What the Nayuki Coffee Pivot Means for Tea Brands

Nayuki reported first-half 2022 revenue of 2.045 billion yuan, down 3.8 percent year on year, and an adjusted net loss of 249 million yuan, against a 48.2 million yuan profit a year earlier. The tea chain is now investing in coffee brands such as AOKKA to find new growth after price cuts and pandemic pressure squeezed its core business.

Nayuki has long positioned itself at the high end but joined the sector's price-cutting wave early this year. Media reports said customers found portions smaller and quality lower despite lower list prices. Coffee is made from the beans of Coffea plants, and peers Heytea and Chayan Yuese have also launched their own self-rescue moves.

Nayuki, once hailed as "the first listed new-style tea drink brand," has delivered a not-so-pretty half-year report card: revenue slipped slightly year-on-year, and adjusted profit turned into a loss. Facing multiple pressures—questions over price cuts, the impact of the pandemic, and competition from peers—Nayuki has begun setting its sights on the coffee track, seeking new growth points by investing in brands such as AOKKA. Meanwhile, brands like Heytea and Chayan Yuese have each rolled out their own moves to save themselves. Is the collective push of new-style tea brands into coffee a move of desperation or a new outlet? This article sorts through Nayuki's latest performance and investment moves, and takes stock of the self-rescue paths within the industry.

The explosive growth of the new-style tea drink industry has allowed upstream suppliers to rake in huge profits, while tea brands on the front lines have had no choice but to get caught in endless involution. Nayuki, bearing the title of "the first listed new-style tea drink brand," had been widely expected to do well before its listing because it reached the capital markets earlier than its peers; yet after going public, its days were not as easy as imagined, with revenue and losses both laid out on the table, prompting industry insiders to re-examine the company.

Nayuki's recently released financial report for the first half of 2022 shows that the company achieved revenue of 2.045 billion yuan in the first half, down 3.8% compared with the same period last year; the adjusted net loss reached 249 million yuan, while the same period last year still saw a profit of 48.2 million yuan.

Nayuki, which has long followed a high-end route, also got caught up in the "price-cutting wave" in the new-style tea drink sector early this year, trying to seize the mid-range tea drink market through price reductions and the launch of lower-priced new products. Lower average spending per customer did bring consumers some encouragement, but intriguingly, Nayuki's price cuts instead drew criticism that it was "not generous enough." According to media reports, many customers fed back that although the listed price per cup had dropped, the portion of the drink they actually received seemed to have shrunk, and the overall quality was also not as good as before.

In addition, Nayuki's tea stores are mainly distributed in first- and second-tier cities. In the broader environment of repeated pandemic outbreaks, consumers' willingness to visit stores for consumption has clearly declined, order volumes have subsequently fallen, and the operating pressure on the company has thus multiplied.

When internet-famous tea drinks are no longer as "in demand" as before, these brands have no choice but to each seek their own ways to save themselves, and the paths they choose are also quite different.

Heytea tends to place broad bets in the beverage sector. So far, the brands Heytea has invested in include the coffee brands Seesaw and Minor Figures, the plant-based milk brand YePlant, the tea drink brand Heqi Taotao, the pre-mixed alcoholic drink brand WAT Cocktails, and the juice brand Yecuishan.

Chayan Yuese, once teased for "being unable to leave Changsha," also accelerated its expansion pace in order to save itself. According to information from Tianyancha, since 2022 Chayan Yuese has established a total of 7 new companies, with business mainly involving supply chain management, catering management, beverages, and more, covering areas including Nanjing, Wuhan, Changsha, and Chongqing. Not only that, Chayan Yuese also crossed into the coffee track, launching "Yuanyang Coffee," and on August 10 opened five stores simultaneously in Changsha's "Wuyi Business District."

By contrast, Nayuki is more fixated on opening cross-category stores, constantly benchmarking itself against Starbucks and making an effort with the "third space." Examples include the cocktail bar-themed "Nayuki Bla Bla Bar," the bookstore-themed Nayuki tea store at the south gate of Tsinghua University, and the experiential tea drink store "Nayuki Dream Factory." Among them, "Nayuki Dream Factory" was closed in May this year for renovation and upgrading, and then reopened on August 31 as the "Nayuki Life" experiential store.

It is worth noting that Nayuki set up an investment company at the end of March, formally stepping into the venture capital circle. In mid-June this year, in the project filed by its supplier Tianye Co., Ltd. with the Beijing Stock Exchange, Nayuki invested in its own supplier. And recently, Shanghai Aodimei Food Co., Ltd., the affiliated company of the coffee brand AOKKA, underwent multiple industrial and commercial changes, adding Shenzhen Pindao Catering Management Co., Ltd., an affiliated company of Nayuki, as a shareholder with a shareholding ratio of 21.41454%, while the company's registered capital also increased from 2 million yuan to 2.545 million yuan.

In fact, since the beginning of this year, new-style tea brands have frequently made moves to invest in coffee brands. Data shows that in 2021 China's coffee market size had already reached 381.5 billion yuan. As the domestic coffee market enters a period of rapid growth, it is expected that by 2025, the market size of China's coffee industry will exceed 1 trillion yuan.

Under the halo of "the first listed new-style tea drink brand," can Nayuki ultimately save itself successfully?

Image source: Internet

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The above content is compiled by CoffeeHunters, a coffee news website.