We operate Nayuki teahouses, a leading premium modern teahouse chain in China serving freshly-made tea drinks. According to CIC, Nayuki was the second largest teahouse brand in terms of total retail consumption value among China’s premium modern teahouse market in 2020, with a market share of 18.9%, and was the seventh largest teahouse brand in terms of total retail consumption value among China’s overall freshly-made tea shop industry in 2020, with a market share of 3.9%. Six years ago, our founders, inspired by Chinese tea culture and the global coffee chain concept, opened our first Nayuki teahouse in Shenzhen, China, with a desire to re-invigorate the tea-drinking experience for those who crave fresher, better tasting, and more accessible tea drinks. Today, our flagship brand, Nayuki, has become a recognized brand among China’s young customers.
Premium modern teahouses emerged in recent years with a focus on offering freshly-made tea drinks with an average selling price of not lower than RMB20, and captivating tea-drinking experience normally associated with modern interior space for customers to socialize, which differentiate themselves from traditional teahouses and other freshly-made tea shops such as tea stands. Through our self-operated premium modern teahouses, we have created a comfortable, upscale social space for our customers and communities to get together and enjoy. Our tea drinks can also be conveniently enjoyed on-the-go to accommodate the increasingly rapid pace of everyday life. Our Nayuki teahouse network has experienced a rapid expansion, with the number of Nayuki teahouses growing from 44 as of December 31, 2017 to 491 as of December 31, 2020, which include 489 Nayuki teahouses covering 66 cities across mainland China and one Nayuki teahouse in each of Hong Kong SAR and Japan. According to CIC, Nayuki had the most extensive premium modern teahouse network in China in terms of the number of cities covered as of December 31, 2020. In terms of the number of stores as of December 31, 2020, Nayuki was also the second largest premium teahouse brand in China. In November 2020, we launched our new teahouse format, Nayuki PRO, with a goal to bring Nayuki closer to our customers’ everyday life. With the debut of Nayuki PRO, we have successfully deployed an extensive network of Nayuki teahouses covering high-traffic locations such as premium premises in upscale shopping malls, office buildings and the centers of residential neighborhoods, thereby making our Nayuki products and experience more accessible by our customers, at their leisure or on their daily commute.
We are committed to product quality and innovation. According to CIC, we are the first in China to make freshly brewed tea drinks with fresh fruit and the first to innovate the concept of pairing freshly-made tea drinks with handcrafted freshly baked goods in China. Headed by our co-founder and General Manager, our product development team refines our menu with new items. This has led to a core Nayuki menu of over 25 varieties of classic tea drinks and over 25 varieties of baked goods as of the Latest Practicable Date. To keep our offerings fresh, we also continuously refine our core menu, with approximately one new drink launched every week on average and approximately 60 seasonal products introduced since 2018. Our tea drinks include fresh fruit teas, milk teas and pure teas-all freshly prepared using premium tea leaves and ingredients sourced from quality suppliers. We make most of our baked goods fresh within our teahouses every day to complement our tea drinks. In addition, we offer a wide selection of retail products, such as gift tea boxes, snacks and ready-to-drink tea beverages, catering to the diversified needs and preferences of our customers.
To make the Nayuki experience more convenient and personalized for our customers, we have introduced the Nayuki membership program and our Nayuki app, which are fully integrated with our Nayuki teahouse network. As of the Latest Practicable Date, we had approximately 34.7 million members registered with our Nayuki membership program. In 2020, approximately 49.0% of the total number of our Nayuki orders was contributed by our Nayuki members. Through our Weixin/WeChat and Alipay mini programs and Nayuki app, our customers can easily join our membership program, find the nearest Nayuki teahouse, and place delivery and pickup orders at their fingertips. In 2018, 2019 and 2020, approximately 4.4%, 12.5% and 22.9% of Nayuki orders, respectively, were delivery orders placed by our customers through our Weixin/WeChat and Alipay mini programs, Nayuki app and other third-party delivery platforms.
We have achieved strong operational and financial performance for our Nayuki teahouse network during the Track Record Period. Our Nayuki teahouse network grew rapidly from 44 as of December 31, 2017 to 491 as of December 31, 2020, and further to 556 as of the Latest Practicable Date. Revenues generated by our Nayuki teahouses increased from RMB909.5 million in 2018 to RMB2,291.5 million in 2019, and further to RMB2,870.9 million in 2020. Our profitability continued to improve throughout the Track Record Period, with adjusted net loss (non-IFRS measure) decreasing substantially from RMB56.6 million in 2018 to RMB11.7 million in 2019, and further turning to adjusted net profit (non-IFRS measure) of RMB16.6 million in 2020. Additionally, same store profit margin for Nayuki with respect to the same stores across 2018 and 2019 remained stable at 24.9% and 25.3% in 2018 and 2019, respectively. Due to the impact of the COVID-19 outbreak, same store profit margin for Nayuki with respect to the same stores across 2019 and 2020 was 13.5% in 2020, as compared to that of 21.0% in 2019.
OUR TEAHOUSE BRANDS
We mainly operate two teahouse brands–our flagship brand Nayuki and sub-brand Tai Gai. Historically, we also operated another immaterial sub-brand Li Shan with minimum revenues, inspired by paring pure Chinese tea with freshly-cut fruits. As of the Latest Practicable Date, we had decided to discontinue the operations of Li Shan and close the remaining two Li Shan teahouses.
We differentiate Nayuki and Tai Gai by offering diverse products and targeting different customer bases. For Nayuki, we focus on offering a broad array of freshly-made tea drinks and handcrafted baked goods, whereas for Tai Gai, we mainly offer a selection of classic milk tea and lemon tea drinks, inspired by our goal to bring the original taste and fragrance of tea to young customers in China. Unlike Nayuki which mainly attracts the rising affluent urban population with a wider age group, Tai Gai mainly focuses on the younger generation of customers, including students and young office workers who are generally more price sensitive. Therefore, we purposefully price our Tai Gai products at a relatively lower price range as compared to that of Nayuki. As of the Latest Practicable Date, the average list price for our Tai Gai products was approximately RMB16, compared to an average list price of RMB27 for the freshly-made tea drinks offered by Nayuki.
Compared with Tai Gai, we deploy a broader network of teahouses for Nayuki. As of December 31, 2020, we had 489 Nayuki teahouses covering 66 cities across mainland China, and had extended our footprint to Hong Kong SAR and Japan, with each having one Nayuki teahouse. In contrast, we had 64 Tai Gai teahouses in nine cities in mainland China as of December 31, 2020.
During the Track Record Period, we recorded higher average daily sales per teahouse for Nayuki as compared to Tai Gai. We recorded average daily sales per teahouse for Nayuki of RMB30.7 thousand, RMB27.7 thousand and RMB20.2 thousand in 2018, 2019 and 2020, respectively. For a detailed analysis of the performance of our Nayuki teahouses during the Track Record Period, see “Business – Teahouse Network Management – Our Nayuki Teahouse Performance – Key Performance Indicators.” Average daily sales per teahouse for Tai Gai experienced a decrease from RMB7,537 in 2018 to RMB6,387 in 2019, primarily due to the fluctuations in customer demands as we decided to strategically shift our resources away from driving Tai Gai’s growth in the short term. Average daily sales per teahouse for Tai Gai further decreased to RMB6,140 in 2020, primarily attributable to the impact of the COVID-19 outbreak.
During the Track Record Period, our flagship Nayuki teahouses had generated a vast majority of our revenues from Nayuki teahouses and we expect Nayuki teahouses to continue to account for substantially all of our business operations in the near future. The following table sets forth a breakdown of our revenues for the years indicated.
OUR FLAGSHIP PREMIUM MODERN TEAHOUSE BRAND – NAYUKI
Our Nayuki Products
Inspired by our goal to elevate the tea drinking culture and spread it to more customers, Nayuki’s menu focuses on freshly-made tea drinks and handcrafted baked goods, all made with premium ingredients. Our menu is carefully crafted with a range of classic and seasonal tea drinks and handcrafted baked goods that go well with the drinks. We have developed a list of classic and seasonal tea drinks, comprising three major product categories in fruit teas, milk teas and pure teas. Our in-store crew freshly makes every cup of Nayuki tea to ensure a bespoke experience, catering to customers’ varying preferences-from customized sugar and ice content, from selection of cheese toppings to addition of other condiments.
Most of our products are freshly prepared within our Nayuki teahouses, including our baked goods. We have developed a fully standardized process for food preparation that ensures food safety and efficient preparation and serving process. In addition, we offer a wide selection of other products, such as gift tea boxes, snacks and ready-to-drink tea beverages, to further enrich our menu and cater to the diversified needs and preferences of our customers.
The sales of our products typically peak during the period from May to August in a year when the weather is warm and summer vacations come. We also achieve higher purchaser orders from time to time during public holidays such as the National Holiday in China.
Our Nayuki Teahouse Network
We opened our first Nayuki premium modern teahouse in Shenzhen in November 2015, and have since been rapidly expanding our network across major cities in China. According to CIC, we had the most extensive premium modern teahouse network in China in terms of the number of cities covered as of December 31, 2020. As of December 31, 2020, we had 489 Nayuki teahouses covering 66 cities across mainland China, and had extended our footprint to Hong Kong SAR and Japan, with each having one Nayuki teahouse. The following table sets forth a breakdown of the number of our Nayuki teahouses by geographic location as of the dates indicated.
Our Nayuki teahouses currently come in two formats, namely (i) the regular Nayuki teahouses including those with diversified Nayuki concepts such as the Nayuki Fantasy Factory, Nayuki’s Gift teahouses as well as Nayuki’s Bla Bla Bars, and (ii) the Nayuki PRO teahouses. We launched our Nayuki PRO teahouses in November 2020 to achieve a broader customer reach, increase operational efficiency and cater to more diversified consumption scenarios and customer preferences, with a goal to make Nayuki ubiquitous to our customers’ everyday life.
We plan to open approximately 300 and 350 Nayuki teahouses in 2021 and 2022, respectively, primarily in Tier 1 cities and New Tier 1 cities, among which approximately 70% are planned to be Nayuki PRO teahouses. We expect the number of new Nayuki teahouses to be opened in 2023 to be at least the same as the number of new Nayuki teahouses we plan to open in 2022, subject to market conditions.
We do not own any property but instead lease the premises for our teahouses primarily from major property developers in China. Lease agreements for our teahouses typically have a term of three to five years.
We believe there is no significant difficulty for us to renew our existing lease agreements that are subject to expiry, based on the grounds that (i) generally we have the contractual and/or legal priority right of renewal with respect to all of our existing lease agreements, (ii) other than the cases in which we decided not to renew the existing lease agreements and subsequently closed the relevant teahouses due to relocation and other strategic and commercial considerations, all of our lease agreements subject to expiry had been timely renewed during the Track Record Period, and (iii) we believe our increasing brand reputation and broad geographic footprints have made us a preferred lessee and business partner for major property developers in China that may have established long-term, stable relationship with us nationwide. Nevertheless, we may not always be able to timely renew the relevant lease agreements on favorable terms, or at all.
Source: Nayuki (02150) Prospectus (IPO Date : 2021/06/18) |