Page 294 - 2020 White Paper on the Business Environment in China
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0 White Paper on the Business Environment in China
to 6.7 percent annually through 2020 but even a Chinese consumers are seeking alternatives to
small percentage increase leads to a massive gain Western carbonated and domestic bottled juice
in volume due to China’s population. On the other drinks which are considered unhealthy. While the
hand, China exports only 15 percent of the tea it definition of healthy varies from person to person,
produces. The fact that although production is fruit teas are considered healthier. However,
rising, tea exports are remaining stable indicates while jumping on trends is good, it may eventually
that local demand is rising firmly (Bolton). become a problem due to lack of differentiation.
Despite the business potential in the new tea
From delicate kung fu tea ceremonies to trendy market, it’s also a difficult path to tread as new
cheese-topped bubble milk tea, China boasts a opportunities arise new challenges. Barriers to
vibrant tea drinking culture that has also translated entry may appear low but due to supply chain
into big business opportunities. According to the complexity, it’s also a challenge. Logistics, storage,
China Tea Marketing Association, as many as 500 and transportation are also important factors. In
million people were drinking tea-related beverages addition, managers must try to maintain efficient
in 2017 – and most of the new converts were young production levels, avoid waste, and decrease costs
people (Liu). While it’s no secret that tea has a long- (Chen, A Blessing).
standing tradition in China, it has transformed
into somewhat of a trend that Chinese beverage On a wider basis, the global tea market
start-ups have jumped onto by enhancing China’s reached a volume of 6.2 million tons in 2018,
traditional tea culture with coffee culture. This registering a CAGR of 5.63 percent during 2011-
combination has rejuvenated China’s milk tea 2018. The market is further projected to reach a
industry, giving rise to many speculations how this volume of 7.58 million tons by 2024. A rise in the
new tea industry came to be and the challenges disposable incomes of consumers has enabled
businesses would face. the tea manufacturers to introduce premium
and health-oriented products. They have started
For example, milk tea isn’t a new concept in adding several healthy ingredients to their organic
China. For many years, it has been dominated by tea formulations in order to target some of the
pearl milk tea, a popular drink that also found its common health conditions including diabetes,
way into the Western market. It wasn’t until after beauty, obesity, and heart health. Therefore, a
2010 when beverage start-ups began to innovate shift towards the consumption of organic tea acts
the concept by introducing multi-flavored milk as an emerging trend which is having a positive
teas. The traditional milk tea market total sales impact on the growth of the tea market. Another
from drink shops (traditional tea shops, tea major factor driving the growth of tea is its strong
houses, dessert shops) was 41.3 billion yuan in consumer acceptance. Currently, it represents
2016. By 2021, total sales are expected to reach the world’s most consumed beverage after water.
77.9 billion yuan in 2021. The demand for the It has very high penetration levels in Asia and
new tea market primarily came from changes in Europe with people consuming tea on a daily
the consumer market. First, as an alternative to basis. Tea represents an inexpensive beverage
traditional tea shops and street vendors, the trend and is consumed across all socio-economic
now is more toward tea rooms—comfortable consumer groups. A major catalyst which has
spaces for their customers to relax. Tea rooms, supported the popularity of tea across various
similar to the space one usually finds at coffee developing markets, such as China, is the fact
houses in premium locations, are often visited that it is affordable by the mass population, a
by white-collar workers or middle to high-income majority of whom belong to low income groups.
shoppers. New teas have also become attractive On a geographical front, China enjoys the leading
substitutes for instant drinks. As China’s middle position in the global tea market while holding
class gets richer, they are spending considerably the majority of the market share. This can be
more on food and beverages. According to HKTDC accredited to tea being an important part of the
Research, 60 percent of respondents indicated Chinese culture where it is consumed on both
that they pay attention to product quality even casual and formal instances (R&M, Global Tea).
though it means greater spending. Furthermore,
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to 6.7 percent annually through 2020 but even a Chinese consumers are seeking alternatives to
small percentage increase leads to a massive gain Western carbonated and domestic bottled juice
in volume due to China’s population. On the other drinks which are considered unhealthy. While the
hand, China exports only 15 percent of the tea it definition of healthy varies from person to person,
produces. The fact that although production is fruit teas are considered healthier. However,
rising, tea exports are remaining stable indicates while jumping on trends is good, it may eventually
that local demand is rising firmly (Bolton). become a problem due to lack of differentiation.
Despite the business potential in the new tea
From delicate kung fu tea ceremonies to trendy market, it’s also a difficult path to tread as new
cheese-topped bubble milk tea, China boasts a opportunities arise new challenges. Barriers to
vibrant tea drinking culture that has also translated entry may appear low but due to supply chain
into big business opportunities. According to the complexity, it’s also a challenge. Logistics, storage,
China Tea Marketing Association, as many as 500 and transportation are also important factors. In
million people were drinking tea-related beverages addition, managers must try to maintain efficient
in 2017 – and most of the new converts were young production levels, avoid waste, and decrease costs
people (Liu). While it’s no secret that tea has a long- (Chen, A Blessing).
standing tradition in China, it has transformed
into somewhat of a trend that Chinese beverage On a wider basis, the global tea market
start-ups have jumped onto by enhancing China’s reached a volume of 6.2 million tons in 2018,
traditional tea culture with coffee culture. This registering a CAGR of 5.63 percent during 2011-
combination has rejuvenated China’s milk tea 2018. The market is further projected to reach a
industry, giving rise to many speculations how this volume of 7.58 million tons by 2024. A rise in the
new tea industry came to be and the challenges disposable incomes of consumers has enabled
businesses would face. the tea manufacturers to introduce premium
and health-oriented products. They have started
For example, milk tea isn’t a new concept in adding several healthy ingredients to their organic
China. For many years, it has been dominated by tea formulations in order to target some of the
pearl milk tea, a popular drink that also found its common health conditions including diabetes,
way into the Western market. It wasn’t until after beauty, obesity, and heart health. Therefore, a
2010 when beverage start-ups began to innovate shift towards the consumption of organic tea acts
the concept by introducing multi-flavored milk as an emerging trend which is having a positive
teas. The traditional milk tea market total sales impact on the growth of the tea market. Another
from drink shops (traditional tea shops, tea major factor driving the growth of tea is its strong
houses, dessert shops) was 41.3 billion yuan in consumer acceptance. Currently, it represents
2016. By 2021, total sales are expected to reach the world’s most consumed beverage after water.
77.9 billion yuan in 2021. The demand for the It has very high penetration levels in Asia and
new tea market primarily came from changes in Europe with people consuming tea on a daily
the consumer market. First, as an alternative to basis. Tea represents an inexpensive beverage
traditional tea shops and street vendors, the trend and is consumed across all socio-economic
now is more toward tea rooms—comfortable consumer groups. A major catalyst which has
spaces for their customers to relax. Tea rooms, supported the popularity of tea across various
similar to the space one usually finds at coffee developing markets, such as China, is the fact
houses in premium locations, are often visited that it is affordable by the mass population, a
by white-collar workers or middle to high-income majority of whom belong to low income groups.
shoppers. New teas have also become attractive On a geographical front, China enjoys the leading
substitutes for instant drinks. As China’s middle position in the global tea market while holding
class gets richer, they are spending considerably the majority of the market share. This can be
more on food and beverages. According to HKTDC accredited to tea being an important part of the
Research, 60 percent of respondents indicated Chinese culture where it is consumed on both
that they pay attention to product quality even casual and formal instances (R&M, Global Tea).
though it means greater spending. Furthermore,
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