Menu Insights - Tea Houses 2H - China - December 2020

OVERVIEW
What you need to know
Key issues covered in this Report
Report scope
EXECUTIVE SUMMARY
The market 
Value and volume growth show divergent trajectory
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
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
Figure 4: Purchased tea drinks, September 2020
Frequent drinkers decline at both online and offline channels
Figure 5: Purchase frequency, September 2020
RMB16-30 has wider appeal while one third accepts over RMB30
Figure 6: Upper price limit, by city tier, September 2020
Out-of-home occasions are still crucial, while in-home consumption heats up 
Figure 7: Consumption occasion, September 2020
Uncork the potential of plant-based ingredients
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
Figure 9: Attitudes towards tea drinks and tea houses – “agree”, by upper price limit, September 2020
What we think
ISSUES AND INSIGHTS
Enhance brand attachment to stand out amid the highly-saturated market
The facts
The implications
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
Figure 11: Chun Feng Tea House’s functional and beautifying tea drinks
THE MARKET – WHAT YOU NEED TO KNOW
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 
Value sales will drop to around RMB50 billion amid the COVID-19 outbreak
Figure 12: Value sales and annual growth rate of tea houses market, China, 2016-20
Steady volume expansion despite the COVID-19 outbreak 
Figure 13: Volume units and annual growth rate of tea houses market, China, 2019-20
MARKET FACTORS
Rising in-home cooking arouses uncertainty for tea drinks spending 
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
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
Behemoths cement leading positions, while rising players tap into unexploited markets
Figure 15: Store numbers and volume share of the top brands, China, 2019-20
Figure 16: Store count of top brands, China, 2020
Figure 17: Store count of Good Me and Yi He Tang, China, 2020
COMPETITIVE STRATEGIES
Transform simple tea drinks into sophisticated desserts 
Figure 18: Examples of tea drinks upgraded into desserts
Collaborate with multiple business formats to gain recognition
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 
Figure 21: Tongrentang Café
Develop emotional resonance to communicate with consumers
Figure 22: HEYTEA’s branding content for its seasonal tangerine-based tea drinks
WHO’S INNOVATING?
The debut of eisbock milk
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
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 
Figure 26: Xinjiang milk tea and Inner Mongolia-style Milk T
THE CONSUMER – WHAT YOU NEED TO KNOW
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
Penetration of fresh tea drinks remains static 
Figure 27: Purchased tea drinks, September 2020
Females contribute more to the market growth than males
Figure 28: Purchased tea drinks, by gender, September 2020
Consumers with kids skew towards milk/plant-based milk drinks 
Figure 29: Purchased milk drinks and plant-based milk drinks, by family structure, September 2020
Frequent drinkers lean towards milk drinks 
Figure 30: Purchased tea drinks, by purchase frequency, September 2020
Play with marketing tactics in promoting pure tea to engage consumers
Figure 31: Purchased tea drinks, by consumption occasion, September 2020
Figure 32: Chun Feng’s overnight water and detox water
Well-penetrated consumers boast high diversity in drink selection
Figure 33: Repertoire analysis of the types of purchased tea drinks, September 2020
Figure 34: Repertoire analysis of the types of purchased tea drinks, by repertoire analysis of the types of consumption occasions, September 2020
PURCHASE FREQUENCY
Proportion of frequent drinkers has taken a dive
Figure 35: Purchase frequency, September 2020
Brands must take frequent male drinkers into account
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
RMB16-30 is the ideal price range for the majority
Figure 38: Upper price limit, September 2020
Spending structure stays alike regardless of different city tiers
Figure 39: Upper price limit, by city tier, September 2020
CONSUMPTION OCCASION
Out-of-home occasions still dominate, while indoor consumption on the rise
Figure 40: Consumption occasion, September 2020
Low spenders’ consumption occasions vary from medium and high spenders’
Figure 41: Consumption occasion, by upper price limit, September 2020
FRUIT AND INGREDIENT PREFERENCE
Fruits steal thunder from ingredients overall
Figure 42: Fruit and ingredient preference, September 2020
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
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
Figure 45: Preferred fruit of waxberry added into tea with cheese topping, by region, September 2020
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
Established tea drinking habits entrenched in consumers’ lives
Figure 48: Attitudes towards tea drinks and tea houses, September 2020
Using environmentally-friendly features to drive premium perception
Figure 49: Attitudes towards tea drinks and tea houses, September 2020
On-the-go consumption occasions can be further utilised
Figure 50: Attitudes towards tea drinks and tea houses, September 2020
Potential to inflate the market’s value sales
Figure 51: Attitudes towards tea drinks and tea houses – “agree”, by upper price limit, September 2020
APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
Abbreviations