April 5, 2022
BEIJING – Coffee, snacks also jumping on the consumption bandwagon
With consumption upgrades led by a rise in purchasing power and living standards, Chinese beverage consumers are participating in a buying bonanza, leaving great market space for afternoon tea-related brands.
On a typical Sunday afternoon, Hai Mian, a 29-year-old programmer in Shenzhen, Guangdong province, takes his girlfriend to a shopping mall near their apartment in Nanshan district. They first go to a handmade dorayaki store to buy a box of the Japanese pancakes, then visit a teahouse next door.
At the tastefully decorated teahouse, Hai often orders a cup of Jasmine Matcha Eisbock for his girlfriend, and a Royal Earl Grey black tea latte for himself.
“The two beverages each cost around the same as that of two Starbucks coffees. However, we prefer the beverages here, because the store offers diversified choices with refined flavors. For example, my Royal Earl Grey black tea latte contains both the fragrance of Earl Grey and the bitterness of coffee,” Hai said.
Bei Bei, Hai’s girlfriend, opens a box of dorayaki pancakes, saying: “China’s newly emerged consumption brands that offer afternoon tea services amaze me. Same as the teahouse, the dorayaki pancake store indeed wins over my heart. Take this box of dorayaki as an example. There are four pancakes in the box, and the recommended sequence of enjoying their taste is first regular cheese, then cherry mousse, earl grey cheese and cinnamon mousse, given that it is better for palate to gradually appreciate a lighter to heavier taste. The whole tasting process has a very good sense of hierarchy, offering an ultimate consumption experience.”
Whether judging from the flurry of new Starbucks outlets constantly popping up, or the homegrown beverage brands springing up like mushrooms, China’s afternoon tea market is transforming into a younger, more trendy and faster-moving category.
According to a report jointly launched by food delivery platform Ele.me and Alibaba’s research arm AliResearch, between 2015 and 2021－given the digitization of China’s catering industry and consumption upgrades－consumer habits and product formats of the country’s afternoon tea market have undergone two critical transformations.
Before 2015, afternoon tea consumption was mainly offline, and the major consumption venues were teahouses, restaurants and mid to high-end hotels. From 2015 to 2020, the scenario gradually shifted to workplaces. Since 2020, with the rise of guochao－wherein consumers increasingly appreciate local elements－afternoon tea drinking became more closely aligned with traditional Chinese culture, and more snacks, such as braised foods and fried chicken, were integrated into the category.
The tea market still has great potential remaining to be fully tapped into. With the growing influence of the digital age, China’s tea businesses have gradually evolved from traditional teahouses and simple online tea sales platforms to various new business formats. Taking advantage of new retail and consumption modes, they are actually achieving intelligence in channel exploration and brand image building.
T9 Premium Tea, the teahouse that Hai and his girlfriend often visit, is a glimpse of how Chinese newly emerged beverage brands are enjoying the fruits of success. Founded in 2017 in Shanghai, within nearly four years, the company’s monthly sales revenue in its first outlet in the city, which only takes up 28 square meters, reached nearly 600,000 yuan ($94,459). On busy days, daily sales revenue ranges from 40,000 yuan to 50,000 yuan, data from the company showed.
Wu Jianqing, CEO of T9 Premium Tea, said that currently, the company’s tea portfolio includes three series: Colorful Collection, Legend Collection and Royal Collection. In total, there are over 50 stock-keeping units covering black, herbal and fruit teas. Prices range from 100 yuan to 10,000 yuan per package, satisfying demand from diversified consumer groups.
“At the initial stage, we chose to explore China’s tea consumption market with the affordable Colorful Collection, whose average customer unit price was around 300 yuan. The repurchase rate reached 40 percent.”
As for the secret to T9’s success, Wu said that on the supply chain side, the company cooperates with a 200-year-old tea supplier based in Hamburg, Germany, to ensure flavor quality.
Moreover, T9 built its own warehouse to store tea leaves of different categories and made great efforts in product quality control.
Other new Chinese beverage brands are also making strides. Guangzhou Zetian Trading Co Ltd, the dorayaki maker that Bei loves, launched stamp collection events, attracting dorayaki lovers to visit the stores and buy their pancakes. Likewise, Shanghai-based Pros Coffee Roaster developed Blue Latte－a tasty blend whose color ranges from blue to white to please visually oriented yet “picky” coffee lovers.
Industry experts said with the rise of Generation Z, consumers’ food and beverage choices have been constantly seeing upgrades, and the pursuit of health and quality is now driving trends. This is equally true for both female and male consumers.
Raming Zeng, the person in charge of the marketing department of Dongguan, Guangdong-based confectionery maker Hsu Fu Chi, said: “Instead of merely pursuing delicacy, consumers prefer high-end afternoon tea choices. The new trend prompted us to stay alert in sensing consumers’ higher-end, more diversified needs, and to adjust our business strategies. For example, this Spring Festival, we launched 38 types of confectioneries, among which 13 are new products, covering categories including candies, cakes, gift boxes and chocolates, to offer rich choices for consumers.”
According to the report from Ele.me and AliResearch, currently, the four core driving forces for China’s afternoon tea market are new consumer needs, supply shortages, industry coordination and government guidance and supervision.
“Although the pandemic has led to many setbacks, people’s afternoon tea consumption habits have formed, and a new round of high-speed growth is coming. Meanwhile, market cultivation in some third and fourth-tier cities has been initially completed, and the upper echelon of the afternoon tea market at the merchant end has also been formed. Skyrocketing demand has allowed businesses to grow quickly,” said the report.
Bo Wenxi, chief economist at marketing firm Interpublic Group China, said: “Amid consumption upgrades, it is an inevitable trend that people are buying healthier, higher-end afternoon tea products. Therefore, merchants should pay more attention to changes in consumer demand as well as realize the close coordination between marketing, promotion, stocking and supply so as to make more effective, timely and accurate business strategies.
In May 2021, the Tea Research Institute under the Chinese Academy of Agricultural Sciences, together with several other institutions, jointly launched a product standard guideline for tea beverages－the first of its kind in the industry. The first batch mentioned in the standard covers milk teas, milk-capped teas, fruit teas, bubble teas and chilled teas.
Independent economist Wang Chikun said that the introduction of the standards, which signals the tightening of marketing regulations, demonstrates that the industry has matured.
“Market competition is already fierce. As consumer demand expands, the number of enterprises is growing, and the market is approaching saturation. Therefore, to get the right break, enterprises are expected to focus on enhancing user experience and satisfy refined demand,” he said.
“In the future, afternoon tea will become a new standard for people’s more refined lives, and Chinese afternoon tea culture will be popular around the world. And the rise of guochao and domestic products will be a good opportunity for local brands to grow rapidly,” said the Ele.me and AliResearch report.