Summary of Key Points
Recently, HiCha opened its first independent Xilado Lab store in Fujian in Xiamen, focusing on Italian gelato and tea drinks. This move represents a shift towards a "differentiated, high-end strategy" after temporarily halting new franchise expansions. The new trend in the tea drink industry is a transition from rapid expansion to competitive market consolidation, with leading brands each adopting different strategies: Mixue is expanding globally, Ba Wang Cha Ji is leveraging its IP and going international, Gu Ming is diversifying its product range, and Nai Xie has lowered prices to appeal to a broader audience. HiCha, on the other hand, is choosing to reduce its scale and focus on enhancing the in-store experience and product innovation. However, this approach comes with challenges, such as managing the supply chain and coordinating between franchise stores and high-end outlets, and the ultimate success of these efforts remains to be seen.
I. The Xilado Lab Store: More Than Just Ice Cream
The Xilado Lab store is not your average milk tea shop; its core proposition is differentiation:
- Products: It specializes in freshly made Italian gelato using custom-made dairy products and animal cream, with seasonal fresh fruits (e.g., city-exclusive versions during opening events), paired with classic tea drinks. The quality of ingredients and the overall taste experience are significantly higher compared to regular milk teas.
- Ambiance: Inspired by the Minnan "tea table" culture, the store features a design that combines red brick textures with modern materials, creating a low-platform seating area reminiscent of a small teahouse. HiCha calls this concept a "differentiated space," part of its effort to refresh its store aesthetic and avoid a uniform look across all its outlets.
- Origins: The Xilado concept first emerged within HiCha's internal product line in 2019, was later sold in experimental stores, and now has become an independent business. Xiamen marks the first launch of this format in the Minnan region, targeting core shopping areas in first-tier and new first-tier cities.
II. Why Did HiCha Suddenly Change Course?
HiCha's strategic shift over the past two years is quite clear:
- 2022 End: Franchise Expansion: While the industry was focused on expanding scale, HiCha aimed to reach a broader market through franchising, growing its store count to over 4,300. However, issues arose—franchise stores varied greatly in quality of service and product freshness, which contradicted HiCha's brand philosophy of "high quality and excellent experience," leading to many negative reviews online.
- 2025 Start: Suspension of New Franchises: Realizing the risks associated with franchising, HiCha shifted towards a more high-end approach, reviving its "Daydream Plan" from 2017 (which emphasized large spaces and local cultural design). It opened a 190-square-meter DP store on Chunxi Road in Chengdu and updated the design of over 130 existing stores, maintaining prices above 20 yuan to reinforce its high-end image. The Xilado Lab store is an extension of this high-end strategy.
III. The Industry Enters a Phase of Competitive Stagnation: Leading Brands Each Take Different Paths
The growth rate of the new tea drink industry has slowed from rapid expansion to around 5%-7%, leading to intense competition among top brands:
- Mixue Ice City: Continues to expand its global presence with over 4,000 stores and adds breakfast options to diversify its revenue sources.
- Ba Wang Cha Ji: Builds brand awareness through partnerships with IPs (e.g., anime and films) and international expansion, also exploring morning and evening market segments.
- Gu Ming: Diversifies into coffee, desserts, and snacks to reduce reliance on milk tea sales.
- Nai Xie: Lowers prices to below 20 yuan to attract a more affordable audience and compete with mid-range brands.
- HiCha: Conversely, it reduces its scale and invests in enhancing the in-store experience and product innovation, resulting in higher average transaction values. However, this approach requires stricter control over processes (e.g., daily fresh gelato production).
IV. What Are the Risks of HiCha's New Approach?
Despite the premium feel of the Xilado Lab store, there are several challenges:
- Challenge 1: Can Gelato Maintain Customer Appeal? Freshly made gelato demands high-quality ingredients and continuous in-store operations, posing significant supply chain pressures. Whether consumers will continue to pay for this "fresh, high-end" experience is key; a low repeat purchase rate could threaten the business's sustainability.
- Challenge 2: Coordinating Franchise Stores and High-End Outlets: With many franchise stores, there is a gap in quality between them and the high-end Xilado Lab stores. If customers encounter poor experiences at franchise stores, it may affect the overall brand image.
V. A Common Question for the Industry: Where’s the Growth?
The industry faces a critical question: How to continue growing when new store openings no longer drive growth? Brands are exploring various solutions:
- Mixue Ice City: Expands internationally and extends operating hours.
- Ba Wang Cha Ji: Builds brand momentum through IP partnerships and international expansion.
- Gu Ming: Diversifies products to reduce risk.
- HiCha: Focuses on high-end experiences and innovation.
The Xilado Lab store in Xiamen represents one of HiCha's attempts to address these challenges. However, whether this strategy will be successful depends on consumer acceptance, the ability of the supply chain to meet demand, and the ability to resolve conflicts between franchise and high-end outlets. Only time will tell.
(The entire analysis is written in plain language, suitable for non-financial professionals to understand.)