2024 is a key year for achieving the goals and tasks of the “14th Five-Year Plan,” with heavy and arduous tasks for reform, development, and stability.
2024 is an important year for implementing the “Suggestions for the 14th Five-Year Development Plan for China’s Tea Industry,” making the optimization and upgrading of the tea economic system urgent.
Against the backdrop of economic downturn and consumption downgrading, what new challenges and changes has the Chinese tea industry experienced in 2024? What new changes and trends have emerged? How can development be sought amidst these challenges?
As a mainstream media platform for the Chinese tea industry, China Cooperation Times · Tea Weekly All-Media bears the media responsibility of promoting industry development and has released the “China Tea Industry Observation Report” for three consecutive years. In addition to leveraging the expertise of professional journalists from Tea Weekly, the 2024 China Tea Industry Observation Report also invited many experts and scholars who have deep knowledge of industry laws and have worked in specialized fields of the tea industry for many years to participate in its creation, identifying prominent problems, providing solutions, and contributing wisdom to industry development through profound thinking.
The 2024 China Tea Industry Observation Report consists of eight chapters, covering eight important areas: industry development strategy, supply chain, technology, brands, e-commerce, space, consumption, and culture. It adheres to the principle that “observation stems from the front line, and conclusions stem from practice,” insisting on finding problems in practice, seeking answers from practice, and observing trends through practice.
Expanding new scenarios, embracing new consumption
Author: Deng Zengyong, Chairman of Beijing Tianxia Mingshan Tea Industry Co., Ltd.
Possesses many years of marketing and comprehensive management experience in large-scale tea enterprises; formerly General Manager of the Domestic Marketing Department of China Tea Co., Ltd., Chairman of Menghai Tea Industry Co., Ltd. of Da Yi Group, and Chairman and General Manager of Xiangyuan Tea Industry Co., Ltd.; an initiator of the “small production area” theory and practice in the Chinese tea industry.
Introduction: In 2024, tea consumption shows both new changes and old problems; while overall it remains relatively stable, there is structural unevenness in “warmth and coldness.” Specifically, traditional tea enterprises are generally under pressure, but some have achieved growth; new consumption is flourishing, with the rapid development of certain bottled tea and ready-to-drink tea companies forming a notable growth pole for tea consumption, while culture promotes tea consumption from different levels.
(I)
Changes in Tea Consumption in 2024
1
Decline in traditional tea consumption
In late November 2024, at the Guangzhou Tea Expo—often called the “barometer of the tea industry”—several tea enterprises that had participated consecutively in previous years, including Pu-erh tea, white tea, and Liu Bao tea enterprises, did not appear. The Guangzhou Tea Expo is not an isolated case; similar phenomena have occurred at tea expos across the country. Behind this phenomenon is a direct reflection of tea enterprises controlling costs when sales are under pressure.
Several heads of large-scale tea enterprises stated that tea consumption in 2024 has experienced a significant downgrade and contraction; some enterprise leaders even believe that the market situation in 2024 is unprecedented in their many years of involvement, illustrating how immense the pressure is. It is also understood that some leading enterprises in different tea categories experienced sales declines of around 30% in 2024, with some individual enterprises seeing drops as high as 50%. As demand for traditional tea consumption declines and finding new customers becomes increasingly difficult—while most tea enterprises still need time to transform—intensified homogeneous competition has become inevitable. Meanwhile, as some branded enterprises face a loss of momentum in their channels, they have increased the intensity of online direct sales, which to some extent has also exacerbated channel conflicts.
Under widespread pressure, the performance of different tea enterprises varies. The author has organized the following table based on public data (see below). Among large enterprises, the year-on-year decline of Tianfu Group, which operates multiple categories, was smaller than that of Yunnan Lancang Gu Cha Co., Ltd., which focuses on a single category (primarily Pu-erh tea); Xie Yuda Tea Co., Ltd. and Guangdong Tianchi Tea Industry Co., Ltd. achieved certain growth by leveraging local characteristic resources; Zhejiang Minghuang Natural Food Development Co., Ltd. and Zhejiang Cha Gan Kun Food Co., Ltd., which focus on tea bags, herbal teas, and tea extracts, achieved varying degrees of growth, with the former’s growth rate reaching as high as 70%.
2
Changes in consumption structure
First, the expansion of the new tea beverage market has driven an increase in the sales of bulk raw tea. For example, Nongfu Spring consumed over 10,000 tons of raw tea in 2023; based on its nearly 60% sales growth for tea beverages in the first half of 2024, its annual raw tea usage is estimated at approximately 20,000 tons. The robust demand for bulk raw tea has driven up the prices of bulk tea raw materials in Pu’er, Yunnan. Second, due to the impact of consumption downgradting, traditional tea enterprises have seen a decline in demand for high-end products, while mid-to-low-end gift boxes, low-unit-price convenient teas, and modernized products have become more popular. Third, e-commerce has driven the sales of more low-unit-price products.
3
Flourishing new consumption
In 2024, China’s tea consumption presented “four new” characteristics:
First is the diversification of consumption forms. Tea drinking is no longer limited to traditional leaf trading but has expanded into the realm of beverages; driven by concepts such as health, wellness, and fashion, new tea beverages and sugar-free teas have developed rapidly, forming a massive market. Nongfu Spring’s 2023 annual report shows that its revenue from tea beverage products reached 12.659 billion yuan for the year, a year-on-year increase of 83.3%, accounting for 29.7% of the company’s total annual revenue; Nongfu Spring’s 2024 interim report shows that its tea beverage products continued to maintain high growth in the first half of the year, with revenue during the reporting period reaching 8.43 billion yuan, a year-on-year increase of 59.5%, accounting for 38.0% of total revenue. In addition to drinking consumption, tea consumption is also reflected in various aspects such as tea-based foods (such as tea pastries and tea ice cream), tea cosmetics, and tea tourism.
Second is the rejuvenation of consumer groups. The force of rejuvenation may come from several aspects: first, new tea beverages attract a large number of young people to start consuming tea in ways they like; second, the introduction of more convenient products such as sugar-free tea beverages, new-style tea bags and single-serving packs, and convenient brewing tools has facilitated tea consumption for young people; third, industry peers are persistently promoting tea to young people.
Third is the diversification of consumption scenarios. Beyond daily individual consumption, tea consumption has extensively extended into business, social, leisure, and wellness aspects. Tea consumption scenarios have expanded from indoors to outdoors, from static to dynamic, from primary to high-end, from shallow to deep, and from single to diverse, greatly enriching consumption scenarios.
Finally, new tea beverages are expanding into overseas markets. Research shows that as of the end of September 2024, Mixue Bingcheng has opened nearly 5,000 stores overseas, with another thousand stores opened in less than a year; Mixue Bingcheng is rapidly expanding its footprint in Southeast Asia. Other new tea beverage brands are also actively expanding into overseas markets. Compared to the traditional export of Chinese tea raw materials, the overseas expansion of new tea beverages is helping Chinese tea expand into new markets in new forms.
(II)
Problems in Tea Consumption in 2024
1
As the Chinese economy enters a low-growth phase, the tea industry and tea consumption need to transform their growth models. Benefiting from China’s long period of high-scale economic growth, the Chinese tea industry has formed massive production capacity and market scale after 20 years of development. As the economy enters a low-growth phase, the growth models for Chinese tea, including the growth model for tea consumption, need to transform, urgently requiring the search for new drivers.
2
The macroeconomy directly affects traditional tea consumption demand. First, tea gift procurement in several industries such as real estate, construction, building materials, and mining has experienced an almost precipitous decline; second, many foreign trade-oriented enterprises have faced significant pressure in recent years, leading to a straight drop in the tea demand of enterprises and business owners; third, many industries are compressing expenditures under the current economic situation, affecting tea consumption demand; fourth, the downturn in the stock market has brought a “negative wealth effect,” making many people feel they have “no money,” which indirectly affects tea consumption.
3
The massive stock of existing tea further exerts pressure on current tea consumption. Since the Pu-erh tea boom in 2005, it has driven Chinese people’s awareness of aged tea, while also creating an intermediate demand for investment and collection, providing opportunities for the rapid development of various tea categories such as Pu-erh, white tea, and dark tea. However, under the current situation, whether it be brand enterprises, channel merchants, or collectors, most have chosen to reduce inventory and consume existing stocks, naturally exerting pressure on current tea consumption. Some enterprises that developed by relying on investment and collection, and were relatively optimistic in recent_years or had product prices deviating significantly from value, may experience operational volatility.
4
Malicious tea speculation incidents and the prevalence of counterfeit and inferior products on live-streaming platforms have had a serious negative impact on tea consumption. Continuous Pu-erh tea speculation in Guangzhou Fangcun Market has affected the mindset of many operators. The explosion of the 2024 “Pan Tea” incident not only caused significant harm to many participants but also created a bad social impact, leaving consumers with a negative impression of the tea consumption market. E-commerce live-streaming was booming in 2024, but low-priced tea and counterfeit/inferior tea remained difficult to curb; this not only affects consumer reputation and brand image, bringing about the “bad money drives out good” phenomenon, but also damages the industry’s image and lowers industry profit margins.
(III)
Taking multiple measures to boost tea consumption
Promoting the healthy and orderly development of Chinese tea
Regarding the current problems in tea consumption, the fundamental strategy lies in boosting demand. Therefore, the author has the following suggestions for tea enterprises in boosting tea and promoting tea consumption:
1
Maintain a positive mindset and respond steadily. Under the current situation, one cannot be blindly optimistic, but one also cannot be overly pessimistic or simply “lie flat.” When past models or methods are no longer effective, more effort is needed to cultivate new consumption demands; after all, there are still large populations that do not drink tea or drink little tea, and many scenarios where tea can be integrated. Actively popularizing tea knowledge and spreading tea culture to the public is an unchanging principle.
2
Adjust and optimize product structure. Follow the new consumption behaviors of old customers under the new situation, as well as the new needs of new customers, by launching new products; adjust the mindset of pursuing “big business” to become accustomed to doing “small business”; shift from what one is used to doing toward what else can be done.
3
Explore channel diversification. Do not limit yourself to brand specialty stores; instead, plan around how to efficiently reach the target audience of enterprises or products to form a diversified channel mix. At the same time, actively think about how to integrate digitalization into daily operations and establish a digital marketing model that fits one’s actual situation.
4
Expand new scenarios and cultivate new consumption. For example, new tea beverages, cold brew tea, wellness tea, tea-food integration, tea-tourism integration, etc. We can step outside the framework of traditional leaf business and extend into four areas: tea beverages, space, tea ware, and tea tourism, acting in accordance with our own resource conditions.
5
Empower terminal stores with culture. Looking at the development over the past decade, the terminal stores of the tea industry are evolving toward the integration of product, space, and culture. One must move beyond the intense “involution” regarding taste and aroma and shift toward seeking cross-industry cultural breakthroughs to empower terminal stores and improve the efficiency of space usage. For branded tea enterprises, empowering terminal stores is an important measure for promoting tea consumption.
6
Actively promote the sale of existing aged tea. For tea enterprises operating aged tea, they must truly base themselves on sustainable development and place more emphasis on the overall promotion of the sale of existing aged tea within their own business systems, striving to keep the total volume, structure, and ratio of aged tea production to sales within a reasonable range.
As for regional governments, the following suggestions are made regarding boosting tea consumption: First, reasonably guide industry development. For example, do not blindly expand tea plantation areas; crack down on counterfeiting and the sale of fakes to regulate market order; build industrial infrastructure and create a good industrial ecosystem. Second, actively and effectively promote regional public brands. The promotion of regional brands is of great significance to the development of the regional tea industry; under the current situation, enterprises need the promotional support of local governments more than ever. At the same time, when organizing relevant promotional activities, governments should also focus more on effectiveness. Third, promote the integrated development of cultural tourism and the tea industry. Fourth, seek various ways to cultivate business entities and support the development of leading enterprises.
Task Force
Chief Planner
An Mingxia
Members
Zhang Xinzhong
Chen Hao
Xiao Qiang
Tian Youlong
Wang Jing
Liang Yan
Deng Zengyong
An Mingxia
Copyright Statement
The 2024 China Tea Industry Observation Report is released by China Cooperation Times · Tea Weekly All-Media,
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Author: Lam Sam (LamSam), the Old Tea Head
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