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Menu Insights - Tea Houses 1H - China - August 2020

OVERVIEW
What you need to know
Key issues covered in this Report
Report scope
EXECUTIVE SUMMARY
The market 
Explosive sales value growth starts to cool down
Figure 1: Sales value & annual growth rate of tea houses market from 2016-2019
Figure 2: Average unit price per cup in RMB, China, 2013-2019
Impact of COVID-19 on tea house industry
COVID-19 leads to shutdown of some tea drinks consumption occasions
Consumers’ uncertainty about economic outlook reduces purchasing power 
Figure 3: Impact from COVID-19 on consumers’ financial status, China, December to July
Figure 4: Impact from COVID-19 on consumers’ economic outlook, China, April to July
Figure 5: Short, medium and long term impact of COVID-19 on Tea House industry, August 2020
Companies and brands
Centralized market with five brands making up great proportion of value share
Figure 6: Value share & volume share of the top brands, China, 2019
Use sub-brands to attract new consumers with trading down products
Rely on social media to engage consumers 
The consumer
Most purchased brands are HEYTEA, alittle-tea and CoCo
Figure 7: Purchased brands, March 2020
Figure 8: Purchased brands – “HEYTEA & alittle-tea”, by age group, March 2020
Figure 9: Purchased brands – “others”, by city tier, March 2020
Desirable flavour and high accessibility matter the most
Figure 10: Brand choice factors, March 2020
More frequent tea drinkers go to offline channels
Figure 11: Tea shops’ visiting frequency, March 2020
Centralized tea base market, with fruit tea favoured by most
Figure 12: Tea base choice, March 2020
Passion fruit is a darling 
Figure 13: Fruit preference, March 2020
Complementary combo of coconut jelly and oats most likely to please the market
Figure 14: Ingredient perception, March 2020
What we think
ISSUES AND INSIGHTS
Light mouth-feel with rich choice of fruits can better fit hot weather
The facts
The implications
Figure 15: Mini-HEYTEA’s new launches of sparkling juices
Develop ingredients that have mixed effects of flavour and texture 
The facts
The implications
Figure 16: The Alley’s milk tea with tapioca balls made of brown sugar
Figure 17: Signature tea drinks from Chun Feng Tea House
Tea houses to diversify revenue channels by marching into retail arenas
The facts
The implications
Figure 18: HEYTEA and Nayuki’s flagship stores
Figure 19: HEYTEA and Nayuki’s product display on Tmall
THE MARKET – WHAT YOU NEED TO KNOW
Fast-growing market shows signs of slowing down
Brands adapt to the new norm of “constant innovation”
COVID-19 results in a loss of consumption occasions
MARKET SIZE
Robust growth of sales value tamed in 2019
Figure 20: Sales value & annual growth rate of tea houses market from 2016-2019
Figure 21: Average unit price per cup in RMB, China, 2013-2019
MARKET FACTORS
Investors’ consistent optimism in the market’s development
Pressure of product innovation keeps mounting up
COVID-19 wipes out a few consumption occasions for tea drinks
COVID-19 arouses uncertainty for consumer expenditure &amp; economic outlook 
Figure 22: Impact from COVID-19 on consumers’ financial status, China, December to July
Figure 23: Impact from COVID-19 on consumers’ economic outlook, China, April to July
KEY PLAYERS – WHAT YOU NEED TO KNOW
Leading brands’ dominance in sales value
Eligible players to consider “subsidiary” strategy
Up-to-date marketing tactics to enhance brand-consumer bonding 
MARKET SHARE
Five players contribute over half of the market sales value
Figure 24: Value share & volume share of the top brands, China, 2019
COMPETITIVE STRATEGIES
Spin-off subsidiary offers price-tiered products, targeting various consumers
Figure 25: Photos of the first Mini-HEYTEA shop in Shenzhen
Figure 26: Menu comparison of HEYTEA (left) and Mini-HEYTEA (right)
Cross-category business exploits purchase power, opening up another revenue channel
Figure 27: Photos of Nayuki’s Bla Bla bar
Figure 28: Bla Bla’s signature cocktails
Cultivating high attachment to tea drinks among consumers
Figure 29: Front page of Good Me’s official website
Hidden menus to excite consumers’ curiosity purchase
WHO’S INNOVATING?
Product innovation: unstoppable flavour fusion of tea &amp; alcohol hybrids
Figure 30: Fresh milk tea with sweet fermented rice from Long Tine Tea Shop
Figure 31: Osmanthus and sweet fermented rice tea drinks with taro balls from One More Time
Marketing innovation: frequent feeds on social media to better engage with consumers
Figure 32: Contents of HEYTEA’s WeChat feeds in 2018
Figure 33: Content of HEYTEA’s WeChat feeds in 2020
Packaging upgrades catering to multiple needs 
Figure 34: Bottled milk tea from Machi Machi
Figure 35: Bottled milk tea from Xiexie Tea
Brands taking the initiative in environmental protection 
Figure 36: HEYTEA’s environmentally-friendly products
THE CONSUMER – WHAT YOU NEED TO KNOW
Concentration and divergence coexist in brand preference
Diverse tastes contribute the most to luring consumers
Divergent ingredient perceptions hint at potential business innovation
PURCHASED BRANDS
Flourishing market led by a handful of big names
Figure 37: Purchased brands, March 2020
Brand preference of Post-00s and Post-90s diverges
Figure 38: Purchased brands, by generation, March 2020
One brand luring exceptionally more male consumers
Figure 39: Purchased brands, by gender, March 2020
First tier cities boasting higher brand diversity
Figure 40: Purchased brands – “others”, by city tier, March 2020
Figure 41: Purchased brands – “I haven’t purchased tea drinks from tea houses in the last six months”, by city tier, March 2020
BRAND CHOICE FACTORS
Consumers fall for abundant flavour options &amp; easy shop access
Figure 42: Brand choice factors, March 2020
Parents value the application of fresh ingredients
Figure 43: Brand choice factors – “using fresh ingredients (eg fresh fruit) in drinks”, by family structure, March 2020
Premium brand consumers skewed towards rich flavour offerings
Figure 44: Brand choice factors – “rich choice of drink flavours & convenient location”, by tea brands, March 2020
Figure 45: Brand choice factors – “rich choice of drink flavours & convenient location”, by tea brands, March 2020
TEA SHOPS’ VISITING FREQUENCY
Offline shops see more frequent tea drinkers 
Figure 46: Tea shops’ visiting frequency, March 2020
Figure 47: Tea shops’ visiting frequency – “once a day or more”, by gender and age, March 2020
Figure 48: Tea shops’ visiting frequency – “2-3 times a month”, by family structure, March 2020
Parents buy tea drinks frequently, those with more than one kid in particular
Figure 49: Tea shops’ visiting frequency – “several times a week”, by family structure, March 2020
TEA BASE CHOICE
Burgeoning tea base market led by fruit tea
Figure 50: Tea base choice, March 2020
Figure 51: Tea base choice – “Pu’er tea”, by age, March 2020
Floral tea garners general preference among females
Figure 52: Tea base choice – “floral tea”, by gender and age, March 2020
White tea lovers value internal brand choice factors
Figure 53: Tea base choice – “white tea”, by brand choice factors, March 2020
FRUIT PREFERENCE
Nearly half of consumers add passion fruit to tea drinks 
Figure 54: Fruit preference, March 2020
Figure 55: Fruit preference – “passion fruit”, by gender and age, March 2020
Creative combos of tea base and fruit to stun the market 
Figure 56: Fruit preference – “apple & white peach & grape”, by tea base, March 2020
Figure 57: Peach oolong tea and gin flavoured cocktail, China, 2020
Figure 58: White peach oolong flavoured sandwich biscuits, China, 2020
Figure 59: Peach and oolong cheese flavoured ice cream, China, 2020
Locally-produced fruits win over regional consumers
Figure 60: Fruit preference – “mango & white peach”, by region, March 2020
INGREDIENT PERCEPTION
Fusion of coconut jelly and oats catering to all needs
Figure 61: Ingredient perception, March 2020
Purple rice, red bean and grass jelly each shine in two attributes 
Beloved cheese fails to stand out in any attribute
Figure 62: Ingredient perception – “those think that cheese can enrich the flavour of drinks”, by gender and age, March 2020
MEET THE MINTROPOLITANS
Concentrated brand preference among MinTs
Figure 63: Purchased brands – “I haven’t purchased any tea drinks from tea houses in the last six months”, by consumer classification, March 2020
Figure 64: Purchased brands, by consumer classification, March 2020
MinTs are more stringent about products and experience
Figure 65: Brand choice factors – “rich choice of drink flavours & using fresh ingredients (eg fresh fruit) in drinks & providing unique signature drinks & can customize flavour and ingredients & frequent update of products”, by consumer classification, March 2020
Figure 66: Tea shops’ visiting frequency – “once a day or more & several times a week”, by consumer classification, March 2020
APPENDIX – MARKET SIZE 
Figure 67: Sales value & annual growth rate of tea houses market from 2016-2019
APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
Abbreviations

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