Although the vision is beautiful, the process is difficult.
Editor’s note: This article is from the micro-channel public number “Capital Planet Planet” (ID: zibenxingqiu), Author: Prime.
On the New Year’s Eve of the Lunar New Year of the Ox, the new tea brand Naixue’s tea formally submitted a listing application to the main board of the Hong Kong Stock Exchange and appointed JPMorgan Chase, CMB International, and Huatai International as their joint sponsors.
As the news of Nayuki’s tea IPO is confirmed, the judgment about Nayuki’s future is polarized again. You can make a joke about whether Nayue can be successfully listed or not, everyone can bet in advance.
From a capital perspective, the rationality of Nayuki’s tea is still open to question. The prospectus shows that Nayuki’s tea has been at a loss for a long time. In 2018 and 2019, under non-IFRS, Nayuki’s tea net losses were 56.58 million and 11.735 million respectively, even though Nayuki’s tea was in a state of loss before 2020. The adjusted net profit obtained in 9 months was 4.484 million yuan, but the overall net profit rate was only 0.2%.
What’s more interesting is that Nayuki’s tea is still madly opening shops without making much money. According to the prospectus, as of September 30, 2020, the number of Nay Xue’s tea stores worldwide has reached 422, covering 61 cities in Mainland China, Hong Kong Special Administrative Region and Japan, and further increased to 507 as of the Latest Practicable Date .
A business that is not profitable, or a business that makes little profit, can you guess whether it can convince Hong Kong stock investors? After all, the last listed company that was related to drinks, opened stores frantically and didn’t make much money was Luckin Coffee.
1. Crazy capital game
From the perspective of market size, the market size of China’s new-style tea beverage industry in 2019 is 60 billion yuan, and the CAGR from 2019 to 2024 is 23.5%. Under the epidemic situation in 2020, it will still increase by 7% to 113.6 billion yuan. The market size is expected to increase in 2024. Reached 172.2 billion yuan. It can be said that this is an imaginative market.
According to incomplete statistics, there will be 11 financing incidents in the new tea-drinking track in 2020, with a total amount of disclosed funds exceeding RMB 1.2 billion.
Among them, Nayuki’s tea absorption ability is particularly obvious. In June 2020, Naxue’s Tea announced that it had received nearly 100 million U.S. dollars in Series B financing from Shenzhen Capital. According to Bloomberg News, after completing the C round of 100 million US dollars in financing in January this year, Naxue’s tea valuation is close to 2 billion US dollars (about 13 billion yuan).
On the other hand, Nayuki’s opponents alsoSufficient “ammunition” was raised. In March 2020, Hey Tea received strategic investment from Coatue and Hillhouse Capital, with a post-investment valuation of 16 billion yuan; in October of the same year, Gu Ming milk tea received strategic investment from Coatue, the specific amount was not disclosed; in November, Shanghai Auntie announced the acquisition A round of financing from Jiayu Fund; at the end of November, ChaLi received 100 million yuan in round B financing; on January 13 this year, Michelle Bingcheng announced the completion of the first round of financing, with a post-investment valuation of more than 20 billion yuan.
There was a report in September 2020 that Heytea plans to go public in Hong Kong before the end of 2021, and it is expected to raise US$400 million to US$500 million. In addition, Michelle Ice City also reported that it plans to list in A shares in early 2021. news. This time Nayuki’s tea was the first to deliver the prospectus in Hong Kong stocks, which means that the battle for the first share of tea has officially started.
From the data disclosed in the prospectus, the revenue of Naixue’s tea in the first three quarters of 2018-2020 is 1.087 billion yuan, 2.502 billion yuan and 2.115 billion yuan respectively. The year-on-year growth rate of revenue in the first three quarters of 2019 and 2020 was 130.2% and 20.8%, respectively, and the growth rate dropped sharply. The losses in the first three quarters of 2018-2020 were 69.7 million yuan, 39.7 million yuan and 27.5 million yuan, respectively. The loss in the first three quarters of 2020 increased by 605.1% year-on-year in 2019, and lost a “small target” in less than three years.
Continuous losses and “burning money” may also be one of the reasons why Nayuki’s tea is eager to go public.
IFR quoted sources as saying that Nayuki’s tea goal raised US$500 million through an initial public offering in Hong Kong. These funds will be mainly used for the company’s plans for the next three years: one is to expand the company’s tea shop network and increase market penetration in the next three years; the other is to further develop the overall digitalization of operations to improve technological capabilities Operational efficiency; the third is to improve the company’s supply chain and channel building capabilities to support scale expansion; the fourth is to use it as working capital and for general corporate purposes.
2. The essence of Naixue: Selling Starbucks-style culture
When analyzing the capital story of milk tea, it is inevitable to mention another drink-coffee.
Guoxin Securities pointed out in the research report that considering cultural origins, consumer base and similar consumption characteristics, the nature of the domestic tea-drinking track can be compared with the European and American coffee tracks, while the existing tea-drinking companies may be able to compete with the United States in the long run. The café race track is partly benchmarked and has broad imagination.
Referring to the “2020 U.S. Cafe Report” published by the World Coffee Portal at the end of 2019, it is estimated that the size of the U.S. cafe market is expected to reach 47.5 billion U.S. dollars in 2020 and 37,274 cafes are expected to be huge. With reference to the “2020 New Tea Drinks White Paper” by the China Business Data Center, it is estimated that by the end of 2020, the total size of China’s tea drink market will reach 442 billion yuan, the total size of China’s coffee market will reach 215.5 billion yuan, and the tea drink market will remain The coffee market is more than twice the size. As of the end of 2019, the number of new tea shops in my country is expected to be about 500,000, which is also not small.
The above data seems to be enough to show that Nayuki’s tea is on a big track, or on the wind.
Picture source: Prospectus
From the perspective of industry status, Nayuki’s tea is also in the leading position. Calculated by the retail consumption value of all products, as of the third quarter of 2020, Naxue’s tea has a 17.7% market share, ranking second in the industry. However, from the perspective of profit margins, there is still a significant difference between the two. Nayuki’s tea profit margins in the first three quarters of 2018-2020 are -5.2%, -0.5%, and 0.2%, while Starbucks’ 2018 and 2019 fiscal years And the net interest rate data for the first three quarters of 2020 are 18.28%, 13.56% and 6.33%.
In essence, Starbucks sells a coffee culture, and it has been working hard to establish a “high-end” and “elite” image in the country. This tradition also makes it unable to completely put down its body, or it cannot accept the mediocrity of coffee 化. It is precisely this weakness that Ruixing Coffee has been able to develop in the cracks.
Naixue’s tea slogan is “a cup of good tea, a soft European bag”, which is exactly the same as Starbucks-style exquisiteness. The company has also been working hard to build a high-end tea brand image. Emphasizing hand-made, freshness, plus a variety of milk caps, desserts and fruits, this is destined to be a business with complex production processes and low automation. It requires a lot of manual participation and also affects the speed and stability of production to a certain extent. . In an interview in 2019, Peng Xin, the founder of Naixue’s tea, said that whether it is the harvesting of tea raw materials in the upstream, or the cups, hanging foams, and milk caps when making tea in the middle reaches, the new tea drinking systemBuck is committed to creating a “third space” belonging to urban white-collar workers. Peng Xin once said publicly: The core of the emergence of new tea drinks is to break through two things. The first is to let young people drink tea (product upgrade and innovation). The second is to get everyone used to drinking tea as a new social lifestyle (spatial experience).
She believes that space is not only the customer’s first impression of the brand, but also social and other needs are also customers’ rigid needs. It is precisely based on this entrepreneurial philosophy that Peng Xin has built the space into Naixue’s second product and the core component of its brand’s core, creating an “all-weather urban living room”.
But from the overall feeling of decoration, the interior decoration of Starbucks chain stores strictly follows the uniform decoration style of the chain. Each store itself is an image promotion and a link in the Starbucks business chain. American designers specially create rich visual elements and a unified style for each store, so that customers and passers-by will be pleasing to the eye and achieve the promotion of the brand. purpose. This kind of promotion is called Tie-in, which is to closely link the image of the cafe with the store.
Nai Xue’s main tea store type, each chain store only retains “40% similarity”, and the other parts are differentiated and designed according to different cities. On the surface, this idea is ingenious, but it reduces the difference to a certain extent. The level of brand awareness of regional consumers.
Picture source: Naixue’s tea official website
From the perspective of store layout, the two are similar. Starbucks currently has 4,704 stores in mainland China, accounting for nearly 5% of the total number of coffee shops in China. According to Talking Data, as of April 2020, the distribution of Starbucks stores in first- and second-tier cities is as high as 90%, and only 10% are located in third-tier and lower-tier cities. The distribution ratio of the first and second tier cities in Nayuki is even higher at 95%, and only 5% are in the third and lower tier cities.
However, in terms of consumption scenes, Starbucks and Nai Xue’s tea are different, corresponding to different consumption needs. Coffee is relatively functional and more business-oriented, while new-style tea mainly meets emotional needs and entertainment needs, and its combination with business activities is weaker than coffee. As a result, the proportion of men among Starbucks consumers is higher than that of women, and the proportion of women among Nayuki consumers is higher than that of men.
The most important thing is that the “Third Space” sold by Starbucks is a place for gatherings and meetings, and in the minds of consumers, Nayuki’s teaIt’s an online order, take away tea drinks category.
Naixue’s tea imitates Starbucks’ “drink + social” model on the single store model, implementing the large store model, with a large rest area + diverse product combinations to strengthen the social scene. Although this kind of thinking can provide consumers with a good store experience, it also increases the company’s overall rental cost to a certain extent.
What’s even more frightening is that Nayuki is completely trapped in the idea of ”playing space with space”, and following the opponent’s rhythm will often lead to no good results.
4. Unable to copy Starbucks, I got Ruixing’s disease again
In 2017, 2018, 2019 and the first three quarters of 2020, the number of tea shops in Nayuki was 44, 155, 327 and 422. Among them, the growth rates of stores in 2018 and 2019 were 252% and 111%. Compared with the previous reporting period, the number of stores in 2019 and the first three quarters of 2020 increased by 172 and 95, respectively. The store growth rate is very fast.
High-speed expansion is not a bad thing most of the time, but it is very important to control the rhythm. If the pace is too large, it is easy to cause problems. The last listed company that focused on beverages and expanded wildly was called Luckin Coffee. Now everything is happening again in Nayuki.
In the report of Muddy Waters Shorting Luckin Coffee, it was clearly pointed out that Luckin’s fundamentally flawed business model, that is, the product lacks core competitiveness, the platform is full of opportunistic customers without brand loyalty and crazy shop openings. speed. Now Nayuki faces the same model dilemma.
From a product point of view, although the new-style tea drinking faucets have their own core products, such as Nai Xue has fruit tea, Hey tea has cheese milk tea, Lele tea has dirty bags/milk tea, etc., but overall The homogeneity of products is more serious.
A new-style tea drinker who averages a cup of tea every day told Capital Planet (ID: zibenxingqiu) that she basically relies on take-out platforms to buy drinks, and only from the taste of Naxue’s tea, hey tea, tribute tea, A little bit, Coco and other common brands are not very different. The main factors that affect their order decisions are price, product value and delivery time. Another consumer who is keen to buy tea offline also said that the taste of several brands of tea he often drinks is not very different. When there are many new tea shops nearby, he will give priority to the queue time Place orders for brands with fewer and faster production speeds.
In the long run, only by creating a series of explosive styles and forming a complete product matrix, new tea drink companies can build the long-term vitality of their brands.
Picture source: Prospectus
On the other hand, the prospectus shows that the average daily sales of Naixue’s tea shop in 2018 was 30,700 yuan, and the average daily order volume was 716. But in the first three quarters of 2020, the average daily sales of a single store was only 20,100 yuan, and the average daily order volume also fell to 465 orders, a growth rate of -35.06%. Originally, the return cycle of stores opened in 2018 was only 10.6 months. By the first three quarters of 2020, the return cycle has increased to 14.7 months.
In order to further increase revenue, Nayuki has been working hard to increase the customer unit price. Nayuki has made a lot of innovations in store style and products. Among them, Naxue wine house BlaBlaBar provides a variety of alcohol products, Naxue PRO provides coffee and breakfast services, Naxue Dream Factory is the “new product laboratory”, providing more than 1,000 SKUs, products include baking, steak, retail, bar , Tea, coffee, claw machine and other 15 sections.
But these efforts did not seem to translate into a significant increase in customer unit prices. The customer unit price of Naixue in 2018, 2019 and the first three quarters of 2020 was 42.9 yuan, 43.1 yuan and 43.3 yuan, respectively. The increase was minimal. This figure is lower than Starbucks’ domestic average customer unit price of 80 yuan and also lower than Xi Tea announced the customer unit price 52-56 yuan.
In addition to internal worries, strong competitors such as Heytea, Lelecha, and Michelle Ice City have been squeezing Nayuki’s market space, and Nayuki has never been able to control market pricing power.
The rapid expansion without mastery of pricing power did not bring Naxue’s imaginary scale effect, on the contrary, it exacerbated the company’s overall loss.
As a result, Naxue didn’t have the life of Starbucks but got Luckin’s disease. The reason is that the product lacks unique competitiveness, the platform and user loyalty are low, and while the scale is expanding, it has not effectively refined operations and improved products. Profit margin.
5. Summary
Nixue’s tea asset-liability ratio in the third quarter of 2018-2020 exceeded 100%, which shows that the company’s short-term debt pressure is relatively high.
From the perspective of solvency, the company’s current ratio and quick ratio are generally low. The company’s current ratio rose from 0.34 in 2018 to 0.39 at the end of the third quarter of 2020, and the quick ratio rose from 0.29 in 2018 to 0.32 at the end of the third quarter of 2020. Although both have increased slightly, there is still a long way to go from the level of 1.
AnotherIn the first three quarters of 2020, the turnover rate of Nayuki’s tea has declined, the total asset turnover rate has dropped from 1.47 to 0.91, and the accounts receivable turnover rate has dropped from 25.36 to 12.81. , The inventory turnover rate dropped from 43.34 to 21.08.
Continuous losses, failure of turnover, rapid expansion, and bloody listing, so that the “Luckin Story” of changing the soup without changing the medicine is still going on. Naixue’s tea development path is still full of challenges, not to mention whether it can become the Chinese version Starbucks, but goodbye becomes the next Luckin Coffee.
(The content of this article is for reference only and does not constitute investment advice; there are risks in the market and investment must be cautious.)