China’sLuckin may prove to be the pioneer in tea delivery. In the United States, takeawaytea is lucrative—McDonald’s sells $1billion worth annually—but largely confined to iced blends.
Luckin hasopened 3,000 locations since 2017 and is now the largest domestic coffee chainin China. Building on its successful coffee delivery model, in July the companylaunched a new tea brand called Xiaolu (little deer) Tea. The line features 10flavors including innovations such as jasmine green tea with mango topped with afrothed cheese imported from New Zealand. Blended with pudding, these teas areboth a beverage and snack and sell for $3.50 to $4.50 per cup.
“We want totransform the tea series from traditional tea drinks into creative ones and wehope people drink it in the offices instead of streets,” Luckin’s chiefmarketing officer Fei Yang told RetailNews Asia. “There arecurrently few renowned brands of milk tea in China (known as tea lattes andbubble tea in the West),” adds Luckin VP and co-founder Jinyi Guo. “The qualityof franchise stores is inferior and supply chain management is deficient,”writes Guo.
Chinese consumers drink 317 cups ofnon-coffee drinks per year on average, much more than the 208 cups in America. Teais in greater demand during the summer months than coffee, explains Guo. Hesaid the company targets young Chinese white-collar workers with offerings ofcheese foam tea, freshly brewed tea and milk (bubble) tea. The latter istrending as coffee shops, which produce a variety of milk and coffeecombinations, embrace creamy, sweet flavored tea drinks with chewy blacktapioca. Balls of tapioca are known as pearls, it is vigorous shaking thatproduces the frothy bubbles for which the drink is named.
Modern milk teas were popularized by 163-storeHeyTea which specializes in cheese tea and by Nayuki, a chain that mixes seasonalfruit with tea along with Gong Cha, a franchise with 1,500 outlets. According toIDGCapital, HeyTea, founded in 2012, serves as many as 2,000 to 3,000 cupsdaily per store in Beijing and delivers 3,000 to 5,000 tea drinks per month inGuangzhou and Shenzhen. Each drink comes with a separate container of frothedcheese to add on delivery.
Sales of specialty tea beverages at tea andcoffee shops and dessert shops in China have risen steeply since 2010. Wenjun Techestimates milk tea sales of $7.6 billion (CNY53.7 billion) in 2018 and projectsan increase to $11 billion (CNY77.9 billion) by 2021. The compound annualgrowth rate of beverage sales from 2016 to 2021 is estimated at 13.5%, asreported by EqualOcean.
Growth iscoming at the expense of instant powdered coffee and tea and traditional street-sidestalls where milk tea is prepared by the cup for passersby. The style of teaoriginated in Taiwan but it was innovators in mainland China who topped the teawith a thick cheese foam leading to longlines of young tea enthusiasts.
Source: RetailNews Asia, Caixin