Why Are Milk Tea and Coffee Shops Closing Across the Market?

About 130,000 milk tea shops left the market in the past year, an average of more than 350 closures a day. As of August 5, the country had 431,000 milk tea stores; 167,000 opened while 130,000 closed, a net gain of only 35,000. Weak peak-season sales, price wars and rising franchise risks are driving the shakeout.

Even leading brands are affected: Heytea's first Hefei store closed, after the first Hefei outlets of Naixue Tea and LELECHA had already shut. Many departing operators had invested years of savings into their own brands, only to face heavy competition coffee and tea sellers now share, with cafe ingredients costs and discounting squeezing margins. Data from Zhaimen Catering and Jihai Brand Monitoring underpin the figures.

Once upon a time, a cup of milk tea was a standard part of young people's daily consumption, and the tea beverage sector was once regarded as fertile ground for entrepreneurship. However, the latest data shows that in the past year, about 130,000 milk tea shops across the country quietly exited the market, with an average of more than 350 operators choosing to close their stores every day. Even leading brands such as Heytea and Naixue Tea could not escape the fate of closures for their first stores in some cities. A weak peak season, cutthroat price competition, and rising franchise risks have pushed this once-thriving industry into a deep reshuffle. This article will combine data from multiple sources, including Zhaimen Catering and Jihai Brand Monitoring, to analyze the multiple reasons behind the large-scale contraction of tea beverage stores.

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Recently, a netizen in Anhui noticed that the first Heytea store opened in Hefei had quietly ceased operations. According to photos taken by the netizen, the store was tightly shut, and the original signboard had been completely removed, leaving no trace of its former operation.

The netizen also mentioned that before the closure of Heytea's first Hefei store, the first Hefei stores of Naixue Tea and LELECHA had also already ended operations.

Not long after the hype around "the first cup of milk tea in autumn" faded, normally this would be the peak sales season for the tea beverage industry, and more customers should be placing orders. But social platforms are flooded with discussions about "milk tea shops closing," and whether independent cafes or chain brands, all seem to be struggling in this "chilly autumn wind."

Data provided by Zhaimen Catering shows that as of August 5, the total number of milk tea stores nationwide was 431,000. In the past year, more than 167,000 new stores opened, for a net increase of only 35,000. In other words, 130,000 milk tea shops exited the market this year, which works out to an average of more than 350 owners closing their stores every day.

Among these departing operators, many chose to create their own tea beverage brands, investing savings accumulated over many years in the hope of building a small shop that matched their vision. However, this painstaking investment did not bring the expected returns, and instead left them burdened with heavy debt.

They admit that compared with chain franchising, self-created brands offer greater autonomy, but expenses such as rent, ingredients, and equipment also rise accordingly. Against the backdrop of "milk tea returning to the 10-yuan era," independent milk tea shops lack the price advantage to compete with chain brands, so customers naturally prefer cheaper products.

Milk tea shop owners who chose franchising also said their small shops were likewise unable to stay insulated. One owner revealed that they had joined a milk tea brand with a Chinese-style direction, but the brand's visibility was limited, and after opening, both dine-in and delivery orders were scarce. After struggling for a year, it was truly difficult to keep going, and in the end they had no choice but to close the store.

Even brands already well known to many consumers, such as ChaPanda, are in fact quietly closing stores. Data from Jihai Brand Monitoring shows that as of August 13, within the past 90 days, ChaPanda opened 614 new stores, but closed 905 during the same period. Another well-known brand, Moyo Yogurt, was also reported by the media to have closed 142 stores within half a year, averaging about 0.9 closures per day.

On the one hand, major tea beverage brands are racing to cut prices, with milk tea products priced at more than ten yuan or even just a few yuan continuously emerging, making industry competition increasingly fierce. "When the gods fight, bystanders suffer." Some independent tea beverage shops affected by the price war said bluntly that they "can't compete" and could only exit this involution early.

On the other hand, public opinion incidents involving food safety and employee rights have gradually stripped chain brands of their mystique. Consumers are more rational when purchasing and tend to choose products that truly meet their needs; franchisees are also more cautious when selecting partner brands, worried that they might accidentally choose a partner that could implode or abscond.

On the day of the Start of Autumn, "the autumn cup" brought a great deal of attention to the tea beverage industry, and sales at many milk tea shops surged. But as soon as the clock struck twelve, those milk tea shops barely hanging on were brought back to reality and still had to face continuous losses. Perhaps after this, more people will use the phrase "opened once, closed now" to prove that they once existed in this bustling industry.

Image source: Internet

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