War is looming in the beverage segment this summer in China. There are rumors that Coca-Cola and Pepsi are weighing in the sparkling water segment and that bubble tea chain, Nayuki, is expected to throw 500 million to 1 billion yuan (~USD 75 – 150 million) to purchase a ready-to-drink (RTD) product line. Does this mean that leading beverage brands will compete in the sparkling water segment in China?
As the sales of RTD products are increasing, Nayuki is eager to purchase an RTD product line. The estimated investment is between USD 75 million and 150 million. Nayuki is expecting to cooperate with an RTD manufacturer in East China or South China that is able to produce 70-80 million boxes of drinks per year with 8 to 12 production lines. Nayuki would also like this manufacturer to be experienced in sterile cold packaging and automation technology.
Established in 2021, Nayuki Drink Technology had launched 7 types of bottled tea drinks. However, the company’s bottled tea drinks have not yet become popular enough, not like its bubble tea products. Now the beverage community believes that Nayuki will weigh in the bottled drink segment; after all, USD 150 million is not a small number.
Why does Nayuki want to invest in bottled sparkling water?
One of the reasons lies in the company’s rival: Heytea, another of China’s leading bubble tea brands, has already entered the bottled sparkling water segment for quite some time. The bottled drinks contributed more than 5% of Heytea’s overall sales in peak seasons. Xi Xiao Ping (喜小瓶 in Chinese), a private label under Heytea, achieved an encouraging outcome with its sparkling water, reaching 3rd place in the “double 11” (Chinese biggest shopping festival) of 2020. Currently, Xi Xiao Ping has even more products, such as juice tea, lemon tea, and bottled milk tea.
Compared to bubble tea drinks, bottled beverages have some advantages, such as popularity, lower production cost, higher gross profit, and a higher retention rate. Though neither Heytea nor Nayuki gained much from selling bottled drinks so far, Heytea will have more stories to tell to its shareholders.
It is certain that challenges and opportunities remain for tea drink brands that want to enter the bottled drink segment.