Introduction: After a five-year legal battle with JDB, Wanglaoji and JDB reached a settlement in August 2017 to share the red can packaging. In December 2017, Wanglaoji officially announced its plan to open physical herbal tea shops. Regarding Wanglaoji's shop opening, there seems to be unanimous approval and praise. However, the author believes that although the category extension of herbal tea is reasonable, Wanglaoji's herbal tea shops are not reliable. Wanglaoji's original intention for opening herbal tea shops: 1 After the dispute ended, the channel density and breadth of the category reached saturation, making self-built channels a new choice From July 2012 to August 2017, for a full five years, Wanglaoji and JDB engaged in a back-and-forth battle, from online posters to court rulings. It seemed they never stopped during those five years. Of course, salespeople in the frontline market were also busy, with one after another taking the stage. Distributors' purchasing policies were repeatedly lowered, terminal display fees were repeatedly increased, and promotional posters were torn down by each other. While capturing public attention, "JDB and Wanglaoji" occupied over 80% of the market share. During the "war," the density and breadth of distribution channels reached unprecedented saturation. The category has entered the "mature stage," making it difficult for herbal tea to find new market growth opportunities and points in the soft drink category. Extending the category and building self-owned channels are inevitable choices for business operations. 2 Standing at the forefront of the "new Chinese tea drink" trend, even pigs can fly In the past two years, "new Chinese" tea drinks have taken a path of scale. In 2016, Heytea received 100 million yuan in financing from IDG Capital, InWE Tea received 500 million yuan from Liu Qiangdong the same year, and Nayuki Tea received over 100 million yuan from Tiantu Capital... The collective financing in the tea drink industry in 2016 and 2017 made Wanglaoji see a new opportunity in Chinese tea drinks. Since they were already in the tea business, why couldn't they become a rising star like others? With the right timing, location, and people, the emergence of "1828 Wanglaoji Fresh-Brewed Herbal Tea" seems timely, but why can't Wanglaoji "fly"? 1The boast is too big; supply chain capability and mindset are both issues According to an interview with a senior executive of Wanglaoji's catering division, they plan to achieve an operating scale of 3,000 stores nationwide by 2021. After hearing this, the author silently calculated: 3,000 stores in 4 years means 750 stores per year, 63 stores per month, 15 stores per week, and an average of 2 stores per day. Such speed, even for capital-driven Heytea, maintained a pace of one store per week in 2017. The expansion of physical stores depends on the backend supply chain integration capability. Being new to store operations and expanding rapidly poses extremely high challenges to backend operational capabilities. Additionally, as a listed state-owned enterprise, Guangzhou Pharmaceutical is unlikely to give Wanglaoji's herbal tea shops much time to operate with care. Although born at the right time, such speed reveals the mindset behind it. If Wanglaoji's 4-year goal were 300 stores, we would believe they could patiently continue, but 3,000 stores in 4 years gives us no reason to believe that Wanglaoji would bend down, be patient, and properly inherit the intangible cultural heritage of "herbal tea." After a 5-year trademark war and now a rapid expansion plan, are you, Wanglaoji, a down-to-earth operator? 2Hundred-year-old herbal tea shops haven't expanded beyond Lingnan; why do you think you can? Herbal tea in the 1.0 era was family-run individual stalls, using "folk recipes" with large porcelain bowls and coal-fired boiling. In the 2.0 era, herbal tea became chain-operated "herbal tea celebrity" shops, represented by Huang Zhenlong and Denglao Herbal Tea. Despite having a hundred years of history, these physical herbal tea shops have never expanded beyond Lingnan and Guangdong. Take Huang Zhenlong Herbal Tea Shop, a household name in Guangdong known as the "King of Herbal Tea," which has been around for nearly 80 years. According to data, it has fewer than 3,000 stores and is limited to Guangzhou. Moreover, old herbal tea enterprises are gradually retreating to the "second line," with stores concentrated around residential areas, doing "neighborhood business." Others, with years of reputation, have been losing ground to fashionable tea drinks and trendy coffee. Can you really attract young consumers just by changing the design, changing the sign, and adding some trendy elements (like painting an old cucumber green)? Regarding the claim that Wanglaoji can succeed, many say that 1828 Fresh-Brewed Herbal Tea can leverage Wanglaoji's brand equity in the soft drink category to quickly build awareness, but the author believes this leverage is actually a constraint and hindrance. Wanglaoji's brand is firmly associated with the functional drink for "heatiness" (shanghuo), but consumers' consumption scenarios are during entertainment and leisure, making it difficult for them to accept a "heat-clearing" tea drink. It is reported that "1828 Fresh-Brewed Herbal Tea" products are divided into two categories: Herbal Tea World and Herbal Jianghu. Herbal Tea World includes Hanfang herbal tea, ancient method herbal tea, fruit tea, and milk tea, while Herbal Jianghu products are desserts with food therapy effects, including peach gum and tremella soup, mango pomelo sago, and pipa autumn forest paste. Every product contains the concept of "health preservation," and even the tea bases of milk tea and fruit tea incorporate ingredients that are both medicinal and edible. For example, grapefruit tea is paired with tangerine peel and licorice, and milk tea's base is paired with ginseng... The author does not deny the health value of these products, but from a commercial perspective, do consumers truly recognize "health preservation" and genuinely need "health"? Indeed, every consumer research report reflects the health-oriented consumption demand under the backdrop of consumption upgrading. But health needs and the concept of health preservation are two different things. Healthiness contrasts with the past "unhealthy" practices, where milk and tea used creamer and tea essence. Now it's fresh milk and good milk, tea essence replaced with freshly brewed tea, and flavorings replaced with fresh seasonal fruits. This is consumers' pursuit of health needs. Herbal tea is a good thing, but is it a bit far from young people's pursuit of quality consumption? The rise of the "new Chinese tea drink" trend is driven by young consumers' pursuit of quality of life and lifestyle. The consumption connotation of a cup of tea includes not only quenching thirst, taste, freshness, and quality, but also leisure and social interaction. The initial novelty and curiosity may indeed attract a batch of consumers, but what about afterward? The brand perception and the "Chinese herbal medicine" aspect of the shops will ultimately make young consumers shy away. With an unsteady mindset, the demands of supply chain operations, the limitations of the herbal tea category, and the concept of health preservation, can you believe Wanglaoji will open 3,000 stores in 4 years? If you have a different opinion, feel free to leave a comment and debate, sharing your views. -END-