After drinking tea for more than 2,000 years, Chinese people are now embracing new styles of this traditional beverage. From bubble tea, cheese-foam tea and lemon tea to coffee-chai, the market is booming with multiple chain brands springing up across the country.
According to data from 2021 China new-style tea market report by China Chain Store and Franchise Association, the new-style tea market is expected to reach 117 billion yuan (roughly $17 billion) by 2022 and grow to around 338 billion yuan by 2025.
China's new-style tea market has boomed in recent years, driven by the creation of innovative products.
Daniel Zipser, senior partner with Consumer and Retail of McKinsey & Company, said Chinese consumers, especially young consumers, have always looked for new and innovative products. "I think there's no place in the world which has as many SKUs (product items), as many flavors, and as many variants. Many of the brands face the situation of a bit of supply demand mismatch, though. At the same time, they also see a strong uplift of omnichannel as well as delivery activities," he added.
Actually, new tea trends started to take off before the COVID-19 pandemic. From 2015 to 2021, the country's annual compound growth rate of per capita urban disposable income increased by 7.2 percent, and the number for the food and beverage sector was 5.3 percent. The pandemic encouraged innovation in the industry, because customers were looking for new experiences to spice up their social life.
Shi Xueqing is a store manager at HeyTea Qianmen Street Branch. She said new products and seasonal drinks are the stars of the brand. "Our recent best seller is a new tea drink co-branded with a famous TV drama. Customers just pour in to try that. Seasonal fresh fruit tea, like peach tea and plum tea, are all-time favorites," Shi said.
Consumers have shown less interest in similar drinks on the market. That's also why new-style tea and coffee started to lead the consumption trend. During the pandemic, people have been more price sensitive, so tea chains have to take product variety and local market feedback into consideration when launching new drinks.
To keep up with customer demand, brands are working hard to come up with innovative products, and offer online sales to boost their market. Innovation remains critical for this niche market, and the lifting of COVID-19 restrictions has also had a major role in spurring consumption.