Financial Services Association, March 28 (Reporter Xu Cihao) “New Tea Drink First Stock” announced the results for the full year of 2023 after the market yesterday.

According to financial reports, Nai Xue's revenue for the full year of 2023 increased by about 20.3% from 4,292 billion yuan in 2022 to 5.164 billion yuan; benefiting from cost reduction and efficiency in 2023, adjusted net profit changed from loss of RMB 461 million in 2022 to profit of RMB 21 million in 2023.

This is also the first time that Nayue's tea has been profitable for the whole year since it went on sale in 2021.

It is worth noting that as Nai Xue's tea, which has always insisted on being directly managed in Tier 1 and 2 cities, it began opening up franchises in late July last year to expand into the sinking third- and fourth-tier markets.

According to financial data, only 81 franchise stores were opened last year; as of February this year, there were 200 franchise stores. According to Nai Xue's tea performance analysis meeting today (28th), Nai Xue's tea will open 2000-3,000 franchise stores in the next 2 to 3 years. However, if we keep up with the previous pace, it is clear that Nai Xue's tea will have quite a few challenges to achieve such goals.

At the opening of today's market, Nai Xue's tea once plummeted by more than 15 points to HK$2.57. As of today's afternoon close, Nai Xue's tea closed at HK$2.72, a sharp drop of 10.82%, with a market value of HK$4.665 billion.

The loss was reversed for the first time, but the order price reached a record low

Looking at the product structure, Nai Xue's tea is mainly made from freshly made tea, with revenue of 3.777 billion yuan in 2023, a slight increase of 2.04%; followed by bakery products, with revenue of 707 million yuan in 2023, a decrease of 7.72% compared to 777 million yuan in 2022; the revenue contributed by bottled beverages increased 69.43% to 267 million yuan from 157 million yuan in 2022.

In addition, other revenues such as coffee, peripheral products, retail products, and souvenirs increased 84.38% to 413 million yuan from 224 million yuan in 2022. The tea retail business represented by “Nai Xue Tea House” had revenue exceeding 100 million yuan, doubling its growth.

It is worth noting that the average sales volume of tea for high-end tea has dropped from 34.3 yuan in 2022 to 29.6 yuan in 2023, a year-on-year decrease of 13.7%, while the average sales volume per order in 2021 was 41.6 yuan. In fact, once in 2023, Nai Xue's tea also launched a 9.9 yuan promotion.

Moreover, as consumer demand for new tea drinks cools down, Nai Xue's tea store order volume has also been affected. According to financial reports, the average daily order volume for each Naixue tea shop was 344.3 orders in 2023, down 1.12% from 348.2 orders in 2022. In 2021, there were 416.7 orders.

Although the average sales volume and order volume of each order are declining, in 2023, Nai Xue's direct-run tea store recorded a store operating profit of 829 million yuan, an increase of about 76.3% over 2022. In 2023, the operating profit margin of Nayue's direct-run tea store was 17.7%. Up about 5.9% from 2022.

This is due to the cost reduction and efficiency of Nai Xue's tea in 2023.

Financial reports show that in 2023, Nai Xue's tea labor costs fell from 23.5% in 2022 to 20.3% in 2023; the share of rent fell from 15.5% in 2022 to 14.5% in 2023; the share of takeout expenses fell 9.4% to 8.2%; and the share of raw materials fell from 39.7% in 2022 to 39.3%.

Furthermore, Nai Xue's tea is also gradually closing stores under the sub-brand.

According to financial reports, Taigai contributed 53.498 million yuan in revenue in 2023, a decrease of 29.086 million yuan compared to 82.584 million yuan in 2022. Losses in the Taigai business narrowed from RMB 11.949 million in 2022 to RMB 8.44 million in 2023.

Nai Xue's Tea announced on January 18 that as of December 31, 2023, the company has operated a total of 7 Taigai stores. Considering that the Taigai brand has not generated significant profits for the company in the past, the company hopes to focus its business on the main brand Nai Xue's tea. Although shutting down Taigai stores is expected to cause the company to lose millions of yuan in closing stores, from a long-term perspective, this move will help the company control costs and strengthen its strategic focus. It is expected that Taigai stores will be shut down one after another in 2024.

Franchise model and cost to be optimized

In terms of the number of stores, as of December 31, 2023, Nai Xue's Tea had 1,574 self-operated tea shops in 111 cities, a net increase of 506.

It is worth mentioning that Nai Xue's tea opened a franchise business in 2023, hoping to open up a second growth curve in the sinking market.

According to data disclosed in the financial report, it was officially announced in late July last year that it was open to join the main brand. However, due to the high entry threshold, Nai Xue Tea will only have 81 franchise stores in 2023. After the franchise threshold was lowered not long ago, by the end of February 2024, Nai Xue's tea had about 200 franchise stores already opened, which means that nearly 120 franchise stores will open in 2024.

Looking at it now, although Nai Xue's tea performance has improved greatly after a series of cost reductions and efficiency, currently Nai Xue's tea is still mainly directly managed stores. The operating model is still heavily focused, and the cost pressure is high.

Compared to other milk tea brands in the industry that mainly use franchise models, take Michelle Ice City as an example. According to data disclosed by it, in the first nine months of 2023, the number of new stores was about 4,992, with an average of 555 stores per month. On average, the number of stores in Michelle Ice City increased by about 18.2 per day.

As for Overlord Chahime, the data shows that 2,000 new stores were opened in 2023, with an average of 166 new stores opened every month. Even for Hi Cha, as of the end of last year, there were over 2,300 franchise stores since it opened. However, since the opening of membership in July last year, as of December 31, 2023, there are only 81 tea stores in Nai Xue.

Obviously, Nai Xue's tea is also aware of her own problems. Nai Xue's tea stated in the financial report that franchise stores are mainly concentrated in middle- and low-tier cities, which will help open up new markets and explore new needs. In 2024, Nai Xue's tea will optimize the requirements of franchisees.

According to Nai Xue's new tea franchise policy in 2024, the investment budget for a single store will be adjusted to start at 580,000 yuan; stores that complete the contract before June 30, 2024 will receive a marketing subsidy of 60,000 yuan. Compared to requiring a working capital verification certificate of 1 million or more when opening a franchise in July last year, Nai Xue's latest franchise policy can be described as “falling short” at the threshold level.

Along with the decline in capital, there are also types of stores and market regions. Products operated by Naixue Partner stores in 2023 include tea, baking, coffee, and new retail. However, in 2024, on the basis of the “tea drink+baking” dual category operation, franchisees can also flexibly choose store configurations such as coffee machines and flower decoration rooms according to the actual consumer needs of their market.

Furthermore, in terms of market types, with the exception of northern Guangshen, Wuhan, Xi'an, Nanjing, and Tibet, all other cities have opened up to join, and will gradually sink into the county market.

A reporter from New Consumer Daily learned today from Nai Xue's tea performance analysis meeting today that the company expects to open 2,000 to 3,000 franchise stores within the next 2-3 years.

Notably, many new tea players focusing on the franchise model hit the IPO one after another. Recently, Chabaidao passed the Hong Kong Stock Exchange listing hearing, and will become the second new tea company to be listed on the Hong Kong Stock Exchange after Nai Xue's Tea. Meanwhile, in January of this year, Michelle Ice City and Gu Ming submitted their listings to the Hong Kong Stock Exchange on the same day.

Zhu Danpeng, an analyst in the Chinese food industry, told the reporter of New Consumer Daily that Nai Xue's tea in the past may have been a phased result of losing money this time as the first domestic tea company. As market competition further intensifies and the IPO process of other new tea brands accelerates, Nayue's tea will be squeezed even more in the future.

For all the players on the new tea circuit, the second half has just begun.