No Monkeying Around for New Chinese Tea Start-up Targeting China's Smaller Cities
COVID-19 and China
Fruit Juice. PHOTO: Credit to Unsplash.

New Chinese tea brand, Reinforcements of the Monkey (猴子的救兵), opened 100 stores in 17 days in China’s small and medium-sized cities, according to Financial Circle. The new Chinese tea start-up beat HeyTea’s past plan to open 100 new stores in China, Singapore, and Hong Kong by the end of 2018.

In Mar 2019, the new tea brand cooperated with a Chinese business platform, “Where is the Business Opportunity” to achieve its goal.

With tea brands such as Nayuki and HeyTea fought in China’s tier one cities, Reinforcements of the Monkey focused on smaller towns, seeing success with its differentiated positioning and cost-effective business route.

Unlike its first-tier competitors, one store is approximately 15 square meters and operated by two people. The overall cost of opening one store is less than CNY 100,000.

The company’s co-founder, ZHANG Jike (张继科), former ping-pong winner of the 7th Grand Slam, realized how China’s smaller cities was an underserved tea community. The market scale of new tea market development exceeded CNY 90 billion in 2018, and brands such as Nayuki had already proven their profitable business models in first-tier cities.

Reinforcements of the Monkey officially launched in Mar 2019; its minimalist appearance with black and white tones became the tea market’s dark horse. After six months of research and development, the new tea brand launched a series of products catered to suit the taste of different target demographics.

A distinct advantage the Chinese tea start-up has over other tea brands is powerful endorsements. The brand became powerful due to not only ZHANG Jike’s fame but also support from his celebrity friend circle such as ping pong champions WANG Hao (王皓) and KONG Linghui (孔令辉); badminton champion, CAI Wei (蔡赟), and film stars MA Su (马苏), DOU Xiao (窦骁), DONG Qing (董晴), and more.

Also, it brings what one would expect to see and feel from new tea start-ups in China’s first-tier cities to unsatisfied markets. According to Jiguang, start-ups can usually monopolize the market they began in. Therefore, this gives it a competitive advantage. However, there’s still ample room for growth in providing convenience for consumers by ordering online or eventually through its app. How the company decides to expand in its downward supply chain will be critical in the future.

HeyTea's advantages lie in its strong network effect, effective WOM (word of mouth) marketing, and customer convenience. Along with Nayuki, it opened a tea room to arguably compete with the atmosphere Starbucks provides. While it's too early to tell whether Reinforcements of the Monkey will venture into first-tier cities, it may stand a good chance in the future due to its reduced marketing costs. According to the South China Morning Post, HeyTea "[saved] millions in marketing" relying on WOM.

The company hopes to become a low-cost entrepreneurial brand with stable profitability. Reinforcements of the Monkey began its operations in Aug 2018 and had a registered capital of CNY 116.1 million.

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