What Do Shuyi Closures Mean for Street Coffee Equipment?

Shuyi Tea Fairy Grass has closed a large number of stores, leaving second-hand equipment unsold, and recyclers have even sold machines worth tens of thousands of yuan at scrap-metal prices. After price cuts and franchise-threshold changes, the brand's store count has fallen by more than a thousand from its peak, and about 120,000 new tea beverage stores disappeared industry-wide in the past year.

One recycler said more than a dozen machines bought for 60,000 to 70,000 yuan each went for only 2,000 yuan as scrap, and some dealers now refuse Shuyi equipment outright. The episode is a reminder for anyone weighing the average startup cost for a coffee shop or a street coffee stand that equipment resale value can fall sharply when a brand contracts.

Recently, Shuyi Tea Fairy Grass has seen a large number of store closures, leaving second-hand equipment unsold, and recyclers have even disposed of machines worth tens of thousands of yuan at scrap-metal prices. This tea beverage brand, once wildly popular for having "half a cup full of toppings," has seen its store count shrink by more than a thousand from its peak after undergoing price cuts and adjustments to its franchise threshold. At the same time, the entire new tea beverage sector is facing a reshuffle, with about 120,000 stores disappearing in the past year. This article reviews the rise and fall of Shuyi Tea Fairy Grass, the plight of its franchisees, and the chain reactions of the industry's wave of closures, while retaining Front Street Coffee's continued attention to industry trends.

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On September 9, a topic about "too many Shuyi Tea Fairy Grass store closures leading to a backlog of second-hand equipment" topped Weibo's hot search list, quickly sparking heated discussion among netizens.

According to a Phoenix Net report, as stores of multiple tea beverage brands closed one after another, the second-hand equipment recycling business actually became booming. Among them, because of the huge number of store closures, Shuyi Tea Fairy Grass equipment once could not be sold from recyclers' warehouses. One recycler revealed that more than a dozen sets of machines previously bought for 60,000 to 70,000 yuan ended up being sold at scrap-metal prices for only 2,000 yuan. A merchant specializing in tea beverage equipment recycling even stated directly: "We are not taking Shuyi Tea Fairy Grass equipment now."

Combining milk tea with grass jelly made Shuyi Tea Fairy Grass frequently appear in consumers' view starting in 2019 and once become an industry bellwether. Compared with the signature products of other brands, Shuyi Tea Fairy Grass used "half a cup full of toppings" as its selling point, bringing milk tea into the "eight-treasure porridge" era and prompting many brands to follow suit in competing over toppings.

Information on its official website shows that Shuyi Tea Fairy Grass opened its first store in 2007, and the brand name changed from the original 85°Tea to Shuyi Tea Fairy Grass. In 2021, the brand's store count reached 7,000, ranking second in the industry, second only to Mixue Bingcheng. However, two years later, as other brands expanded rapidly, Shuyi's store count fell by more than a thousand compared with 2021 and is currently less than 6,000.

The brand's current large-scale store closures are clearly inseparable from its price-cutting strategy in the first half of this year. In April, Shuyi Tea Fairy Grass formally joined the price war, replacing its product line, which had originally been concentrated in the 15-yuan range, with a new menu focused on "within 10 yuan," leaving franchisees forced to follow suit complaining endlessly.

"Product prices have dropped, but purchasing costs have not changed, and the already thin profit margin has been further squeezed." A franchisee once said in an interview that Shuyi Tea Fairy Grass's store revenue had declined noticeably over the past two years, with average daily revenue of only a little more than 1,000 yuan, almost halved compared with when the store first opened, and more and more people wanted to transfer or close their stores. A person in the equipment recycling industry said they had once received calls from 13 Shuyi Tea Fairy Grass franchisees about withdrawing stores in a single day.

In order to attract franchisees, Shuyi had also previously lowered its brand franchise threshold. In February 2022, the initial investment and first batch of material fees to open a Shuyi Tea Fairy Grass store required at least 310,000 yuan; now, however, the upfront cost of joining Shuyi is estimated at less than 180,000 yuan, nearly halving the cost.

On the other hand, judging from the daily updates of second-hand equipment dealers operating self-media accounts, the closure phenomenon of Shuyi Tea Fairy Grass may only be the "tip of the iceberg" in the industry. This is because in their warehouses, besides the trending Shuyi Tea Fairy Grass, equipment recycled from consumer-familiar chain brands such as ChaPanda, GoodMe, and Shanghai Auntie can also be seen everywhere, and the equipment received is becoming newer and newer. However, unlike Shuyi, these brands still have franchisees willing to join, so their second-hand equipment still has market demand for now.

Since the beginning of this year, the rapidly expanding tea beverage sector has also entered a bubble period. According to August data from Zhaimen Canyan, the number of newly opened tea beverage stores in the past year was 165,000, with a net increase of 46,000, meaning 120,000 tea beverage stores disappeared within a year; in addition, the number of newly opened stores in the past year was 167,000, and the net increase shrank to 35,000. In other words, in just two months, another 10,000 stores disappeared.

Regarding whether there were large-scale store closures this year and how franchisees' equipment was handled, a reporter called Shuyi Tea Fairy Grass, but customer service staff said it involved company privacy and could not be disclosed.

Image source: online screenshot

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