The global trend of milk tea, which originated from Taiwan, has become popular worldwide. If you ask anyone under 40 if they have tried milk tea, most would say yes.
In Seda County, western Sichuan, at an altitude of about 3900 meters and with a population of 16,000, you can find 10 milk tea shops, including popular brands such as Heytea and Chafin. Once people try it, many become addicted and enjoy drinking it regularly.
The milk tea industry in China has been growing rapidly. By the end of 2023, there were approximately 500,000 milk tea shops in mainland China.
However, in 2024, Nai Xue Tea, known as the “Starbucks of Chinese tea” and the first Chinese tea company to go public in Hong Kong, is facing challenges.
Founded in 2015 by the couple Zhao Lin and Peng Xin, Nai Xue Tea has seen significant success. Peng Xin’s online alias “Nai Xue” inspired the brand name. The company differentiated itself by offering high-quality, premium tea drinks using fresh ingredients.
Nai Xue Tea strategically targeted young women aged 20-35 as their primary demographic. Their stores, located in prime city centers, feature stylish decor that attracts customers for a unique experience along with photo opportunities. The company also received strong financial support through various investments to expand its operations.
While Nai Xue Tea initially thrived, its stock price has plummeted by 90% since going public, mainly due to the brand being perceived as too expensive amidst consumer downgrading.
Despite maintaining a high average selling price per order, Nai Xue Tea’s escalating costs have hindered profitability. The company has struggled to compete with lower-priced competitors in the market.
As a result of changing consumer preferences and economic challenges, Nai Xue Tea, along with other tea brands, has faced declining profits and store closures.
This trend has had a significant impact on the milk tea industry in China, causing a shift towards lower-priced offerings and intensifying competition. The market has faced challenges due to the economic downturn and changing consumer behavior.
With the closure of thousands of milk tea stores in 2024, it is evident that the industry is no longer expanding as it once did.
The tea industry has seen a decline in sales and profitability, requiring brands to adapt to changing market conditions to remain competitive.
As young people in China face economic uncertainties and reduced spending power, the landscape of the milk tea industry continues to evolve. The era of high-priced tea beverages is giving way to more affordable options in response to shifting consumer demands.
The economic challenges faced by young people in China have impacted their spending habits, leading to a transformation in the milk tea market. Amidst a backdrop of economic hardship and increased competition, milk tea brands are forced to adapt to survive in a changing landscape.
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