On August 9th, CHABAIDAO (2555.HK) issued its first profit warning since its listing.
As a new player in the Hong Kong stock market this year, CHABAIDAO's performance in the first half of the year has seen some changes.
It is expected to record a net profit of 220 million to 250 million yuan in the first half of the year, a year-on-year decrease of no more than 63.03%; and an adjusted net profit of 380 million to 410 million yuan, a year-on-year decrease of no more than 36.45%.
CHABAIDAO stated that the main reasons for the decrease in adjusted net profit are changes in consumer habits, increased subsidies to franchisees in the first half of the year, and increased overall market investment costs.
According to data from Jiuan Zhongtai, CHABAIDAO opened a net of 554 to 8103 stores in the first half of the year. However, the cost of trial and error behind this expansion is not small, with 723 stores closed in the first half of the year, and the closure rate increased by 5.2 percentage points year-on-year to 9.7%.
An analyst specializing in food and beverage from East China Securities, commenting under the name of TradeWind01, expects that CHABAIDAO's same-store average daily sales in the first half of the year have declined, leading to an increase in the closure rate of stores compared to the same period last year.
TradeWind01 inquired with CHABAIDAO about the main sources of competition pressure faced in the first half of the year, but as of the time of writing, there has been no response.
Currently, CHABAIDAO faces pressure from both internal competition within the industry and from the &#34;disorderly expansion&#34; of coffee chains.
Differentiating itself by price range, CHABAIDAO is positioned in the most competitive mass market price range (10-20 yuan) within the tea beverage industry.
According to data from Zhuoshi Consulting, as of the first three quarters of 2023, in terms of the number of stores, the top five players in the freshly made tea beverage market are Mi Xue Bing Cheng, Gu Ming, CHABAIDAO, Hu Shang Auntie, and Shu Yi Shao Xian Cao. Apart from the industry leader Mi Xue Bing Cheng positioned in the affordable price range (below 10 yuan), the other four are positioned in the mass market price range. Their market shares are close, at 1.9%, 1.6%, 1.6%, and 1.5% respectively.
CHABAIDAO is the most expensive among the top 5, with product prices ranging from 6 to 22 yuan. For comparison, Gu Ming's prices range from 6 to 20 yuan, and Hu Shang Auntie's range from 7 to 19 yuan.
In terms of product offerings, there is not much differentiation among the competitors, with a focus on milk tea and fruit tea categories. However, CHABAIDAO's menu has a richer variety of SKUs compared to its competitors.
According to data compiled by analyst Ye Sijia from Guojin Securities, in January of this year, CHABAIDAO had 59 SKUs, 23 more than Gu Ming and 19 more than Hu Shang Auntie. In 2023, CHABAIDAO's classic tea beverages accounted for 40% of the total SKUs, with the top five classic products contributing over 30% of the GMV.
Furthermore, in terms of new product launches, CHABAIDAO, which relies on high-volume classic products, has a slower pace of new releases.
In the first three quarters of 2023, Gu Ming launched over a hundred new products, while CHABAIDAO only released 48 new products throughout the year, less than half of the former.
In the highly competitive tea beverage industry, new product launches and collaborations are the best ways to attract consumer attention.
A ready example is the rapid rise of the tea brand Ba Wang Cha Ji at the end of 2022, with marketing strategies including Dior-style packaging, the brand concept of &#34;Eastern Tea,&#34; and endorsements from numerous athletes promoting product health benefits.
Under this strategy, Ba Wang Cha Ji expanded rapidly from 1000 stores at the end of 2022 to nearly 5000 stores currently, approaching the scale of the established tea brand COCO
Competition pressure faced by CHABAIDAO may also come from the coffee track, with Luckin, which has over 10,000 stores, getting involved in the tea beverage market.
In August, Luckin launched a new milk tea product, Light Jasmine · Light Milk Tea, with sales exceeding 11 million cups in the first week of listing, bringing the price war from the coffee track to the tea beverage market. It started the &#34;Buy 100 million cups of 9.9 afternoon tea&#34; campaign, allowing consumers to purchase the above-mentioned milk tea product for 9.9 yuan after 4 p.m. daily.
Currently, the only player with over 10,000 stores in the tea beverage market is HEYTEA. There are only a few players like HEYTEA and GUMING that can price their milk tea products below 10 yuan.
Both have invested heavily in the upstream supply chain to ensure cost control under the low-price strategy.
For example, GUMING claims to have &#34;built the largest cold chain storage and logistics capability in the industry&#34; and is the &#34;only company that can frequently deliver short shelf-life fruits and fresh milk to stores in lower-tier cities&#34;.
It has even established a self-owned cold chain fleet of around 300 vehicles, while most new tea beverage players like CHABAIDAO rely on third parties for distribution.
The upstream supply chain capabilities built by them have become the guarantee for Luckin to quickly launch new products. Last year, Luckin launched a total of 102 new products, on par with GUMING.
Low-price strategy and rapid product launches are not currently CHABAIDAO's strengths.
After the warning was issued, investors voted with their feet.
On August 12, CHABAIDAO's single-day decline reached 12.38%, closing at HKD 6.3 per share. On the 13th, it continued to drop by over 10% during trading hours, with the year-to-date stock price decline exceeding 60%

02555

- TeaBee (2555.HK) issued its first profit warning since going public on August 9.
- The company, a newcomer in the Hong Kong stock market this year, experienced a downturn in its performance in the first half.
- Factors contributing to the decline include changing consumer habits, increased subsidies to franchisees, and higher overall market investment costs.

New product launches and internal competition: The dual pressure facing CHABAIDAO