Summary of Key Points
Tea Yan Yue Se has recently accelerated its expansion into Guangzhou. On the surface, this appears to be a national rollout for the internet-famous brand, but in reality, it is a strategic defense measure driven by various factors such as the heavy capital investment in its own supply chain (for example, the 520 million yuan factory in Changsha, which is currently underutilized), the need for a high density of stores due to its direct-operated model, and intense competition from local markets. Guangzhou was not the preferred location; it was merely the option with the lowest marginal costs based on Shenzhen's existing supply chain infrastructure. The brand's future success will depend on its ability to spread supply chain costs over a sufficient number of stores, ensuring that the Changsha factory and cold-chain logistics systems operate efficiently.
1. The Underutilized Factory: A Pressing Need for Expansion
In 2025, Tea Yan invested 520 million yuan to build a production base in Changsha with a capacity designed to serve 5,000 stores. However, there are currently only around 1,000 main brand stores nationwide, and even when considering subsidiary brands, the utilization rate of this capacity is just one-fifth. Costs associated with the factory, warehousing, and headquarters are fixed expenses—whether the facilities are used or not, depreciation and labor costs must be incurred. The longer the facilities remain idle, the more money is lost. It’s like buying a large oven but using it only to bake one bread per day; the cost will be high unless more bread is sold to offset the investment. Therefore, Tea Yan needs to open more stores quickly to utilize the factory's capacity, or these heavy assets will become a burden.
2. Shenzhen Lays the Foundation: Guangzhou Is the Most Cost-Effective Next Stop
Tea Yan’s entry into Guangzhou did not start from scratch. Even before officially announcing its first store in Shenzhen in January, the company was already recruiting warehouse managers and establishing a warehousing and management team. Both Guangzhou and Shenzhen are part of the Greater Bay Area, which means shorter logistics distances. The supply chain system in Shenzhen can be directly utilized, reducing costs significantly compared to setting up new infrastructure. Tea Yan has chosen shopping malls operated by China Resources (such as Shenzhen Bay Vanke City and Nanshan Vanke Tian Di) for its stores in both cities, and the same cooperation processes are applied in Guangzhou’s first store at Bai E Tan Vanke City. This approach minimizes additional costs associated with communication and opening new stores.
3. The Shortcomings of a Direct-Operated Model: Insufficient Store Density Leads to High Costs
Tea Yan operates on a direct-operated model, meaning it bears all the expenses for rent, labor, and warehousing. In Changsha, with hundreds of stores in close proximity, these costs can be spread over each cup of milk tea, keeping the logistics cost per store low. However, outside of Hunan, where there are fewer stores, fixed costs (such as a monthly warehouse rental of 100,000 yuan, which would amount to 10,000 yuan per store if there are only 10 stores) become much higher. To make the supply chain viable, Tea Yan must open enough stores in a particular area. With only one store in Guangzhou so far, it will inevitably need to expand further; otherwise, the cold-chain vehicles will have to make multiple trips for just a few cups of milk tea, resulting in substantial losses.
4. Intense Local Competition Forces Expansion
The competition in Changsha is becoming increasingly fierce. Brands like Gu Ming and Ba Wang Cha Ji are not only opening stores in core business districts but also expanding into communities and smaller towns, competing for Tea Yan’s regular customers. Tea Yan’s once unique product offerings (freshly brewed tea bases and fresh milk with cream) are now being replicated by many other milk tea shops, reducing its competitive edge. If it remains solely in Changsha, its market share will continue to shrink, forcing the brand to seek new markets.
5. Queueing at Opening Hours Is Not the Real Test: The Critical Factor is Capacity Utilization
There will definitely be queues at Tea Yan’s first store in Guangzhou, but this is just a temporary phenomenon. The real challenge is whether the brand can open enough stores to ensure that cold-chain vehicles from Shenzhen are fully loaded with goods every day, avoiding unnecessary losses. Founder Lu Liang emphasized that either expansion or inaction will lead to failure, mainly due to supply chain issues: if the company does not expand, the idle factory will result in losses; if it expands but does not achieve sufficient store density, high supply chain costs will also cause losses. Ultimately, the brand’s survival depends on its ability to manage these heavy asset investments effectively.