How do tea price rises shape coffee beverage development?
Since the start of the year, budget tea brands including Mixue Bingcheng, Yidian Dian and CoCo have raised prices, a broad move that is unusual for the sector. Packaging and raw material costs climbed after the pandemic, and the increases now test whether consumers stay with low-price brands or shift toward mid- and high-end options.
More than a decade ago a cup of milk tea cost about three yuan; Heytea later pushed mainstream pricing to roughly thirty yuan, and that ceiling has held. Budget chains kept a loyal base in the five- to twenty-yuan range. The pricing pattern matters for coffee beverage development, since coffee brands watch the same cost pressure and consumer limits. Canada's tax on sugary drinks also raised questions about cola prices.
From three-yuan pearl milk tea on the street corner to today's specialty tea drinks that often cost thirty yuan, the price shifts in the beverage market reflect profound changes across the entire industry. Since the start of the year,平价-oriented brands such as Mixue Bingcheng, Yidian Dian, and CoCo都可 have raised their prices one after another, something rarely seen in previous years. Under the impact of the pandemic, material and raw material costs have continued to climb, leaving tea beverage brands with no choice but to adjust prices. But whether consumers will accept the increases, and whether this will push customer groups toward mid- to high-end brands, has become a focus of industry attention. At the same time, news from Canada that sugary carbonated drinks will be taxed has made whether cola will also become more expensive a hot topic. This article will sort out the ins and outs of this wave of price increases and analyze the pressures and choices facing various brands.
The beverage market has recently been filled with news of price increases, and milk tea has naturally not been immune. Looking back more than a decade ago, Grande Taipei milk tea cost only three yuan a cup; today HEYTEA already sells for thirty yuan, a tenfold increase. It is worth noting, however, that the highest price for mainstream milk tea on the market seems to have stalled at around thirty yuan.
Fortunately, there is no shortage of brands taking the approachable route. Drinks at shops such as Mixue Bingcheng, Yidian Dian, and CoCo都可 are mostly concentrated in the five- to twenty-yuan range. Precisely because their pricing is down-to-earth, these brands have also built up a fairly loyal customer base—after all, not everyone is willing to pay thirty yuan for a cup. Yet after the Spring Festival, many consumers discovered that numerous milk tea shops that had originally taken the low- to mid-end route quietly raised their drink prices.
Normally, beverage costs rise somewhat at the beginning of each year, but a collective price adjustment on such a broad scale is truly unprecedented. It is not hard to see that the pandemic dealt companies a heavy blow, with milk tea shops facing rising costs for packaging materials and raw materials alike. As a result, tea beverage brands issued price increase notices one after another, leaving consumers feeling rather helpless.
Specifically, Yidian Dian chose to post price increase announcements directly, clearly informing customers; while brands such as CoCo都可, Mixue Bingcheng, and HEYTEA adopted a low-key approach to price adjustments without making a big publicity push. Such a move is bound to drive away some price-sensitive consumers, and for most tea beverage brands this is undoubtedly a considerable blow.
Take HEYTEA and NAYUKI as examples. They were already positioned in the mid- to high-end market, with drink prices generally above twenty yuan. Precisely because of this, many consumers in the past would turn their attention to more affordable low- to mid-end brands. But now that low- to mid-end tea drinks have also begun to raise prices, and these brands themselves have limited gross margin space, once they increase prices, customers may well turn to mid- to high-end brands with better quality in the future. Looking at feedback from consumers on Weibo, quite a few do not accept the price increases. Their view is straightforward: if low- to mid-end brands are all raising prices, then why not simply buy something of better quality?
It can thus be seen that price increases in the packaging materials and food raw materials needed by tea beverage brands are now a foregone conclusion, and this large-scale price adjustment in the tea beverage world will also force the industry into a major overhaul. Brands must improve drink quality in order to retain their existing customer base and then develop new sales models. This is an unavoidable path the tea beverage industry must take.
The reasoning is simple: if a company remains content with the status quo and lacks a sense of crisis, it will find it hard to make progress. Only companies that can stand firm and consolidate their foundations amid one crisis after another can achieve healthy development in a given field.
Also worth mentioning is that cola, the most popular drink in the beverage world, has kept its price unchanged for ten years, yet this year there are reports that it may also increase in price. Although the news came from the internet, in fact BC NDP had already announced the relevant plan last year, with the original text mentioning that tax measures would be taken on sugary carbonated drinks. The measure was originally scheduled to take effect on July 1, 2020, but was later postponed to April 1 of this year because of the pandemic. Seen this way, a cola price increase in the Canadian market is almost inevitable.
That said, Canada is, after all, far from us, and the likelihood that cola in the domestic market will follow suit is actually not high. The reason is that cola itself has very low costs, and the domestic cola market is already firmly controlled by the two giants Coca-Cola and Pepsi. In order to compete, neither company will easily raise prices; their approach has always been small profits but quick turnover. If the two giants took the lead in raising prices, the many new competitors below them would seize the opportunity and grab market share with affordable routes. Once share is carved up, profits would only grow thinner and thinner—this is precisely the key reason the two cola companies have not raised prices for so long.
Taken together, milk tea price increases are an inevitable trend; it is only a matter of time. But whether brands can use this crisis to protect their own names is a test for every tea beverage company. In the final analysis, any company that wants healthy development must inevitably go through a process of wave-like advance and spiral-like rise.
*Image source: Internet
The above content is compiled by CoffeeHunters, a coffee news website.
