On Thursday, Chinese beverage brand Nayuki announced a sharp price reduction as it launched a new series named “Relaxation”. Its stock price rose by 14.89% today on the HKEx, closing at HK $4.86, and its market value totaled HK $8.336 billion.
The promotional offer will see prices reduced to between 9 yuan ($1.42) and 19 yuan in addition to the company’s promise to introduce at least one new product cheaper than 20 yuan every month.
None of Nayuki’s drinks are priced higher than 29 yuan now, and most range between 14 to 25 yuan. Mango drinks, for example, in the new Relaxation series the mango beverages are priced at 19 yuan, 10 yuan cheaper than the Fresh Mango Cloud FruiTEA.
Nayuki explained the adjustment was a response to consumer demand after some research by the company. As such, Nayuki is looking to provide consumers with beverages with more options and lower prices based on the company’s strong supply chain, digital capabilities and quality control.
In terms of supply chain, Nayuki has built a stable and efficient system to keep its stores brimming. It adopts scale procurement, reduces upstream scale costs and provides space for product price adjustment through the co-construction of a tea orchard, digital management and strong brand bargaining power.
Since 2021, many tea brands, including Yidiandian, CoCo Fresh Tea & Juice, Yi He Tang, Chabaidao and Modern China Tea Shop, have raised product prices, most are now up by 1 yuan, and very few are up by 3 yuan. Yet against the price increase, HeyTea, Nayuki Tea and LELECHA cut prices ranging from 1 yuan to 10 yuan, even setting some prices at less than 10 yuan. On February 24th, HeyTea announced not to price any new product at 29 yuan or above in 2022, and promised not to raise the prices of all existing products this year.
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Analysts consider the reason for the price increase of small and medium tea brands was the soaring cost of raw materials and lower dividends. The high-end market is approaching a ceiling, so leading tea enterprises are seeking growth in the low-end market. As leading tea brands start to reduce prices, the competition in the industry will undoubtedly become more intense, and the development space of small and medium-sized brands will be further narrowed.