---
title: "If It's Not Expensive, It Doesn't Deserve to Be Called 'New Consumption'"
description: "New consumption brands are increasingly pricing products at premium levels, from 30-40 yuan cups of tea to 40 yuan bowls of noodles, sparking consumer complaints about affordability. While some argue this reflects consumption upgrades and brand storytelling, others question whether it's a trap or a result of intense market competition, with capital still pouring into these high-priced brands despite their struggles."
author: "开菠萝财经团队"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-09-10"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/if-it-s-not-expensive-it-doesn-t-deserve-to-be-called-new-consumption-4b218f7b/"
markdown: "https://xinjignxiao.com/en/articles/if-it-s-not-expensive-it-doesn-t-deserve-to-be-called-new-consumption-4b218f7b.md"
original_source: "https://mp.weixin.qq.com/s/oSa-Az7wEou177IHV7GtJg"
translation: "https://xinjignxiao.com/zh/articles/%E4%B8%8D%E8%B4%B5-%E4%B8%8D%E9%85%8D%E5%8F%AB-%E6%96%B0%E6%B6%88%E8%B4%B9-4b218f7b.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/if-it-s-not-expensive-it-doesn-t-deserve-to-be-called-new-consumption-4b218f7b/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# If It's Not Expensive, It Doesn't Deserve to Be Called 'New Consumption'

> New consumption brands are increasingly pricing products at premium levels, from 30-40 yuan cups of tea to 40 yuan bowls of noodles, sparking consumer complaints about affordability. While some argue this reflects consumption upgrades and brand storytelling, others question whether it's a trap or a result of intense market competition, with capital still pouring into these high-priced brands despite their struggles.

**Click to read the original article for details**

With cups of Heytea and Naixue Tea costing 30-40 yuan, a bowl of Hefu Noodles at 40 yuan, and a box of Zhong Xue Gao ice cream at nearly 100 yuan, consumers joke that new consumption brands are not only too numerous to share users, but also increasingly expensive.

"Why is XXX so expensive?" On social platforms, netizens ask similar soul-searching questions. "Why are some new brands I've never seen priced outrageously high, while brands I used to buy are gone?"

At the convenience store downstairs, consumer Song Yuan also expressed similar sentiments. "This might be what new consumption is—a consumption upgrade I haven't kept up with," she said with a bitter smile.

The popularity of new consumption is obvious to all, but have we actually ended up with fewer price options? Is this new consumption so expensive that consumers can't afford it?

Li Feng, founding partner of FreeS Fund, once wrote that in the consumption upgrade stage, changes in the market, supply chain, and demand have indeed given brands the opportunity to "make products expensive." However, he also noted that the severe "involution" in the consumer goods industry has made "making expensive" one of the inevitable trends.

Bai Qun, founder of a liquor brand, said that the emergence of some high-priced, high-premium brands in the Chinese market proves the rise of domestic brands. But if the "involution" in the new consumption track is squeezing out affordable or even low-priced brands, he is not optimistic about this trend.

Why are new consumer products getting more expensive? Is it a "trap" under consumption upgrades, or a forced move under involution?

Looking at representative brands that have gone public, these new expensive brands are not doing well. So why do the brands you complain about as expensive never worry about financing, and their valuations are even so high that they "scare off" many investors? This article attempts to answer these questions.

**New Consumption: So Expensive You Can't Afford It?**

After looking around at "new consumption brands," Song Yuan came to a simple conclusion: "expensive" is the key.

Take sugar-free sparkling water: Zero and Diet Coke haven't exceeded 3 yuan for years, but Genki Forest started at 5 yuan from birth. Is it because erythritol is more premium than aspartame? Or because its "0 sugar, 0 fat, 0 calories" concept is more appealing?

Instant noodles used to cost 2 yuan a pack or 5 yuan a bowl in childhood, but Lamian Talk sells for nearly 20 yuan a box. Similarly, a cup of fresh fruit tea: Shanghai Auntie costs 17 yuan, Bengong Tea 14 yuan, but Heytea and Naixue can sell for 30-40 yuan.

How much do you think a bowl of noodles costs? At Chen Xianggui and Ma Jiyong's noodle shops, a bowl of Lanzhou beef noodles costs 26 yuan. At Yujian Xiaomian, there are affordable noodles for over 10 yuan, but most are above 30 yuan.

Compared to them, Hefu Noodles is bolder: a bowl of sour soup with snowflake beef noodles costs 38 yuan, and tomato soup with pork cartilage noodles costs 39 yuan.

Yujian Xiaomian (left) menu vs. Hefu Noodles (right) menu
Image source / Dianping

Of course, they all bring new stories. For example, Genki Forest founder Tang Binsen said: "Among all beverage companies in China, ours is the only one where the water in the bottle is more expensive than the bottle."

Heytea and Naixue Tea claim to replace tea powder with freshly brewed tea, sugar and creamer with fresh milk, and canned fruit with fresh fruit. Hefu Noodles tells the story of "study room health noodles."

Song Yuan specially tried a bowl of Hefu Noodles: "Overall, it tastes similar to a 15-yuan bowl of noodles. I can't understand why the story of 'eating noodles while reading' is so valuable. If you eat noodles while reading, oil will splash on the book!"

She also can't understand why Zhong Xue Gao can sell for 66 yuan per stick. She even did the math: the money for one Zhong Xue Gao could buy 6 Magnum bars, 10 boxes of Baixi, 12 Cornetto cones, or 66 Little Pudding popsicles. Isn't that better?

Why can these new brands sell so expensively?

New retail expert Bao Yuezhong conducted an analysis: China's consumer market is a pagoda-shaped stratified structure. The top 20% of the population, though fewer in number, have disposable income 11 times that of the bottom 20%.

For a long time, the consumption needs of the top 20% or even 40% of middle-income groups at the top of the pagoda have not been fully met.

In other words, there are people who no longer want to eat 0.5-yuan Little Pudding popsicles or drink 2-yuan milk tea. In the view of many experts, the consumer market is being segmented and stratified by differentiated needs. The unmet needs of some groups represent the "gold mining area" of China's consumer goods industry.

Li Feng, founding partner of FreeS Fund, wrote in an article titled "Breaking the Consumer Industry Dilemma: The Secret Is to 'Make It Expensive'?" that in the consumption upgrade stage, changes in the market, supply chain, and demand have given brands the opportunity to "make expensive"; and the severe "involution" in the consumer goods industry has also made "making expensive" one of the inevitable trends.

**There were also "Zhong Xue Gao" in the past, but most of them "died."** "In the past, even if FMCG wanted to sell expensive, it 'basically couldn't sell.' Because existing channels couldn't carry it, and they couldn't find the top 20% of consumers at the top of the pagoda," Bao Yuezhong told Kailuobo Finance.

Chen Momo, vice president of Yuanjing Capital, also said that in the past, high pricing might result in limited channel acceptance. In traditional mass retail channels, the higher the price of products in the same category, the lower the conversion rate. Unless commissions are high, channels have no incentive to promote products with low conversion rates.

But now, new consumption brands and sales channels are closer to consumers. Most brands have been validated online or in other new retail channels before entering offline channels, making them more accepted by offline channels.

"Especially in some new retail channels, users are mainly young people, and channels hope to attract target users through internet-famous/traffic products," Chen Momo said. As a result, we can see "new expensive" brands in convenience stores that we couldn't see before.

Bai Qun told Kailuobo Finance that these new consumption products sell expensively also because they are good at storytelling.

Most founders of new consumption brands come from marketing backgrounds and often lack experience in consumer goods. The most typical example is Zhong Xue Gao founder Lin Sheng, who previously worked in consulting and advertising marketing. He once said in a media interview: "Ice cream consumption in China is mainly concentrated in the 1-3 yuan price range," and Zhong Xue Gao challenges exactly that.

**Lin Sheng and others have mastered the essence of selling expensive brands: "redefinition." Thus, we see redefined beverages, ice cream, noodles, and more.**

**The Expensive Business Is Not Necessarily Easy**

Selling at high prices doesn't mean these new brands have an easy business.

Wang Sheng, partner of Inno Angel Fund, believes that making consumer products expensive now is also a kind of necessity.

In the past, it was an industrialized consumer goods system with large orders, mass production, large channels, and large distribution. Production efficiency reached a certain limit, and production costs were reduced to very low.

But that's the past. Consumers have limited purchasing power and simple decision-making. The era of relying solely on price and function is over. Now it's a market where supply and demand are inverted, and consumers decide everything.

When the choice is entirely in consumers' hands, brands must cater to increasingly segmented and personalized needs. SKU update speed must be fast, and the R&D costs of new SKUs and non-scaled supply chains lead to lower business efficiency. Essentially, high costs determine high pricing.

"Consumers are getting smarter. They know that spending 10 yuan on a blended milk tea might not be as cost-effective as spending 30+ yuan on a cup of fresh fruit tea from Heytea or Naixue."

Chen Momo told Kailuobo Finance that this is partly because in the past, some categories had too many distribution layers and unreasonable pricing. Now, with more transparent information channels, brands in the same price range are easily compared, and consumers tend to pay the same or higher price to get a product experience far beyond what the original price would have offered.

But high pricing doesn't mean high profits; you also need to look at the markup ratio.

Take Naixue Tea, which has gone public. Its prospectus shows an average selling price of 27 yuan per cup, with raw material costs accounting for 38%. In comparison, Starbucks' raw material costs account for only 13%, and Luckin Coffee's are around 23%.

Its first post-IPO financial report showed a gross margin of 37%. A former milk tea chain operator revealed that the gross margin of mid-to-low-end milk tea is at least around 60%.

"Naixue Tea is struggling so hard; this was unimaginable in the past," Wang Sheng sighed to Kailuobo Finance. Compare with Mixue Ice City: its signature fresh lemon water sells for 4 yuan a cup and still makes money, because Mixue has enough scale and has long built a fresh lemon supply chain.

New-style tea drinks tell the story of adding fresh fruit to tea. To provide high-quality products, they have to set high prices. "The current markup ratio is already disadvantageous; lowering it further would mean more losses."

Of course, it doesn't mean Zhong Xue Gao, Naixue, and others won't make money in the future.

Zhuang Shuai, a retail e-commerce expert and founder of Bailian Consulting, analyzed Zhong Xue Gao as an example: From the perspective of ice cream production technology, it's not impossible for Zhong Xue Gao to reduce costs through technical means, production process adjustments, and organizational efficiency improvements.

Because whether it's mid-to-low-end Cornetto or mid-to-high-end Magnum, gross profits are high. Essentially, they have achieved a certain level of scale effect.

But so far, these seemingly glamorous, expensive brands are still "struggling."

**Are Expensive Brands More Favored by Capital?**

However, a noteworthy phenomenon is that the more you complain about a brand being expensive, the more it doesn't worry about financing, and its valuation is even so high that it "scares off" many investors. The rapid rise of these "new expensive" brands is also inseparable from capital support.

Zhong Xue Gao completed a 200 million yuan Series A round earlier this year, after receiving angel funding from ZhenFund and FreeS Fund, and Pre-A funding from Tian Tu Capital and Toutou Shidao. According to IT Juzi, its post-A valuation exceeded 1 billion yuan.

In the capital world, this year is the "year of noodle shops." Hefu Noodles, Yujian Xiaomian, Wuye Banmian, and Chen Xianggui have all received large financings, with valuations often reaching over 1 billion yuan.

Yujian Xiaomian received two rounds of financing in just four months, with its valuation rising to 3 billion yuan. Hefu Noodles, which sells at higher prices, received the largest financing in the snack industry this year—nearly 800 million yuan. According to IT Juzi data, its post-financing valuation reached 6.4 billion yuan.

Heytea's valuation was 16 billion yuan in March last year, and it rose to 60 billion yuan in just over a year. With over 800 stores, that's 70 million yuan per store. Naixue Tea, listed on the Hong Kong Stock Exchange, reported 578 stores in its Q2 financial report, with a current market value of nearly 16.4 billion yuan, and a per-store valuation of nearly 28.37 million yuan.

Compare with offline chain giant Starbucks, which has 33,000 stores globally and a market value of 880.1 billion yuan, with a per-store valuation of only 26.66 million yuan, far lower than Naixue and Heytea.

Are new "expensive" consumption brands more favored by capital? In fact, different types of capital have different demands.

Zhuang Shuai said that for projects at different stages, VC demands differ.

For earlier-stage projects, VCs care less about how much product is sold and more about whether someone will take over, when the next round will come, and what the valuation will be. They need to assess whether there is a demand for consumption upgrades in the macro environment and whether China lacks high-end brands in this category. If these conditions are met, they can invest because there will definitely be capital to take over.

For later-stage projects, with brand awareness, being in a hot track, and having a certain sales scale, the problems that need to be solved have been solved. Then they bet on the IPO, enjoy the premium of the secondary market, and exit after making a big profit.

Industrial capital, like Tencent behind Hefu Noodles and Meituan Longzhu behind Heytea, follows a different investment logic compared to pure financial VCs.

In fact, the giants' calculations are clear: they want to enter the industry and hope to combine the project with their existing business, focusing more on strategic layout.

"Tencent's calculation is: use my toolbox at the front end and my digital system at the back end, from production processes, production line management to internal organizational management, mini-programs, cloud, user management, financial service management, employee WeChat Work, etc., all can use mine," Zhuang Shuai said.

"Whether a brand is high-end or low-end is not that important; it's just that high-end customers give more money and higher returns."

He analyzed to Kailuobo Finance that when projects like Hefu Noodles and Yujian Xiaomian are in early stages, industrial capital enters at a low price but with a high stake, which is very cost-effective. It might be more efficient, lower cost, and higher return than Tencent investing in advertising to promote Hefu Noodles using its mini-programs and other backend tools.

Although industrial capital investment personnel will conduct comprehensive evaluations from financial, internal, and external environment perspectives, **in the end, the conclusion is often "we invest in all," like Tencent, which invests in both Heytea and Hefu Noodles.**

In Zhuang Shuai's view, the evaluation dimension is not scale, but whether they can gain more industry experience and serve different systems. So they need low-priced, affordable, and high-end brands.

According to Wang Sheng's observation, **some brands set prices too high, which is "involution" driven by capital.** Because investors all hope to invest in companies with high gross margins and visible profit prospects.

But the other side of the coin is that to achieve high gross margins, pricing must be high, and sales volume will be limited. If you lower gross margins, you'll continue to lose money and fall into a swamp of vicious price competition.

He prefers brands with high markup ratios and high gross margins, believing that such brands can make money in any channel; otherwise, they are easily replaced and have low investment value.

Too many consumer products try to become high-premium brands, knocking down old, established brands.

But in Wang Sheng's view, we need to think from the underlying logic: does this category support high pricing or high premiums and high gross margins? It's possible that many categories don't support it at the bottom. Because some categories have weak value beyond basic functionality.

He prefers brands with high markup ratios and high gross margins, believing that such brands can make money in any channel; otherwise, they are easily replaced and have low investment value.

"Current data doesn't prove anything. It's too early to draw conclusions. Many brands haven't completed a full cycle, and haven't even finished targeting their first wave of users," Chen Momo said. The market needs more patience with "new expensive" brands.

**Are you "watching" me?**


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671