Core Viewpoint - The tea beverage market is experiencing a downturn, as evidenced by the significant revenue decline of Master Kong's tea drinks, which fell by 6.3% year-on-year in the first half of 2025, resulting in a revenue drop of 7.22 billion yuan [1] Company Performance - Master Kong's tea beverage revenue decreased to 10.67 billion yuan, contributing to an overall beverage revenue decline of 2.6% to 26.359 billion yuan [1] - The sales of bottled water and juice also saw declines, with bottled water down 6.0% to 2.377 billion yuan and juice down 13.0% to 2.956 billion yuan [1] - In contrast, carbonated and other beverages experienced a growth of 6.3%, reaching 10.256 billion yuan [1] Industry Trends - Despite Master Kong's decline, the tea beverage segment remains a growth driver for the industry, as demonstrated by Nongfu Spring's impressive revenue growth in tea beverages from 2021 to 2024, with a peak growth rate of 83% in 2023 [1] - Nongfu Spring's tea beverage revenue reached 16.7 billion yuan in 2024, surpassing packaged water to become its largest product category, accounting for 39% of total revenue [1] - The decline in Master Kong's tea beverage sales may not reflect a decrease in overall market demand, as evidenced by a 9.1% increase in revenue for Uni-President China’s tea beverages, which reached 5.068 billion yuan in the same period [1] - The shift in consumer preference towards sugar-free tea, dominated by Nongfu Spring's Dongfang Shuye brand, may indicate changing market dynamics affecting Master Kong's sugar tea segment [1]

Core Insights - The beverage market is experiencing a cyclical shift, with "sugar tea" gaining renewed attention this year, contrasting with the previous focus on sugar-free tea [1][2][35] - Despite a traditional market perception, sugar tea remains a significant category in terms of market size and innovation potential, consistently outperforming sugar-free tea in scale [4][6] Market Dynamics - From July 2023 to June 2025, the market size of sugar tea is projected to remain nearly double that of sugar-free tea, with a slight year-on-year increase in market share for sugar tea [4][6] - The introduction of new products in the sugar tea category has been more robust compared to sugar-free tea, with sugar tea's new SKU count being more than double that of sugar-free tea during peak seasons [6][12] Brand Performance - Yuanqi Forest's iced tea has emerged as a standout performer, with a market share growth rate of approximately 150% and a sales growth rate exceeding 50% [10][22] - Traditional brands like Master Kong maintain a significant market share of around 40%, but their growth has stabilized, while smaller brands like Nestle Tea and Wahaha show notable growth potential [10][12] Consumer Trends - The sugar tea market is characterized by a high concentration of red tea, green tea, and jasmine tea, which together account for over 80% of the market [17] - The preferred packaging sizes for sugar tea are shifting towards larger formats, with 650-1000ml bottles gaining popularity, reflecting consumer preferences for value and convenience [19][21] Competitive Landscape - The competitive environment is intensifying, with numerous new entrants and imitations of successful products like Yuanqi Forest's iced tea [35][39] - The market is witnessing a shift from traditional iced tea to a broader category of "iced tea," appealing to health-conscious consumers and younger demographics [44][46] Innovation and Technology - Yuanqi Forest's use of "-196°C liquid nitrogen freezing technology" for preserving flavor has set a new standard in the sugar tea category, enhancing product appeal [27][28] - The diversification of flavors and larger packaging options are key strategies for brands to differentiate themselves in a crowded market [32][34]