By Liu Xinwei

Recently， the modern tea brand “Chayan Yuese（Modern Tea Shop）” opened up its first store in Wuhan. The opening time was schedule to be 10：00am， but a long queue could already be seen in front of the store at around 8：00am. Some customers brought small campstools in preparation for the long wait. After the store opened， the official microblog of Chayan Yuese claimed that every customer had to wait for an average of 8 hours， and could buy a maximum of four cups of tea. Some netizens say that compared with the modern tea pioneers HeyTea and Nayuki， where customers only had to wait for 1 or 2 hours， Chayan Yueses 8-hour wait is a perfect testimony to “hunger marketing”.

The modern concept of tea has been creeping into our lives and has become popular among young consumers. The record “l(fā)ong wait for a cup of tea” has been broken again and again.

Modern tea enters digital phase 3.0； proportion of online orders rising

As peoples awareness of healthy consumption increases， consumers are demanding more high-quality products. Modern tea culture features quality tea and healthy ingredients， and has become popular among consumers. As the milk tea industry continues to expand， more and more new techniques and equipment are being applied to its production， in order to improve the quality of the milk tea. Differing from the traditional“powder + tea”， modern tea mixes the tea with more fresh ingredients， such as milk， fruits and cheeses.

Recently， Nayuki worked with CBNData to launch the 2020 Modern Tea White Paper （hereinafter referred to as the white paper）. The white paper shows that in 2020， Chinas tea market value amounted to RMB 442 billion， and the modern tea market value was expected to reach RMB 102 billion by the end of 2020. Modern tea has entered digital phase 3.0， after undergoing phase 1.0 of material upgrading and phase 2.0 of variety integration in multiple consumption scenarios.

The shift towards online channels requires modern tea brands to focus more on the intensive management of its users membership. Modern brands have adopted pre-ordering and integrated mall and evaluation channels to enhance their connection with customers. The intensive membership management has become an important method for increasing customer loyalty and re-purchase rate. By November 2020， both Nayuki and HeyTeas membership had surpassed 30 million.

Data from online ordering platform Eleme shows that in August 2020， the number of online orders of modern tea had increased fivefold from the number in February. The number of stores had also increased strongly. The modern tea industry has embraced the era of “post-epidemic compensatory consumption”.

As the milk tea industry grows， Chinas milk tea industry has shifted from the model of the domination of the Taiwan-style milk tea to a cluster of many local milk tea brands.

Industry reports show that female milk tea consumers account for 76% of the total； from the perspective of age， approximately 81% of consumers are aged under 35. This group of consumers focus more on quality and brands， which indicates that the milk tea market will continue to be upgraded in the future.

Modern tea popular in the capital market； innovation is the key

From the “first cup of milk tea in autumn” to the listing of milk tea brands to the opening up of new stores by Chayan Yuese， modern tea brands have become popular with young consumers， and also with capital investors.

It is said that Nayuki has entrusted China Merchants Bank with its listing preparations. HeyTea is also expected to be listed on the Hong Kong stock market by the end of 2021， with funds USD 400-500 million already being raised.

In the area of financing， HeyTea has also been very active. Since 2016， HeyTea has won A-round， B-round and B+-round financing. In March 2020， it also got C-round financing and its post-investment value may surpass RMB 16 billion， becoming Chinas modern tea brand with the highest valuation.

These events send a key message： the modern tea industry is booming. According to iiMedia Research， in 2019， the value of Chinas modern tea market reached RMB 204.48 billion.Although the industry has been hit by the COVID-19 pandemic， in the long run， the modern tea industry will keep expanding. It is estimated that in 2021， the modern tea industry will recover to pre-pandemic levels， with the market size approaching RMB 280 billion.

Why is modern tea favored by capital？ Zhang Yi， founder and CEO and chief analyst of the iiMedia Research Institute， explained that the rise in consumption allows investors to see the broad prospects of the modern tea industry.

The marketing strategies adopted by modern tea brands include social media marketing， digital marketing and scene marketing. iimedia data shows that in 2020， the main types of publicity activities seen in the modern tea industry include the opening of themed experience stores and providing social media products for users. These two activities account for 58% and 32% of the total， respectively. Livestreamed recommendations by internet celebrities on short video platforms also accounts for approximately 27% of the total.

Compared with traditional beverages， modern tea features upgraded raw materials. The product material and beverage appearance focus more on distinct qualities. This has also led to innovations in production procedure， brand operation and other aspects， and promotes the integration of online and offline sales.

In terms of whether Nayuki or HeyTea will be the first listed modern tea brand， Zhang Yi said that the industry should focus on who will be the market suppliers and who will provide the most valuable products for consumers. Meanwhile， it is important for the market brand to also bring real benefits to investors， stakeholders， employees and suppliers in the upper chain. As such， new thinking and model innovation will be key factors.

Quality and safety are the primary choice； industry standards to be established

In recent years， China has been undergoing consumption upgrading， which is supported by new consum- erism. New consumerism is centered on a sense of existence， ritual， engagement and happiness. It also features the shift from “having more” to “having better”， from “functional satisfaction”to “emotional satisfaction”， and from a“physical high price” to a “psychological premium”.

Delicacy， quality and customer experiences have become evaluation standards for the modern tea brands. The white paper points out that quality and safety have replaced the taste and flavor to become the primary factor for consumer choice. For example， approximately 70% consumers would choose a low sugar option.

Digital innovation has accelerated the development of modern tea brands. Convenience， market segmentation and diversity will become the main trends of the industry. The white paper shows that in 2020， nine modern tea brands had already established digital teams. Nayuki and HeyTeas digital teams contain more than 100 people. Digital tools have become the musthave equipment for these brands. In 2020， Nayuki and HeyTea launched on the Tmall platform and registered over 10 million sales in the “Double 11 Singles Day” sales gala.

Regarding the phenomenon of a“l(fā)ong wait for just a cup of tea”， Zhang Yi said that this is an abnormal business model and has many deficiencies. The first is being unsustainable； it only happens for a short period of time. As peoples feeling of novelty wanes， the phenomenon of a long wait will disappear. The second is that it will create false impressions for companies to expand production. The third is that as the brand becomes much more famous， the “viral” transfer will cause disputes and negative influence.

Zhang Yi said that the modern tea industry needs to learn how to reach Gen Z users. In order to satisfy consumers personal demands and curiosity， the industrys future development requires product innovation， expansion of the periphery of products and advancements in multi-product integration， such as Nayuki and Lelechas “tea + European bread”， and HeyTeas “tea + beer” and “tea + snack”promotions.

The modern tea industry also needs to conduct research on the market “cutting point”. Zhang Yi said that as the industry becomes increasingly competitive， a few top brands have grabbed their market shares through cross-sector development， social media marketing and scene marketing， and have thus consolidated their position in the market. Under such circumstances， other brands need to choose a development model that is tailored to their own competitiveness.

At present， the number of modern tea stores have mushroomed in Chinas first-tier and second-tier cities. However， in the third-tier and fourth-tier cities， there are still relatively few stores. Moreover， the storessize is small and their operation efficiency is low. It is estimated that more than 90% of HeyTea and Nayukis stores are located in first-tier and second-tier cities. As these market spaces becomes congested， these brands are turning to lower-tier cities to seek new growth opportunities.