The rise of internet coffee has popularized coffee from niche groups to the masses, also spurring the growth of ready-to-drink coffee brands like Tanbing and Shengruisi. However, the similarly booming milk tea market has not seen the same level of activity in ready-to-drink product development. Despite chains like 1点点 opening over 4,000 stores and Heytea being valued at 9 billion yuan, the market for ready-to-drink milk tea seems relatively calm. What are the reasons? Where is the spring for ready-to-drink milk tea?
-01- What has cup milk tea brought to ready-to-drink milk tea?
The milk tea we commonly drink today is English-style milk tea, which was developed in Taiwan and Hong Kong, giving rise to variations like Hong Kong-style and Taiwan-style milk tea. In the early days, milk tea was mainly sold in offline shops and restaurants.
After milk tea entered mainland China, the category that created a whirlwind was not street-side milk tea shops or ready-to-drink milk tea, but cup powdered milk tea (referred to as cup milk tea). Xiangpiaopiao quickly became popular nationwide, establishing the first milk tea stock. It can be said that cup milk tea brands like Xiangpiaopiao opened the door to domestic milk tea and achieved category education.
However, during the development of cup milk tea, although many large manufacturers entered, such as Uni-President Assam Milk Tea and Nongfu Spring's Da Milk Tea, the presence of ready-to-drink milk tea was lower than that of cup milk tea, and the overall category development was mediocre (this mediocrity is compared to the hundred-billion-yuan ready-to-drink tea market. In fact, comparing sales with Xiangpiaopiao, the difference between Uni-President Assam and Xiangpiaopiao is not significant).
According to statistics, Uni-President Assam's sales in 2018 were approximately 4 billion yuan, with a market share of over 70%. Based on this, the ready-to-drink milk tea market is estimated to be around 5.5-6 billion yuan.
The chart below shows Uni-President Assam Milk Tea sales data from 2010 to 2017. From 2010 to 2013, the compound growth rate of Uni-President Assam Milk Tea was as high as 82%, but from 2014, the market entered a decline until 2017 when it returned to positive growth. Combined with Xiangpiaopiao's sales data from 2010 to 2017, the growth trends of Assam Milk Tea and Xiangpiaopiao show high similarity.
Image: Uni-President Assam Milk Tea historical sales data Image: Xiangpiaopiao historical sales data
Since 2017, Uni-President has adjusted its brand communication strategy, targeting young users, mainly post-95s and post-00s, with value marketing as the guide, highlighting the association between Assam Milk Tea and good mood. Through strong brand marketing for brand rejuvenation, it achieved certain sales growth. However, other brands during the same period did not show good sales performance. Xiangpiaopiao's Niuru Cha series even experienced negative growth.
Other brands like Weikezi have not made eye-catching moves after launch. This may be related to Assam Milk Tea's high cost-performance ratio and high channel distribution.
According to a regional manager of Uni-President, Assam's distribution rate in the local area is almost 100%, with sales accounting for about 45%. Therefore, in the future, Uni-President milk tea may further strengthen the Matthew effect, further squeezing the sales space of other brands. To a certain extent, this limits the market volume and competitive diversity of the category.
It can be said that the market education of cup milk tea has a supporting role for the launch of ready-to-drink milk tea. The unhealthy image of cup milk tea will also affect ready-to-drink products, and ready-to-drink milk tea has not escaped the user impression that milk tea is unhealthy.
Compared with cup milk tea, ready-to-drink milk tea has no special formula or taste, and is not healthier than cup milk tea. This leads to a limited overall market size for milk tea, so after a brief upward trend, the category entered a decline.
In addition, the promotion of cup milk tea has a large volume, defining the new category. Whether it's Xiangpiaopiao's "Selling one billion cups a year, the cups can circle the earth three times" or Youlemei's "Hold you in the palm of my hand," cup milk tea has significantly higher visibility in category promotion, and has more topic advantages in communication. Users have a stronger impression of milk tea in cups, and the concept of "milk tea = cup" is stronger than ready-to-drink milk tea. Ready-to-drink milk tea is more easily understood as a supplement to cup milk tea, with no unique points in category claims, losing the communication advantage.
Therefore, although it has returned to positive growth with the help of the new tea drink trend, with the large-scale layout of offline milk tea shops, ready-to-drink milk tea faces new huge challenges.
-02- Will new tea drinks ignite the ready-to-drink milk tea market?
Different from the formula of creamer and instant tea powder, new tea drinks emphasize real tea and real milk, good tea and good milk, rich ingredients, and novel tastes. The emergence of new tea drinks has dealt a dimensionality reduction blow to cup milk tea, causing the cup milk tea market to be widely pessimistic, and also produced many internet-famous brands such as Heytea, Naixue's Tea, and 1点点. The leap from cup to freshly made milk tea verifies the existence of consumption upgrade needs among new consumer groups.
Let's first look at who is consuming freshly made milk tea.
Data shows that the age of freshly made milk tea consumers is concentrated in 16-35 years old, accounting for about 90%, with women accounting for over 60%. Young people are the main force of milk tea. This group is more individualistic, needs new products to show personality and taste, is more willing to enjoy life than the previous generation, and is more willing to spend money on things that make them happy.
Young people have many scenarios for drinking milk tea. For example, when shopping, sitting in a shop chatting with friends, giving a gift to a girlfriend, self-reward in the office, new employees, asking for help, etc. Milk tea is an excellent social lubricant. At the same time, good looks can also help become a fashionista in the circle of friends.
The ready-to-drink milk tea market is 5.5-6 billion yuan, while data shows that the offline tea drink shop market capacity is estimated at hundreds of billions. The magnitude difference is huge. Can the popularity of new tea drinks drive the explosion of ready-to-drink milk tea?
First, freshly made milk tea is a product with emotional attributes higher than functional attributes.
The rapid growth of the freshly ground coffee market triggered the ready-to-drink coffee category to also enter a new product explosion, but this pattern cannot be directly applied to milk tea.
Coffee and milk tea exist in different psychological accounts in users' minds. Coffee is a product with functional attributes stronger than emotional attributes. Office workers rely on coffee more for refreshing, so coffee is more likely to exist in the user's account of necessities. Therefore, users can choose ready-to-drink, instant, or freshly ground coffee according to different scenarios, jointly promoting category growth.
But milk tea is different. Milk tea is more likely to exist in the enjoyment product account or social account, and this account type cannot be transferred to ready-to-drink consumption.
Freshly made milk tea is not just a drink, but also a choice to reward oneself, a fashion symbol, and a low-cost social weapon. Within the hedonic account consumption, substitution can occur, and users can "fall in love with" new products. When users' finances tighten, they are more likely to cut hedonic consumption first.
Ready-to-drink milk tea is more likely to be a product for personal enjoyment rather than a product that can form social interaction. Its attribute is a beverage, so it is more of a functional beverage, which is essentially different from freshly made milk tea.
Second, the hidden menu of cup milk tea cannot be replaced by ready-to-drink.
When ordering milk tea, is it just milk tea? Don't you want coconut jelly, red beans, or pudding? Don't you choose full sugar, half sugar, or no sugar? Can't you choose iced or hot? You see, drinking milk tea is not just about drinking milk tea. Finding hidden menus and DIY freely, although milk tea may become "milk porridge," this pleasure cannot be given by ready-to-drink milk tea.
For users, the process of choosing the type, ingredients, and waiting for preparation is full of surprises and expectations. When that mouthful of thick milk tea reaches the mouth, pleasure reaches its maximum, and the brain secretes dopamine that makes people happy, which is an enjoyment.
For ready-to-drink milk tea, these processes are omitted. Milk tea is just milk tea, that high-sugar, high-fat milk tea. In fact, when users choose ready-to-drink milk tea, they are more rational than with freshly made milk tea, and are more easily guided by health to choose other beverages. This is even worse than cup milk tea.
In terms of active user dissemination, ready-to-drink is far inferior to freshly made milk tea.
The popularity of freshly made milk tea defines drinking milk tea as a trend, a fashion icon, and easily triggers spontaneous dissemination in the circle of friends. But ready-to-drink milk tea is mainly functional, and only with breakthrough differentiation can it trigger a certain amount of dissemination.
But from the current products on the market, few have this breakthrough, especially compared with new tea drinks. Therefore, if ready-to-drink milk tea wants to trigger automatic dissemination in social circles, it needs to create differentiation in packaging and design from current products, so that users have the desire to share.
The price of cup milk tea limits the price space of ready-to-drink milk tea.
Milk tea not only competes with beverages, but also with freshly made milk tea. In first- and second-tier cities, there are many freshly made milk tea shops, with prices ranging from low to high, distributed between 10-30 yuan; in fourth- and fifth-tier cities, tea drink brands like Guming and Mixue Bingcheng have single cups priced around 8 yuan.
According to statistics, there were about 400,000 milk tea shops nationwide in the first half of 2018. Generally, users believe that freshly made milk tea is better than ready-to-drink, so the price of ready-to-drink milk tea is generally lower than freshly made.
When Xiangpiaopiao's meco Niuru Cha and Lanfangyuan milk tea are positioned as high-end ready-to-drink milk tea products, in third- and fourth-tier cities, they will inevitably face competition from mid-to-low-end milk tea and low-priced ready-to-drink milk tea from Kangshifu and Uni-President. In first- and second-tier markets, high-end users enjoy brands like Heytea and Naixue's Tea, while mid-to-low-end users choose brands like 1点点, Coco, and Xiaolu Tea. The ubiquitous milk tea shops and convenient delivery services make milk tea very accessible.
Therefore, although the milk tea market looks very lively, when it comes to the ready-to-drink milk tea category, after the market is divided by freshly made milk tea, the actual space is not as large as imagined.
-03- Will Xiangpiaopiao's liquid tea bring a new upgrade to ready-to-drink tea?
Currently, in the ready-to-drink milk tea market, Uni-President Group occupies more than 70% of the market capacity, almost monopolizing the ready-to-drink milk tea market. If other brands want to compete for the market, they must produce sufficiently competitive differentiation to compete with Assam Milk Tea in terms of product.
In 2017, Xiangpiaopiao launched upgraded ready-to-drink products - meco Niuru Cha and Lanfangyuan milk tea. Let's take meco Niuru Cha as an example to see if the upgraded ready-to-drink milk tea can capture users' hearts.
In the first half of 2019, Uni-President Assam Milk Tea increased by 14.3% year-on-year. But Xiangpiaopiao's liquid milk tea was the opposite. From January to September 2019, Xiangpiaopiao's liquid milk tea decreased by -37.69% year-on-year, showing negative growth.
Appearance: Xiangpiaopiao meco Niuru Cha adopts a cup form, and the overall design simulates the design style of freshly made milk tea in offline milk tea shops. From a visual perspective, meco is quite competitive;
Ingredients: meco Niuru Cha uses raw milk and Indian Assam black tea, with a tea addition of 1.5g/100ml. The dairy and tea content are better than other ready-to-drink milk teas, but after actual tasting, the author and friends felt that Assam Milk Tea's taste and flavor were better than meco. meco's high value was not reflected in taste.
Price: The regular price of Meco is 8.5-9 yuan per bottle, which translates to about 3 yuan per 100ml. A 500ml cup of tea costs about 15 yuan, even higher than 1点点 milk tea, with little price advantage. The high price also narrows sales channels, affecting sales in ordinary channels;
Target group: meco Niuru Cha is positioned at mid-to-high-end, emphasizing healthier and higher-quality raw materials. However, since mid-to-high-end users have a certain consumption base, they have more choices. meco Niuru Cha's formula and taste cannot well meet user needs;
Communication: meco partners with popular male star Chen Weiting, focusing on "high-end milk tea," more on product functional benefits, mainly through ingredients and packaging to convey effects, failing to form a linkage in quality.
In summary, Xiangpiaopiao meco is positioned as an upgraded ready-to-drink milk tea, using better raw materials (raw milk, Assam black tea) and more attractive packaging to attract users. But as a packaged beverage, meco's high price inevitably limits purchases by some low-income consumers.
The target group of ready-to-drink milk tea may be younger post-95s and even post-00s. This group has higher requirements for taste, stronger needs for emotional interaction, and mainly focuses on mainstream price bands. High-spending consumers can conveniently buy freshly made milk tea or other healthier beverages, rather than high-end ready-to-drink milk tea.
Users may make a first purchase due to meco Niuru Cha's attractive packaging, but based on taste and high price, repurchase may be lower than brands like Uni-President Assam, especially in lower-tier markets and young groups like post-00s.
Summary:
As a beverage, ready-to-drink milk tea faces internal competition from cup and freshly made milk tea, and external competition from beverages like cola and juice. The unhealthy attribute attached to the category affects its development. Therefore, it can be inferred that the category's market space is limited, and there will be no explosion in the future. Brands are expected to continue expanding into county-level markets and continuously use youthful marketing methods to gain support from young users, thereby increasing overall volume.
For ready-to-drink milk tea, by appropriately upgrading and improving the unhealthy aspects of the product, such as reducing sugar content, increasing nutritional content, and creating popular flavors, the freshness of the category can be appropriately extended.
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