fishingjacket| With revenue of more than 5 billion yuan, only earning more than 10 million yuan, Naixue's "sinking" business is not easy to do.

Five years after listingFishingjacketAfter a sharp fall in its share price, Naixue finally made a profit. According to financial data, in 2023, Naixue achieved a total operating income of 51.FishingjacketThe net profit attributed to the parent company reached 13 million yuan, but the net profit margin on sales was only 0.21%.

At present, the new tea industry is in an upsurge of listing, such as Tea Baidao, Honey Snow Ice City, Shanghai Aunt, Gu Ming and other emerging brands have come to the fore, competing to submit listing applications or have successfully landed in the capital market. With their excellent performance, these brands continue to attract the attention of investors.

In the face of the increasingly fierce market competition and the rapid development of the tea industry, Nai Xue began to re-examine its own development path and competition strategy, chose to open up to join, to achieve the transformation from high-end to popular.

In this context, investors' expectation of Nai Xue's tea is not only to achieve from loss to profit, but also to show stronger profitability and continue to release greater profit value, so as to stand out in the fierce market competition. However, in the face of the popular sinking market, Nai Xue's performance is somewhat inadequate.

First, the sinking market will not move, and the order volume and price will fall.

In 2022, in order to seize the sinking market, Nai Xue's tea launched a series of price strategy adjustments. In March of the same year, Naixue's tea officially announced through its official Weibo that it would greatly reduce the prices of its tea products, and specially launched a "easy series" of fresh fruit tea priced in the range of 9 to 19 yuan. to meet the diversified needs of consumers.

Nai Xue's tea promised in the official WeChat that it will launch new tea products of no more than 20 yuan every month to ensure that consumers can enjoy a high-quality tea experience at a more people-friendly price. At the same time of launching the low-price series, Nai Xue's tea has also lowered the prices of a number of products, and there are no longer products in the "3-prefix" price range on the menu.

The price reduction strategy is like a double-edged sword in the new tea market, although it can stimulate the market vitality in the short term, it does not fundamentally solve the deep-seated problems.

To make matters worse, in the context of the new tea industry, the decline in prices did not bring volume growth, but a slight decline in daily sales. According to the annual report, the average sales value of each order in Nai Xue's direct stores in 2023 was 29.6 yuan, down 15.87 percent from 34.3 yuan in 2022, and the daily order volume was 344.3, down 1.12 percent from the same period last year.

The phenomenon of both quantity and price falling in a single store shows that the income growth of Nai Xue's tea through the "horse enclosure" strategy is gradually approaching the critical point of saturation. In order to seek new growth momentum, Nai Xue's tea made a series of strategic adjustments in 2023 and opened up its business.

However, after the passage of time, by the time of 2024, the sinking market has gradually become saturated, and the competition is becoming increasingly fierce. At present, the store expansion of new tea brands has involved the fierce competition for the resources of existing franchisees. In view of this, Honey Snow Ice City and Tea Road are actively adjusting their strategic direction, shifting their focus from simply pursuing the growth of the number of franchisees to how to more effectively encourage existing franchisees to open more stores in order to achieve more robust market expansion.

In order to achieve this goal, at the beginning of 2024, Tea Road Company decisively announced the implementation of the zero franchise fee policy as an important measure to lead the development of the industry. Subsequently, the book also burned fairy grass and other brands have also followed suit and launched a "waiver of franchise fee" policy, which aims to further stimulate the enthusiasm of franchisees and promote the expansion of business scale.

Compared with other brands, Naixue set a relatively high threshold at the beginning of its opening, and its joining fee significantly exceeded the general "three high" standards of the market. Specifically, the cost of joining Nai Xue is not cheap, the cost of joining a single store is at least 1.5 million yuan, and the cost of regional joining is as high as 4.5 million yuan. In addition, Nai Xue has relatively high requirements for store area, which is between 90 and 170 square meters, which is more stringent than that of 50 square meters of happy tea.

In terms of staffing, Nai Xue also sets a high standard, and a single store partner needs to have a capital verification certificate of more than 1.5 million yuan and at least 2 years of working experience in the catering industry. Regional partners are required to meet capital verification requirements of more than 4.5 million yuan and at least 3 years of operation and management experience.

As the threshold for joining is relatively high, the joining process of Nai Xue shows an obvious lag. Since Naxue officially announced the opening of its franchise business to major brands in late July 2023, only about 200 stores have successfully opened by the end of February 2024. Compared with the development goals of Wandian set by brands such as Tea Baidao and Shanghai Auntie, the pace of expansion of the sinking market appears to be particularly slow.

The progress of the expansion of the franchise store is not satisfactory. At the end of February this year, Nai Xue's tea adjusted the franchise policy, reduced the franchise fee, and announced the new franchise policy for 2024. According to the new policy, the investment budget of a single store will be reduced from 980000 yuan to 580000 yuan. At the same time, a marketing subsidy of 60, 000 yuan will be given to open a store in the first half of the year.

However, although the single-store investment budget has been reduced to 580000 yuan, compared with the 20-300000 yuan investment of brands such as Shu Yi burning fairy grass and tea, the threshold for investment in Nai Xue is still relatively high.

Second, the cost has been greatly reduced, and the pain of "high-end" has not stopped.

Although the daily order volume of the Naxue single store and the average price per order have declined, the operating profit margin of the Naxue store is constantly increasing. In 2023, the operating profit margin of Nai Xue direct stores was 17.7%, an increase of nearly 6 percentage points compared with 11.8% in 2022.

The increase in operating profits of Naxue stores is mainly due to a significant decline in the proportion of its costs. According to the annual report, Naxue's operating profit is based on material costs, staff costs, depreciation of right-to-use assets, other rents and related expenses, depreciation and amortization of other assets, utilities expenses and distribution expenses. Store operating profit margin is calculated by dividing store operating profit by revenue for the corresponding period.

In the cost structure of Nai Xue store, manpower, rent and material costs are the main costs. As rent is usually difficult to change significantly in the short term, in order to achieve cost reduction, Naxue mainly needs to optimize and reduce the cost of manpower and materials. In 2023, the labor cost of Naixue's tea order store fell from 23.5% to 20.3%, a drop of 3 percentage points.

From the annual report data as a whole, since 2020, the proportion of Naxue's material consumption cost in its operating income has declined year by year, from 37.91% to 32.90% in 2023. At the same time, after a brief increase, the salary of employees also showed a steady downward trend, from 30.06% in 2020 to 27.19% in 2023.

It can be seen that in the face of fierce market competition and changing consumer demand, the Nai Xue brand is seeking various cost optimization strategies. However, from extravagance to frugality is difficult, at the beginning of the high-end positioning, so that the dominant cost of rent is higher, forming a big store model.

At present, with the tea brand of Nai Xue gradually moving from high-end to popular, its market positioning is no longer limited to the high-end field. Users' consumption habits are also gradually changing to pick-up and takeout orders. According to the data, from 2021 to 2023, the proportion of sales of "store ordering" mode showed a downward trend year by year, with specific values of 28.2%, 19.1% and 14.5%, respectively. At the same time, the proportion of self-orders rose steadily from 35 per cent to 43.6 per cent, while the share of takeout orders rose to 41.90 per cent in volatility.

This change in consumption pattern has brought double pressure on Nai Xue's operation. On the one hand, the huge store cost was invested in the early stage to create a high-end brand image, which formed a heavy burden in the process of transformation; on the other hand, with the increase of takeout and self-order, the cost of distribution services continued to rise. The proportion of distribution services in business revenue continued to rise from 2018 to 7.61% in 2023. Therefore, Naxue not only has to bear the high store rent, but also has to pay the growing distribution costs, this transformation process is undoubtedly a severe test for the brand.

At present, the second half of the competition in the new tea market has just begun. as a high-end brand in the new tea industry, Nai Xue's tea is facing a new round of challenges in the sinking market, and its future development prospects are full of uncertainties and challenges.