Once touted as securing 300 million yuan in orders, Tongrentang's herbal tea has gone quiet during the peak sales season. Recent reports from multiple sources indicate that Tongrentang's herbal tea is not selling well at the terminal, with some distributors even terminating partnerships due to slow movement. Industry analysts suggest that the high price of 5.5 yuan and limited distribution channels are major obstacles to the brand's development.
Terminal Product Stagnation and Distributor Terminations In March, Tongrentang launched its herbal tea with great fanfare at the Chengdu Sugar and Wine Fair, announcing cumulative intended orders of up to 300 million yuan. Five months later, during the peak season for herbal tea sales, how is Tongrentang's herbal tea performing in the market? Our reporter found that the product is frequently discounted, and many former partners have given up their agency for Tongrentang herbal tea.
Visits to Tongrentang's self-operated stores revealed that a 24-can case of Tongrentang herbal tea is being sold at a 10% discount, priced at 118.8 yuan. Alongside the discount, there is also a buy-one-get-one-free promotion: purchasing one jin of Tongrentang donkey-hide gelatin comes with a free six-pack of Tongrentang herbal tea. Observations at multiple Tongrentang pharmacies showed that despite the promotions, few customers were buying. Similarly, on JD.com's Tongrentang official flagship store, the herbal tea product has only three cumulative reviews.
Compared to Tongrentang herbal tea, JDB and Wanglaoji have already established solid positions in the market. It is known that JDB's actual sales exceeded 20 billion yuan several years ago, while Wanglaoji surpassed 4 billion yuan.
Some partners have firsthand experience with Tongrentang herbal tea's sluggish sales. A former regional general distributor for Tongrentang herbal tea revealed, "Due to poor sales and almost no movement of goods, we terminated our cooperation with Tongrentang."
Furthermore, an insider revealed that when Tongrentang launched its herbal tea, it intended to promote the product through sponsorship or product placement in entertainment programs. However, due to low distributor recognition and insufficient funds, the golden opportunity for product promotion was missed. An industry insider commented, "We don't know the actual order amount behind the 300 million yuan in intended orders, but based on current performance, it seems Tongrentang herbal tea may fizzle out in the herbal tea market."
Price 60% More Expensive, Limited Ingredient Value Data shows that last year, JDB herbal tea led the Chinese herbal tea market with a 52.1% sales share, followed by Wanglaoji and Heqizheng with 28% and 9.9%, respectively. Nearly 90% of the market is divided among these three companies, leaving only 10% for other brands. Breaking through in such a competitive market is extremely challenging.
Zhu Danpeng, a food and beverage industry researcher at the China Brand Research Institute, pointed out that the health industry is currently booming, and many pharmaceutical companies are entering the FMCG sector, indicating their optimism about the industry. Judging from Tongrentang's current performance, pricing is a key aspect worth reconsidering.
The newly launched Tongrentang herbal tea is priced at 5.5 yuan for a 310ml can, which is 2 yuan higher than the comparable packaging of Wanglaoji and JDB, which sell for around 3.5 yuan. What justifies the 2 yuan price difference? Tongrentang has publicly stated that the raw materials for each can are of higher quality, using premium herbs, resulting in higher raw material costs, and the product targets the high-end market. However, a comparison of ingredient lists reveals that Wanglaoji and JDB herbal teas contain water, white sugar, mesona chinensis, plumeria rubra, prunella vulgaris, microcos paniculata, chrysanthemum, honeysuckle, and licorice. Tongrentang's herbal tea has essentially the same main ingredients, with the addition of four different herbs: monk fruit, mulberry leaf, mesona chinensis (also known as Chinese mesona), and lophatherum gracile.
In Zhu Danpeng's view, although monk fruit and other ingredients are costly, a price 60% higher than competitors is still controversial. The mainstream price for herbal tea is around 3.5 yuan. The high pricing and additional herbs are part of Tongrentang's strategy to differentiate itself, but the added herbs are not particularly expensive. "The high price of Tongrentang herbal tea is not directly related to the cost of the ingredients," he said.
In terms of taste, Tongrentang emphasizes low sugar, using the natural sweetness of monk fruit to flavor the product. However, the low-sugar selling point is not unique. This year, Wanglaoji announced the launch of sugar-free and low-sugar herbal tea products, and Want Want also introduced a new packaging for its Laoweng herbal tea, also entering the low-sugar market.
Channels Relying on Pharmacies, Hard to Find in Supermarkets Despite being a latecomer, Tongrentang had high hopes for its herbal tea. The company publicly stated its intention to push the product into the mass consumer market, selling through supermarkets, convenience stores, and other general channels, expanding distribution as a precursor to its overall "health strategy layout." Tongrentang targeted seven major regions—North China, East China, Southwest, Central China, Northeast, Northwest, and South China—with a focus on key regions and cities. The company's goal was for supermarkets and foodservice to account for 70% of total channels.
However, visits to several supermarkets in Beijing revealed that only one supermarket near the Third Ring Road carried Tongrentang herbal tea, with Tongrentang's own pharmacies serving as the primary channel. Yao Wenhua, president of the Beijing Supermarket Suppliers Association, explained that new products entering supermarket channels must pay high fees. After paying, the product has a three-month trial period. If sales are unsatisfactory, the product is removed, and the fees are not refunded. Therefore, Tongrentang is reluctant to take such a risk, only placing its products in small community supermarkets, making it difficult to enter large supermarkets.
Zhu Danpeng believes that the main channels for herbal tea are supermarkets and foodservice. For example, JDB and Wanglaoji have already covered many supermarkets, with foodservice accounting for nearly half of their channels. Most pharmaceutical companies rely on their original medical channels, which are relatively closed and relationship-driven, lacking exposure to fierce market competition. Additionally, the operational team is crucial. Major herbal tea brands have been in the market for years, understanding consumer preferences and marketing effectively. Tongrentang's core business is not herbal tea, so it cannot respond quickly to market changes.
Our reporter sent an email and made phone calls to Tongrentang regarding the sales and market situation of its herbal tea, but received no response by the time of publication.
This article is from Beijing Business Today.
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