Milk tea brings sweet earnings to Pingnan entrepreneurs

2020-12-30 12:04:05

Pedestrians pass milk tea stores in Pingnan county, Guangxi Zhuang autonomous region. [Photo/CHINA DAILY] In 1990, young worker from Guangxi sets the sector brewing in Guangdong Thirty years ago, Chen Youjie, then 19 years old, headed to Guangzhou, Guangdong province, from his hometown in Pingnan county, Guangxi Zhuang autonomous region, for an oil sector job. He never imagined that the milk tea business he started at the time would help lift his hometown out of poverty. Currently, milk tea brands set up by entrepreneurs from Pingnan have surpassed 200, and offline stores selling the products now stand at more than 40,000, covering not only China but Southeast Asian countries. Annual sales revenue from their companies topped 50 billion yuan ($7.6 billion) last year, taking up around 20 percent of China's market share for the beverages. Moreover, the milk tea industry in the small county employs nearly 200,000. "Back in 1996, when I was an oil sector worker in Guangdong, bubble milk tea became popular there. The tea was sold for 5 yuan a cup, and a lot of young people lined up to buy it. That was when I thought I could change my career and establish my milk tea business, which, compared with oil extraction, was not that hard and much cleaner," Chen said. In 1999, Chen's "1-yuan milk tea "hit the retail shelves in Tianhe district, one of Guangzhou's most flourishing areas. The success of his 12-square-meter store on the very first day surprised him as he sold out more than 8,000 cups of milk tea on a single day. This convinced him to set up another five stores shortly thereafter. Chen said he was astonished at the early success of his milk tea business. At that time, the average monthly salary level of people in Guangzhou was 300 yuan. For Chen, his first milk tea store in Tianhe could sell more than 1,000 cups a day, bringing him a daily net profit of around 500 yuan. Chen then came back to Pingnan and brought six fellow villagers to Guangdong. They quickly acquired milk tea business operational knowledge from Chen, and then brought their relatives to Guangzhou, Dongguan and other cities in Guangdong. "At that time, almost overnight, Guangdong was full of Pingnan milk tea stores," said Chen Rensheng, one of the fellow villagers from Pingnan. Thanks to Chen Youjie selflessly passing on business experience and technical skills, Pingnan milk tea stores began flourishing nationwide since 2000. Wang Gangyi, a professor at the College of Economics and Management at Northeast Agricultural University, visited Pingnan for field research in October 2019. "The milk tea business based on lineage relations helped local households quickly form a milk tea store network nationwide. Instead of competing with each other, they formed an industrial aggregation by further developing refined divisions of labor, from raw material sourcing to marketing," Wang said. "The number of Pingnan milk tea stores astonished me. Just like people from Lanzhou, Gansu province, and their famous noodles, Pingnan milk tea stores became ubiquitous in China," Wang added. However, with the growth of the millennial generation, who serve as the backbone of milk tea consumption, alongside the influx of social capital, new milk tea brands, including Hey Tea, Lelecha and Naixue's Tea, now compete with Pingnan's milk teas. Chen Rensheng said that product design and packaging from new milk tea stores seemed to be better than traditional milk tea shops. "And startup capital for a milk tea shop is higher than in the past. A normal store needs at least 100,000 yuan, and a high-end one can cost up to 600,000 yuan," he said. In March 2018, Chen Youjie established the Guangxi Pingnan Milk Tea Association. He served as chairman and Chen Rensheng stood as secretary-general. The association serves as an information and resources sharing platform. It not only connects the local government with the industry, but also pairs upstream suppliers with downstream milk tea enterprises. With the help of the association, Pingnan residents are making milk tea using refined methods. Each family first takes over a mature brand, and then when the brand attains a certain market share locally, they develop a new brand. "Currently, although the market share of Pingnan milk tea is not as high as before, every year thousands of new stores are opened. There are so many newly opened stores that the association can't keep track of every one of them," said Chen Rensheng. Wang said Pingnan's milk teas mainly target the medium and lowend markets. Instead of competing with newly emerged high-end brands, it was utilizing the business mode of small profits and quick returns. "Moreover, with the whole industrial line mastered, Pingnan milk teas have been conducting capital intervention by taking over other milk tea brands. From milk tea itself to capital injection, the transition helped it to gain core competitiveness," he said. Following the success of Pingnan's milk teas, Chen Youjie also wanted to help poor villagers in Pingnan. For fruit farmers, the Guangxi Pingnan Milk Tea Association offered technical guidance and helped them market their produce-which included lemons and passion fruit-at market prices via signed sales agreements. For those who wanted to get involved in the milk tea business, the association helped them start up a franchise without charging them, offering each entrepreneur technical guidance, equipment and raw materials worth 10,000 yuan. So far, the association has helped 300 struggling households run milk tea businesses of their own. Yang Dadong, deputy secretary of the Pingnan county Party committee and head of Pingnan county, said: "With milk tea stores springing up everywhere in Pingnan, the government will offer support to boost the development of the milk tea industry. Specifically, we plan to construct a milk tea industrial park, milk tea town, milk tea training bases and raw material supply bases." Chen Youjie said that as the next step, Pingnan's milk teas plan to go global. With the association serving as a service platform for milk tea information and resource sharing, he plans to stay in Pingnan to build a research and development center, training bases, industrial chain plants and a logistics city in order to further boost employment and help the poor in his hometown. "Pingnan people will follow the joint development pattern in China and sell our milk teas to the world," Chen said.