Cuppa that doesn't cheer! Chabaidao shares sink on HK debut
Shares of China's third largest teadrink vendor Chabaidao sank more than 30 percent in its trading debut in Hong Kong on Tuesday.
As the second Chinese teadrink chain store to go public after Naixue, Chabaidao's lackluster performance turned a latest reflection of the growing competition for follow-up players.
Chabaidao's parent group Baicha Baidao Industrial Co traded as low as HK$12 early on Tuesday, after raising about HK$2.59 billion (US$331 million) at HK$17.50 apiece.
It closed down 9.4 percent at HK$11.6 on Wednesday.
According to Frost & Sullivan data, Chabaidao had the third largest market share of 6.8 percent in the fresh-made tea shop sector in terms of retail sales value in 2023.
As of early April, the Chengdu-based company operated 8,016 stores, spanning 31 provinces and municipalities and covering different tiers of cities in China. Of these over 99 percent were franchise stores.
It expects to use about half the proceeds to improve operations and strengthen its supply chain.
Industry watchers point out that established chain stores have gained an upper hand to leverage their brand impact and expand operation network, especially in lower tier cities.
As many as 49 percent of China's beverage and teadrink vendors are chain stores, according to the latest ranking by the China Chain Store & Franchise Association.
The expansion of chain stores has been picking up in lower tier cities in the last year, especially those with smaller size like fast food and beverage shops, it suggested.
Veteran marketing expert Chen Jingjing believes that a number of teadrink chain stores seeking to go public want to make an early move to prepare for market shifts and outperform smaller players.
As many as 49 percent of China's beverage and teadrink vendors are chain stores.
The overall market size of China's beverage store industry has grown from 136.0 billion yuan (US$18.77 billion) in 2018 to 383.9 billion yuan in 2023, representing a compound annual growth rate of 23.1 percent, according to Frost Sullivan's latest data.
Demand for quality teadrinks is expect to push up the market size of freshly-made tea shops to 538.5 billion yuan in 2028 to make up around 63.4 percent of China's beverage store industry.
But consumers' shifting preferences make it harder for retailers to capture their demands.
New flavors have become a major driver for the industry as curiosity drives consumers to try out new recipes. They sometimes also draw skepticism, however, with some wondering whether this could go a long way after creating a social media buzz in the short term.
A soy sauce-flavored milk foam put on top of tea was launched by a local teadrink chain store, drawing discussion and skepticism.
A soy sauce-flavored milk foam put on top of tea launched by Sweet 7, a local teadrink chain store, drew wide discussion earlier this month.
Despite much debate over coffee or teadrink offerings such as "Big Cheese Latte" and "Watermelon Pink Latte," soy sauce still came as an astonishing idea for tea lovers.
Totole Food, one of China's leading condiment and seasoning brands, said the tie-up seeks to draw attention to the taste and health benefits of low-salt soy sauce.
Combining beverages with Chinese flavor and dining habits has become a latest trend for teadrink vendors.
But still, the target customer for such new recipe seems vague and the idea of bringing cooking ingredients in a leisure teadrink is bewildering.
"The idea of a mixture of salty sweet and creamy flavor for the milk foam is intriguing but not many consumers would want to return for more," said Shanghai consultant Jessie Dong, who prefers to join friends for a casual drink in the afternoon.
"There's plenty of fruit-flavored tea drinks or seasonal offerings to choose from and the idea of cooking material is not relevant when one shops for milktea," she added.
Many new flavors have been launched by teadrink vendors in recent years but few have lasted long enough.
Totole's idea is to allow customers to unleash their imagination for new food or beverage recipes using soy sauce as an ingredient.
However, low-fat or zero-sugar options, which are already keywords for food and beverage vendors, are no longer a recipe for success.
Simply by creating a "low-fat" version of the existing product line will not guarantee success and brands should dig deeper to track down consumers' real needs, industry experts suggest.
Low sugar or zero additives have been a very common feature and brands need to elaborate on what specific type of customers they are targeting when they launch a new offering with health claims, said Luo Xianliang, vice president of Ries Category Creation Strategy & Consulting.
Many new food and beverage innovations fail to come up with appealing products that attract repeat customers. Instead they just resort to fancy ideas with little demand in the long term, he added.
