China's hand-shaken drink market is facing a wave of closures! In the past year, as many as 197,000 hand-shaken bubble tea shops have been closed, including well-known brand franchise stores, directly-operated stores and independent stores. what happen?
- China's hand-shaken drink market is facing a wave of closures: In the past year, up to 197,000 hand-shaken bubble tea shops have closed, including well-known brand franchise stores, directly-operated stores and independent stores. Some stores have even closed down within a month of opening. case.
- Price wars and homogeneity accelerate the decline of the industry: various brands engage in price wars to seize the market, leading to a decline in profits; serious product homogeneity makes it difficult to cultivate consumer loyalty, exacerbating the vicious cycle of the industry.
- Accelerated brand expansion leads to thunder: Many brands pursue rapid expansion and lower the franchise threshold, resulting in uneven quality of franchisees. Coupled with subsequent poor management and management, the trend of bankruptcies is accelerated.
According to "BBC" statistics, there are estimated to be 500,000 hand-shaken drink stores in China. According to 2023 data, the output value of China's hand-shaken drink market is as high as 145 billion Chinese yuan, approximately US$ 19.9 billion.
However, after local brands such as Mixue Bingcheng, Heytea, Nayuki's Tea, Cha Momodo... became popular, it is now reported that the Chinese milk tea market is in turmoil! According to the Chinese media "canyin88", as many as 197,000 Chinese milk tea shops have closed down in the year to November 2024, and not only independent shops, but also well-known brand franchise stores and directly-operated stores will not be spared. what happen?
Note: The definition of hand-shaken drinks in Taiwan is very broad, mostly defined by store type, category or chain model. The 500,000 hand-shaken drink shops counted by "BBC" may not overlap statistically with the milk tea shops counted by "Red Food Network". This article refers to hand-shaken drink shops as milk tea shops in general, following the Taiwanese terminology. However, relevant statistics are still dominated by foreign media.
Price war and homogeneity: accelerating industrial decline
"Red Meal Network" reported that behind the wave of milk tea shop closures is the result of the interaction of multiple factors. First of all, in the past few years, China's tea market has entered a period of rapid expansion. Various brands have accelerated store openings. Coupled with the pressure of the job market, many people have chosen to join the milk tea business, resulting in an oversupply in the market.
In order to stand out in the fierce competition, various brands invariably engage in "price wars" and use price reduction promotions to attract customers. Since this year, the price of new tea drinks has dropped directly to less than 10 Chinese yuan (about US$ 1.37), which is close to the price range of Mixue Bingcheng's sub-10 Chinese yuan. However, in the long run, it will severely compress profits and accelerate the depletion of industrial funds.
In addition, product homogeneity is also a serious problem. Many milk tea shops offer similar products, making it difficult to establish a unique brand image and consumer loyalty.
This situation has also led many netizens to share instructions on "making XX milk tea shop signature products at home" on social platforms, showing that milk tea shops have almost no threshold in terms of raw materials, formulas and quality control. In other words, the problem of hand-shaken drink shops in China that specialize in milk tea drinks is very similar to the Portuguese-style egg tart trend in Taiwan in the late 1990s.
Rapid expansion accelerates the wave of bankruptcies
In addition to price wars and homogeneity, the brand's rapid expansion strategy also raises hidden concerns. In order to rapidly expand market share, many brands have lowered the threshold for joining, resulting in uneven quality of franchisees. Some franchisees lacked business experience, and the support provided by the headquarters was limited, which led to operational difficulties and eventually bankruptcy, which is quite similar to the "Liao Boss incident" in Taiwan's hand-shaken drink industry in recent years.
The report also mentioned the cases of many franchisees. Some people spent five years of savings to open a store and still suffered a loss of 300,000 Chinese yuan (approximately US$ 41,179) for more than a year. There are also people who joined third-tier brands and announced their stores less than half a year ago. Failure, some people even joined first-tier brands, but lost more than 2 million Chinese yuan (approximately US$ 274,529) in one year.
Liu Ge, who runs the recycling business of second-hand catering equipment in Chengdu, said that after the National Day this year (October 1st in China), Chengdu milk tea shops ushered in a wave of closures. He even gave away five franchise stores of the same brand one day. "The last journey", he also lamented that "no one can escape the curse of National Day"; A Fei, who runs a recycling business in Foshan, also mentioned that many of the equipment he recycled were still very new, and some stores even closed down within a month of opening. .
First-line brands and second-hand equipment recyclers are also affected
The wave of bankruptcies of milk tea shops not only affects entrepreneurs and franchisees, but also affects the second-hand equipment recycling industry. Due to the large number of equipment to be recycled, recyclers no longer refuse all comers, and even only accept well-sold brand equipment, resulting in some equipment having to be treated as scrap.
It is worth noting that this wave of closures has not only affected small stores and franchisees, but also some large chain brands have not been spared. For example, Chamomodo, which was launched in April this year, opened 826 new franchise stores in the first half of the year and also closed 245 stores. Nayuki's Tea, known as the "No. 1 tea drinker", closed 89 directly-operated stores in the third quarter of this year. At the beginning of the year, it completely closed all stores of its sub-brand "Taigai".
Sources: BBC, Financial Times
