Milk tea brews a boom amid bust

Milk tea has become somewhat of a national obsession, and a booming business, in China. Many tea connoisseurs said they just can't wait for the COVID-19 pandemic to end so they could resume indulging in their favorite pleasure－drinking milk tea.

Not so long ago, such consumers would line up outside milk tea stores. But, the advent of online service platforms that offer home and office delivery has transformed the business, expanding its scope and reach.

Now, the pandemic and the attendant stay-in lifestyle have led to further growth of online orders and contactless deliveries of beverages, spurring exclusive e-stores on Alibaba's Tmall shopping platform.

Far from crimping the milk tea market, the pandemic appears to have presented new growth opportunities, an industry expert observed.

"The epidemic has forced some small businesses to shut down due to financial pressures, and this will likely benefit reputable brands that boast deep pockets and loyal patrons. The industry will see concentration of leading brands that are expected to enjoy long-term dividends," said Neil Wang, president of consultancy Frost& Sullivan China.

Hey Tea is one such leading brand. Guangdong province-based, the popular milk tea maker debuted in 2012. It will soon launch its official store on Tmall, and offer a group of new products such as tea gift boxes, juices, yogurt, biscuits, coupons, and some other cultural derivative products.

"We aim to keep innovating and diversifying our portfolio, and create freshness for consumers. By retailing online and cooperating with renowned brands, we can further expand our consumption scenarios and create more demand," said Huo Wei, public relations director of Hey Tea.

"The brand has expanded its hot-selling flavors and is an inspiration for other joint products and more channels. Thus, it will slowly foster its explosive IP (intellectual property)," she said.

In the past, Hey Tea had cooperated with Unilever Plc, the Anglo-Dutch household goods, personal care and foods conglomerate, to launch ice cream in a distinct flavor. It also worked with Chinese bakery chain Holiland and introduced a grape juice-flavored bakery product.

Early March, Hey Tea and Alibaba's Freshhema, a fresh food retailer, jointly launched cheese soymilk flavored qingtuan, a green glutinous rice-ball dessert popular in spring among the residents of the Yangtze River Delta.

Other milk tea retailers are also getting into the marketing act. For instance, Nayuki launched its official store on Tmall in late March. It offered several tea products and coupons online. The company said the online store is an extension of its brand and will help expand its market.

Next, Nayuki will put more efforts on the online store and develop more products that are fit for online sales.

Before Nayuki, another milk tea maker, Lelecha, launched its official store on Tmall, where it sells only tea gift box products.

"Catering firms, including milk tea makers, are facing certain pressures due to the impact of the epidemic, and they are keen to expand online sales channels. For milk tea brands, it is inevitable that they should expand into new retail channels," said Wang of Frost & Sullivan.

"By strengthening online layout, they can help alleviate the operational pressures of brick-and-mortar stores. In the long term, this strategy can help expand brand influence. Their popularity will easily spread to smaller cities, and will pave the way for their future store openings in lower-tier cities after the outbreak."

The epidemic had a negative impact on China's catering sector, including the milk tea segment. In the first two months of this year, sector-wide sales declined nearly 40 percent year-on-year. Since March, the sector started to recover, according to Frost& Sullivan.