IMAGINE BEING THE Starbucks of tea. A couple in Shenzhen founded a company in 2015 with that dream – and they are already billionaires.
It’s a love story with a business twist.
Peng Xin was working as the brand director of a technology company. In 2015, she had an idea of opening a bakery and tea shop. But she had no experience in that area and faced a lot of difficulties in getting started.
Peng Xin dreamed of opening a bakery and tea shop. Picture: Nayuki
On the recommendation of a mutual friend, Peng Xin met Zhao Lin, a man with rich experience in Shenzhen’s catering industry. He used to work for Burger King and Maxim’s Group, and was well-known in the local food business.
As a still-single “leftover man” at the age of 35, Zhao Lin was eager to find a lifelong partner. He’d decided that he would not participate in social activities other than blind dates.
FATEFUL BLIND DATE
On one such occasion, he met Peng Xin. She had her business plan in mind and they talked for 3 hours. Zhao Lin listened carefully and gave her an unusual recommendation for a first step into a new area of business: “You have no experience in the catering industry. If you want to open a teashop, the only way is to be my girlfriend.”
Peng Xin, eight years younger than the businessman she was facing, was a little shy, but found herself agreeing with the request. Three months later they were married – and almost at the same time, the first Nayuki’s tea shop opened, a single outlet in a mall in Shenzhen.
But the business expanded at extraordinary speed.
In Osaka, customers queue outside a Nayuki store. Picture: Nayuki
The rest, as they say, is history. The business became an international success, with branches in Singapore, Japan, and many cities, including Hong Kong (on the Peak).
A few weeks ago, they listed their Chinese bubble tea chain Nayuki, which has more than 500 stores, on the Hong Kong Stock Exchange. The stock price fell on opening, indicating that the road to world domination may not be smooth, but they still managed to raise US$656 million.
Nayuki stores are stylish and aimed largely at the female market. Picture: Nayuki
NAYUKI VERSUS HEYTEA
In fact, Nayuki, known as Naixue’s Tea in Chinese, is the number two in the Chinese market, slightly behind HeyTea, which is not yet listed, but plans an IPO before the end of this year.
HeyTea was established in Jiangmen, China in 2012, and pioneered a new type of tea called Milk Gai Cha, which is called cheese tea in English. It has a special cheese foam topping on different brewed teas and fruit drinks.
Nayuki is more upmarket and has beaten its rival in offering shares to global investors. The firm is also making strong moves to establish an international presence. The group now has 556 directly owned stores in more than 70 cities in China and Japan, plus one branch in Hong Kong.
Nayuki and Heytea have different strategies. Nayuki is more upmarket, with drinks costing about 30 yuan. It recently launched a premium brand, Nayuki PRO, and added more coffee products. But it also offers snacks that office workers can grab when passing. Heytea launched a takeaway chain store called Xixiaocha last year with very cheap items (six yuan to 15 yuan) for the low-end market.
Taking the same route as Starbucks, both offer drinks which are no longer simple cups of brown liquid but are tall, colorful treats. Look at this picture of strawberry tea and accompanying snack released to mark Nayuki’s fifth birthday for an example (below).
Both drinks and food are highly Instagram-friendly. Picture: Nayuki
New-style teas are generally served with extra items such as pearls (small chunks of jelly), coconut, cream toppings, and even chunks of fresh fruits. These highly sweet ingredients will make the human brain secrete dopamine, which makes people feel happy.
The new-style tea drinks are healthier than powdered milk tea, have a rich taste and are highly Instagram-able of course.
But it’s not an easy business: investors note that costs are high and profit margins slim.
Classy decor, fresh ingredients and staff costs make razor-thin margins. Picture: Nayuki
TWICE THE SIZE OF COFFEE MARKET
China Business Data Center estimated that by the end of 2020, the total scale of China’s tea drink market reached 442 billion yuan, twice the size of the country’s coffee market at 215.5 billion yuan. It is expected that in 2021 the gap will widen.
China is, of course, the birthplace of tea culture, and has been around for more than four thousand years. (This publication will do a more detailed history of the drink for publication later this year.)
But the first brewers of the drink would be unlikely to recognize the colorful, sweet treats that bear the name of tea today.
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Renee Zheng is a staff writer/ researcher for Friday magazine