Summary of the Analysis in Plain Language
This article dissectes the current predicament of the popular Changsha bubble tea brand, Chayan Yuese. The brand once gained nationwide attention for its "innovative new Chinese style" and its limited availability in Changsha, which led to long queues and demand from scalpers. However, in recent times, it has closed several businesses, including the "Yizhoushijiu Cha" (Art and Literature Wine and Tea House) and the "Xiaoshenxian Cha Guan" (Relaxation Tea House), which it had been experimenting with for over two years. Additionally, attempts at diversifying into other areas such as tea cafes, lemon tea, cultural merchandise, and quick-service food failed to replicate the brand's success. What's more problematic is that Chayan, which hesitated to expand outside Hunan for seven years under various excuses, has finally decided to venture into competitive markets like Guangzhou and Shenzhen. But by then, the trend for new tea drinks has passed, and its once-exclusive advantages have become the norm in the industry, leaving it with very limited room for error.
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Four Easy-to-Understand Explanations
1. Failed attempts at diversification: The problem wasn't a lack of popularity, but a failure to understand the economics of different businesses
Many people wonder why Chayan’s tea houses, which attract large crowds, wouldn’t attract customers when it tried to open other types of businesses. The issue was that Chayan applied the same profit model to completely different types of businesses. For example, trying to run a coffee shop with the same mindset as a tea house is bound to fail. The core of a tea house is speed—customers order, drink, and leave quickly, allowing for a high turnover rate. A 20-yuan cup of tea can generate a profit of over 10 yuan, and selling two to three hundred cups a day can cover the costs. In contrast, Chayan’s Xiaoshenxian Cha Guan, with an average order price of 16-18 yuan, was designed for long-term seating and leisure activities. However, it couldn’t even accommodate a steady stream of customers, resulting in losses due to high expenses. The Yizhoushijiu Cha Guan tried to offer affordable drinks, but it failed to appeal to both non-drinkers and those looking for a lively atmosphere or a variety of drinks. Clearly, Chayan didn’t understand how to make money in different business models.
2. The "new Chinese style" has lost its exclusivity
Chayan’s success was due to a niche in the market: previous tea drinks were either Western-style or traditional Chinese, and no one had fully explored the "new Chinese" concept. Chayan was the first to use elements like traditional Chinese aesthetics and poetry in its branding, which was novel at the time. But now, the "new Chinese style" has become common. Brands like Mixue Bingcheng and Xicha offer limited editions with traditional Chinese themes, and even basic tea shops with simple designs can claim to be part of this trend. As a result, consumers are no longer impressed by these features, and they won’t pay extra or queue for a cup of tea.
3. The hesitation to expand out of Hunan was a conservative choice
Chayan’s refusal to expand outside Hunan for seven years was based on excuses such as high direct-operated costs, supply chain challenges, and a desire to maintain a connection with local culture. However, these reasons are not convincing compared to competitors like Bangwang Cha Ji, which started later but quickly expanded nationwide. Bangwang Cha Ji has already solved the same issues, demonstrating that Chayan missed out on opportunities due to its comfort in its home market.
4. Expanding now, at a time when the industry is declining
Chayan’s decision to expand to Guangzhou and Shenzhen is timing poorly. In 2020, there was still demand for its unique brand in a market where new Chinese-style tea drinks were just emerging. But now, these cities have a wide range of tea options, and consumers are less willing to queue for a cup of tea. Moreover, the growth in the new tea drink industry has slowed down, with brands focusing on retaining existing customers rather than attracting new ones. Even competitors like Bangwang Cha Ji are seeking new revenue streams. Chayan’s entry into these markets comes at a difficult time, and the chances of a turnaround are slim.
In summary, Chayan’s struggles reflect a failure to adapt to changes in the market and a misunderstanding of the economics of different business models. Its once-exclusive advantages have become the norm, and it has missed critical opportunities due to a conservative approach.