This is an English adaptation of a FoodBud historical article originally published on September 19, 2022.
FoodBud revisited a hometown market to observe foodservice consumption in a lower-tier Chinese city. The focus was on two locations in Xiangyang, Hubei: North Street in the Gulou core commercial area of Xiangcheng District, and Wolong Town, a township under Xiangcheng.
Xiangyang is generally seen as Hubei's second- or third-largest city after Wuhan, often compared with Yichang for the No. 2 position. Its main urban districts are Fancheng, Xiangcheng, and Xiangzhou. Fancheng's core retail area has shifted in recent years from People's Square toward Wanda Plaza and Minfa's commercial complexes on Changhong North Road. Xiangcheng's core retail area, by contrast, has long centered on Gulou and North Street.
Xiangcheng District has a permanent resident population of about 560,000. Wolong Town has roughly 80,000 registered and permanent residents.
North Street is about 500 meters long and functions like a milk-tea and snack street. Mixue Bingcheng had four stores there, plus one Luckin Coffee-affiliated Lucky Cup store. Other tea brands included 1dian Dian, CoCo, Shuyi Tealicious, and Guming. Luckin Coffee also had a store on the street.
Walking the full street, Mixue Bingcheng was the most visible brand in consumers' hands. At least a dozen groups were seen carrying Mixue products. Other brands spotted among pedestrians included Tianlala, Shuyi Tealicious, Guming, and Ningji.
At the end of North Street, near the old city wall, a Luckin Coffee bag was seen in a trash bin, but the cup inside was from Mixue Bingcheng.
The Lucky Cup owner said the store had opened four months earlier and that sales were far behind Mixue Bingcheng. A key barrier was consumer concern that drinking coffee would make it hard to sleep. Across the street, Mixue's four stores were the busiest, with customers clustered inside. Lucky Cup was quiet enough that one staff member stood outside calling to passersby.
Wolong Town's central commercial area is split across East Street, South Street, and West Street. East Street has a primary school. South Street has a supermarket and formerly had a middle school, later merged into another school, leaving South Street with limited daily foot traffic. West Street has a locally known chain supermarket and appears to have overtaken South Street commercially.
Across from the West Street supermarket, a Wallace fast-food store had decent lunch traffic, with about half its seats occupied.
At the West Street and South Street intersection, there was Wuyin Liangpin, a milk-tea brand invested in by Juewei, plus a Tianlala store that was closed. There was also a The Alley store next to a Meiyijia convenience store. Another The Alley was located at the East Street and South Street intersection.
The Alley stores were also selling small convenience-store-style goods, suggesting that a standalone milk-tea shop may be hard to sustain in a township. At Wuyin Liangpin, a staff member said the store had opened recently. Near midday, an order placed there showed ticket No. 10.
There was no Mixue Bingcheng store in the town itself. A nearby Mixue store around a university area had suspended operations, mainly because students were being relocated to another campus.
In Fancheng's core commercial area, FoodBud saw two Mixue Bingcheng stores: one street-facing store and one in a mall B1 level near a supermarket entrance. The core ice cream product was priced at RMB 2, RMB 1 cheaper than a comparable Guangdong product. Lemonade was priced consistently at RMB 4 per cup.
The strongest sellers remained ice cream and lemonade. During the summer peak season, stores add part-time staff.
The mall B1 Mixue store was visited on Sunday morning and again on Monday morning. On Monday, two employees were present, but traffic was light. Staff said the store opened together with the Good Neighbor supermarket. Compared with street-facing stores, it had clear disadvantages: promotional sound was controlled because of the supermarket setting, and mascot-style activities such as Snow King appearances were hard to arrange and required complex approvals. The store had previously drawn many student customers, but after a new Mixue opened near the school, the B1 store largely lost that traffic.
The conclusion: Mixue's extreme value-for-money positioning and still-credible brand execution give it strong resilience. The remaining question is whether the same store model works at township level. Adding snacks and peripheral goods may help support township economics.
Wuyin Liangpin and Tianlala also showed meaningful penetration into lower-tier markets, suggesting that China's broad geography and deep demand base can support multiple tea brands even in smaller markets.
In a third-tier city like Xiangyang, coffee consumption still needs time to develop. At Lucky Cup on North Street, staff said the gap with Mixue Bingcheng was very large, mainly because many consumers worry about sleep disruption.
A coconut-water-and-coffee product from Lucky Cup had little noticeable coffee flavor. Staff strongly recommended half sugar, and even at half sugar the drink tasted very sweet.
At Luckin Coffee, during a 5-10 minute wait, most visible orders were raw coconut lattes. This differed somewhat from a recent observation in Zhuhai, where a Luckin Coffee store in a mall B1 level, observed for 30-50 minutes, showed strong sales of the raw coconut series, new osmanthus-flavored products, and matcha products.
Nayuki's store in Xiangyang had a large space but felt highly retail-oriented. Around 11 a.m., only three tables were occupied, with substantial room for more seating. A nearby Starbucks had a slightly smaller footprint but more consumers, including children playing and people waiting for family members to pick up coffee.
Nayuki may have an opportunity to establish a stronger space-led positioning in third- and fourth-tier cities. Some products, such as Americano, tasted relatively light with a strong smoky note, possibly reflecting a market-education choice.
Because Starbucks entered many markets earlier and trained consumers around espresso-based coffee, other flavor profiles, such as some American-style coffees from Tims, can face complaints. If American-style coffee were the first format to educate consumers in third- and fourth-tier cities, espresso might later face similar pushback.
A local coffee chain in Xiangyang had already opened five stores in core commercial districts. Local coffee brands in smaller cities can survive around communities, schools, and hospitals, with less intense competition than in first-tier cities. FoodBud had also spoken with a coffee operator in Chifeng, Inner Mongolia, who had four stores and was doing reasonably well.
Many market analyses argue that households in lower-tier cities may have more disposable cash than some households in first-tier cities. FoodBud notes that this may be partly true, but the picture is more complicated.
Even assuming lower-tier households have more disposable income, many people remain reluctant to spend. One relative had more than RMB 1 million in cash deposits, homes in both rural and urban areas, no mortgage, and a car with no loan, yet still lived very frugally because consumption habits were hard to change.
Another family had nearly RMB 1 million in disposable cash accumulated over decades, but a son's marriage could potentially consume much of it at once. Some elderly rural residents had several hundred thousand RMB in deposits but still avoided spending, mainly because of medical-risk concerns.
The broader observation is that consumption in many lower-tier households remains centered on necessities. Outside must-have purchases, consumers focus heavily on value for money. It is not simply a question of affordability; operators need to understand whether the product is perceived as a real need.
Note: all investment references and market observations above are historical, based on the article published on September 19, 2022.