What is driving the high price coffee and milk tea trend?
Milk tea prices have climbed from roughly 3 yuan a cup a decade ago to about 30 yuan for premium brands today. After the start of the year, mid- and low-end chains including Mixue Bingcheng, Yidiandian, and CoCo Du Ke raised prices, citing higher material and raw material costs plus pandemic pressure on business.
Heytea and Nayuki already sat above 20 yuan, so the increases widened the gap between budget and premium segments. Canada's tax on sugary drinks has raised talk that cola could follow, but the domestic duopoly structure makes that unlikely. The broader point: rising costs are forcing every drink category, including high price coffee, to test what customers will pay.
In recent years, drink prices have generally risen, with milk tea going from 3 yuan a cup ten years ago to as high as around 30 yuan today. After the start of the year, mid- and low-end brands such as Mixue Bingcheng, Yidiandian, and CoCo Du Ke have raised their prices one after another, while high-end brands such as Heytea and Nayuki were already positioned above 20 yuan. Rising costs and the impact of the pandemic have put the tea drink industry under pressure to reshuffle, and consumers have reacted differently to the price increases. At the same time, cola may also face pressure to raise prices because of Canada's tax on sugary drinks, but in the domestic market, due to the duopoly competition structure, the possibility of price increases is relatively low. This article sorts out the phenomenon of tea drink price increases and the industry logic behind it.
In recent years, almost all kinds of drinks have experienced price increases, and milk tea is naturally no exception. Looking back ten years, Taipei milk tea cost only 3 yuan a cup, while today Heytea sells for 30 yuan, an increase of ten times. However, the highest price of mainstream milk tea on the market now seems to stop at around 30 yuan.
Fortunately, there are still many brands taking the approachable route, such as Mixue Bingcheng, Yidiandian, and CoCo Du Ke. Most of their drinks are priced between 5 and 20 yuan, so they have also built up a group of loyal customers. After all, not everyone is willing to spend 30 yuan on a cup of milk tea. However, after the start of the year, many mid- and low-end milk tea shops quietly raised their prices.
Although drink costs rise somewhat at the beginning of every year, price adjustments on such a large scale are truly rare. This indirectly reflects that the impact of the pandemic on businesses has been quite severe. The material costs and raw material costs of milk tea shops are both climbing, so tea drink brands have successively issued price increase notices, leaving consumers feeling helpless.
Take Yidiandian as an example: it directly posted a notice explicitly stating the price increase, while brands such as CoCo Du Ke, Mixue Bingcheng, and Heytea chose to adjust prices quietly. This approach will inevitably drive away some price-sensitive customers, which is undoubtedly a heavy blow for most tea drink brands.
Take Heytea and Nayuki as examples. They were already positioned in the mid- to high-end segment, with drink prices generally above 20 yuan. Previously, many consumers would switch to cheaper mid- and low-end brands because of price. But now these mid- and low-end brands are also raising prices, and their own gross margins were not high to begin with. Once they raise prices, it may instead push customers toward higher-quality mid- to high-end tea drinks. Judging from consumer feedback on Weibo, many people say they cannot accept the price increases and believe that if even mid- and low-end brands are raising prices, they might as well directly buy better-quality ones.
It can be seen from this that the price increases in packaging materials and food raw materials needed by tea drink brands are now a foregone conclusion, and this large-scale price adjustment in the tea drink world will also push the industry toward a major reform. Brands must improve drink quality in order to retain old customers and develop new sales models. This is a stage the tea drink industry must go through.
If an enterprise is content with the status quo for a long time and lacks a sense of crisis, it will be difficult for it to make progress. Only enterprises that can stand firm and consolidate their foundations in crisis after crisis can achieve healthy development in a field.
In addition, cola, the most popular drink in the beverage world, has not raised its price for ten years, but this year there are reports that cola may also have to raise prices. The news comes from the internet, but in fact last year BC NDP announced that a tax would be imposed on sugary carbonated drinks. The original text mentioned that the measure was originally scheduled to take effect on July 1, 2020, but was postponed to April 1 this year because of the pandemic. From this point of view, a cola price increase in Canada is also inevitable.
Nevertheless, Canada is far away from us, and whether cola in the domestic market will raise prices is actually not very likely. This is because cola itself has very low costs, and the domestic cola market has long been occupied by the two giants Coca-Cola and PepsiCo. For the sake of competition, neither will easily raise prices, and they also follow a small-profit-but-high-volume strategy. If these two giants raised prices, many new competitors below them would take the opportunity to enter with affordable routes, their market share would be carved up, and profits would become thinner and thinner. This is exactly why the two cola companies have never raised prices.
In summary, milk tea price increases are an inevitable trend; it is only a matter of time. Whether a brand can seize this crisis and protect its own brand is a test. But overall, any enterprise that wants healthy development must inevitably go through a process of wave-like advance and spiral-like ascent.
*Image source: internet
The above content is compiled by CoffeeHunters, a coffee news website.
