How is the coffee formula changing as new-style coffee adds milk tea toppings?
New tea and coffee are moving in opposite directions. Heytea, Nayuki, and Lelecha have cut prices, with Heytea abandoning the 30-yuan era for products around 15 yuan, while Luckin and Starbucks raised theirs. Luckin recovered from its 2020 fraud scandal, turned profitable in early 2022, and now has more stores in China than Starbucks.
As competition intensifies, new-style coffee increasingly borrows from milk tea, adding cheese, matcha, and brown sugar crystal boba. That shifts what latte coffee means for many drinkers and complicates the basic coffee formula. Huawei, Li-Ning, and China Post have entered the sector, pushing the question of whether coffee will repeat tea's irrational involution.
In the scorching summer heat, beverage consumption reaches its peak. On street corners and in alleys, young people are holding either tea drinks or coffee. But upon closer observation, one will find that new tea drinks and coffee are embarking on completely different development trajectories: brands like Heytea and Nayuki have been cutting prices one after another, while Luckin and Starbucks are raising theirs. The coffee sector's popularity is soaring, with giants like Huawei, Li-Ning, and China Post making cross-industry forays, pushing competition to a fever pitch. At the same time, new-style coffee is increasingly resembling milk tea, with toppings like cheese, matcha, and brown sugar crystal boba appearing frequently. This prompts the question: will new-style coffee repeat the irrational involution of new tea drinks? This article will analyze from perspectives including price changes, market positioning, and product innovation, and bring Front Street Coffee's professional observations.
As midsummer arrives, cold beverage consumption naturally enters its peak season. Under the blazing sun, only a cup of iced drink can bring a bit of relief. In weekend commercial districts, young consumers almost invariably have a tea drink or coffee in hand. If one pays attention to the price trends of these two types of beverages over the past two years, one will find that although they belong to the same beverage sector, new tea drinks and coffee are on completely different development paths.
Heytea, a representative brand of new tea drinks, has seen its store expansion pace slow noticeably since 2021; in February of this year, Heytea announced that its product pricing would bid farewell to the 30-yuan era and shifted its focus to mid-range new products priced around 15 yuan. Subsequently, brands such as Nayuki's Tea and Lelecha, which also position themselves as high-end new tea drinks, have successively adjusted their product prices.
As a leading brand in China's coffee chain industry, Luckin Coffee suffered a financial fraud scandal in 2020, and the outside world once believed it would be difficult for it to survive. However, in just two years, Luckin made a "comeback," achieving profitability for the first time in the first quarter of 2022, with its store count also surpassing Starbucks' stores in China.
Luckin's revenue growth benefited from its continuously expanding store strategy; while its profit realization mainly depended on the rise in average customer spending. Based on its Q3 2021 financial report, Luckin's beverages had an average selling price of 15.2 yuan, an increase of 5.5 yuan compared to Q4 2019.
The coffee sector continues to heat up, attracting cross-industry entrants such as Huawei, Li-Ning, and China Post, further intensifying the sector's involution. But compared with the equally involuted new tea drinks, coffee beverage prices have risen rather than fallen. While Luckin's unit price rose, Starbucks also raised its product prices.
Price fluctuations are a "barometer" of market positioning. In other words, coffee beverages raising prices indicates that their perceived value in consumers' minds is increasing; while new tea drinks cutting prices means that the status of such beverages in young people's minds is declining.
One of the reasons for this difference is that a large number of film and television works frequently feature scenes of "drinking coffee" and "going to a café"; by contrast, new tea drinks appear far less frequently in film and television works. Film and television, as the seventh art, while providing audiovisual enjoyment, also exerts a subtle influence on viewers' behavior.
However, the new-style coffee led by Luckin is gradually moving toward milk tea-fication. Besides coffee and milk, ingredients such as cheese, matcha, and various flavored syrups—common milk tea ingredients—also frequently appear in its coffee beverages. The proportion of classic coffee continues to shrink, while new-style coffee products are increasing day by day, with "watermelon latte," "meteorite thick milk latte," and the like emerging endlessly. Coffee cups now contain not only fruity syrups but also milk tea toppings like brown sugar-flavored crystal boba, and milk, the classic coffee companion, has also been replaced by formulated milk bases.
The once red-hot new tea drink sector saw new brands emerge endlessly, with dense financing events and high amounts, and the price per cup even exceeding 40 yuan. Now, new-style coffee has taken over the baton from new tea drinks, with various "creative" beverages constantly emerging, new coffee brands springing up like bamboo shoots after rain, and even the new tea drink giant Heytea frequently investing in and taking stakes in coffee brands, while coffee prices per cup keep rising.
Is new-style coffee step by step retreading the old path of irrational involution of new tea drinks?
Image source: Internet
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The above content is compiled by CoffeeHunters, a coffee news website.
