31: Purchased tea drinks, by consumption occasion, September 2020
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- Figure 32: Chun Feng’s overnight water and detox water
- Well-penetrated consumers boast high diversity in drink selection
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- Figure 33: Repertoire analysis of the types of purchased tea drinks, September 2020
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- Figure 34: Repertoire analysis of the types of purchased tea drinks, by repertoire analysis of the types of consumption occasions, September 2020
Purchase Frequency
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- Proportion of frequent drinkers has taken a dive
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- Figure 35: Purchase frequency, September 2020
- Brands must take frequent male drinkers into account
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- Figure 36: Online frequent drinkers, by gender and age, September 2020
- Figure 37: Offline frequent drinkers, by gender and age, September 2020
Upper Price Limit
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- RMB16-30 is the ideal price range for the majority
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- Figure 38: Upper price limit, September 2020
- Spending structure stays alike regardless of different city tiers
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- Figure 39: Upper price limit, by city tier, September 2020
Consumption Occasion
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- Out-of-home occasions still dominate, while indoor consumption on the rise
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- Figure 40: Consumption occasion, September 2020
- Low spenders’ consumption occasions vary from medium and high spenders’
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- Figure 41: Consumption occasion, by upper price limit, September 2020
Fruit and Ingredient Preference
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- Fruits steal thunder from ingredients overall
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- Figure 42: Fruit and ingredient preference, September 2020
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- Figure 43: Product line of coconut-added tea drinks from HEYTEA and Le Le Cha
- Burgeoning fusions can leverage their edge in nutrition and texture
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- Figure 44: Preferred ingredients of longan and adlay added into plant-based milk drinks, by family structure, September 2020
- Cheese tea to regain the momentum
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- Figure 45: Preferred fruit of waxberry added into tea with cheese topping, by region, September 2020
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- Figure 46: Product line of waxberry-added tea drinks from HEYTEA and Le Le Cha
- Figure 47: Preferred ingredient of longan added into tea with cheese topping, by city tier, September 2020
Attitudes towards Tea Drinks and Tea Houses
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- Established tea drinking habits entrenched in consumers’ lives
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- Figure 48: Attitudes towards tea drinks and tea houses, September 2020
- Using environmentally-friendly features to drive premium perception
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- Figure 49: Attitudes towards tea drinks and tea houses, September 2020
- On-the-go consumption occasions can be further utilised
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- Figure 50: Attitudes towards tea drinks and tea houses, September 2020
- Potential to inflate the market’s value sales
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- Figure 51: Attitudes towards tea drinks and tea houses – “agree”, by upper price limit, September 2020
Appendix – Methodology and Abbreviations
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- Methodology
- Abbreviations
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