The secret recipe of HEYTEA’s buzz in China and how it became a new-style tea pioneer

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Founded in a small city in Guangdong in 2012, HEYTEA is a new style tea drink brand that is known for “cheese flavored top” made of thick, salty cream, along with its tasty toppings such as brown sugar tapioca pearls. HEYTEA mainly targets customers in first tier and second-tier cities, mostly in Eastern and Southern China. With a strong globalization strategy, it has now covered 61 cities all over the world.

It is nothing unusual to see hundreds of customers waiting in queues for globally anticipated products such as the latest iPhone. However, the Chinese brand HEYTEA (in Chinese: 喜茶 xi cha), had convinced clients to line up for more than five hours –– and for quite a different type of product: tea.

Indeed, since 2018, China’s consumers have developed an abrupt craze for cheese tea (Chinese: 奶盖茶 naigaicha), which lead to endless queues before the stores of HEYTEA. Observing the crowds waiting for just a cup of tea, we wonder at how brands in China, like HEYTEA, have managed to create a mania over an everyday product. HEYTEA was a pioneer in new style tea, and since then, shops like LeleCha, Nayuki and the next queuing culture phenomena, Sexy Tea (Chayan Yuese)

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, timeline of HEYTEA’s major achievements

The Starbucks-inspired tea brand

Since February 2017, HEYTEA’s buzz in China has changed the brand into a phenomenal food trend. According to Yuwan Hu, senior project manager at Daxue Consulting, HEYTEA’s founder, Yunchen Nie (聂云宸), aspires to forge a Starbucks-style brand in the tea market. Nie was just a 19-year-old with a high school degree when he founded his first business in 2010. His mobile phone business, however, eventually closed because it never turned profitable. Following this business experiment, he went on to launch HEYTEA -formerly named ROYAL TEA (Chinese: 皇茶; pinyin: Huangcha)- in 2011 in his hometown, the city of Jiangmen (江门 ; pinyin : Jiāngmén) in Guangdong province. On February 26 last year, ROYALTEA adopted the new name HEYTEA because the characters in its previous name (皇茶) were too easily counterfeited. Additionally, the name “HEYTEA” (喜茶) may be translated as “happy tea,” denoting a sense of positivity.

Even so, there were still many counterfeit brands that sought to imitate the brand. Thus, HEYTEA’s official website has declared that all former ROYALTEA stores have been converted to HEYTEA stores, and that any remaining stores named ROYALTEA are unrelated to HEYTEA.

At the top, HEYTEA’s logo (previously called ROYAL TEA). Below, the new brand identity, launched on February 2016.

With a 100 million yuan investment from co-investors IDG Capital (IDG资本) and Guangdong Nowaday Investment Co., Ltd. (广东今日投资公司) in August 2016, the HEYTEA founder Nie expanded the Guangdong-based brand, which now owns 50 branches across China. Thanks to HEYTEA’s buzz in China, especially in Shanghai and Shenzhen stores, the brand’s turnover has reached, in average, over 1 million yuan per month per store – roughly 2000 cups per day. The highest turnover is realized in a single Shenzen shop, at 1.5 million to 1.7 million yuan per month. So, what made those consumers stand hours in line for a cup of HEYTEA?

All elements of Starbucks’ strategy are visible in the Chinese brand’s marketing mix, suggesting that the 25-year-old founder of HEYTEA was influenced mainly by this foreign brand. Furthermore, HEYTEA’s strategy aimed to incite in consumers a sense that they are privileged. Through the experience of a new product, the brand sought to make customers feel as if they are a part of something big.

HEYTEA’s shop near Taikang Road

Consumers waiting in line for tea outside HEYTEA’s shop near Taikang Road (泰康路). Photo Credit: Daxue Consulting.

A product under high expectations

The latest hit in Shanghai as offered by HEYTEA is a tea with two layers, composed 20 percent of a cream cheese topping (奶盖) and 80 percent of a green or fruit tea (茶) base. The cream layer is sometimes sweet, sometimes salty and sometimes sprinkled with salt. Ingredient-wise, however, the brand adopts a strategy quite different from that of Starbucks’. In spite of HEYTEA’s efforts in ensuring the quality of its milk topping’s ingredients, which it sourced from Meiji 明治), a top-quality Japanese dairy producer, the brand uses tea leaves of mid-low quality.

Moreover, according to the results of a blind test conducted in May 2017 by the Tood-tasting Group in Shanghai (魔都食鉴局), which aimed to assess the taste of 19 different tea brands, HEYTEA failed to place in top positions.The brand Yi Dian Dian (一点点) emerged as the test’s leading tea brand. Worse still, HEYTEA was placed among the worst five brands in several rounds of the blind test.

HEYTEA was able to obtain a high rank only in the category of green tea, at third place. Nonetheless, it did not defeat its competitor Yi Dian Dian, which came in first place for the category.

Thus, HEYTEA reworked its menu in efforts to increase the perceived value of its drinks. For example, a product previously named “Cheese and milk green tea” (芝士奶霜绿茶) is now called “Green beauty” (绿妍). Similarly, each of the brand’s products was given a “fancier” new name in place of their more descriptive former names.

Daxue Consulting-HEYTEA menu
HEYTEA new menu

Throughout the past six years, HEYTEA had changed its menu 5 times. Source: Jiemian website, (界面).

 

A price above the market

Regarding its pricing policy, HEYTEA positioned itself as providing high value-added products. Each cup of HEYTEA costs between 11 to 29 yuan, with an average of 25 yuan. In comparison, Yi Dian Dian–– champion of the blind test hosted by Food-tasting Group in Shanghai’s —offers tea at undercut prices ranging from 6 to 18 yuan per cup, with an average price of 14 yuan, according to DazhongDianping (大众点评 ).

The average price of the four most popular takeaway tea brands in China, Coco Dukou (Coco 都可), Miguo (蜜菓), Happy Lemon (快乐柠檬), and Gong Cha (贡茶), is about 15 yuan per cup.

HEYTEA’s packaging is an upgrade from its competitors

With a slogan of “inspiration of tea”, HEYTEA expresses that they will keep pursuing creative products and combining modern culture with Chinese traditional tea culture. To differentiate itself from its competitors, the brand insists on using consumer-centric packaging design to maintain a consistent visual identity while addressing the packaging flaw of other milk tea brands. HEYTEA’s eye-catching packaging allows consumers to concurrently savour both layers of tea, which in turn maximizes the product’s taste experience.

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, HEYTEA’s unique packaging design

China’s middle class has a higher spending power than ever and is increasingly willing to pay more for brand names, differentiated features, and higher quality. Younger consumers are more curious than their parents. As they have more choices than previous generations have ever seen, they are often willing to try new experiences, technologies, platforms, and foreign brands or products. This observation is especially true for the dinning industry. Consequentially, one of the best ways to emerge above competitors in the food and drink sector is to place emphasis on forging not just a product, but a new experience. This strategy successfully meets Chinese Millennials’ expectations for food.

Nie understood this pattern, and in order to create HEYTEA’s buzz in China, he attempted to develop the impression of a new experience surrounding HEYTEA beverages. In stores, employees were instructed to ask the new customers if they knew how to drink the brand’s teas before serving them. According to the brand, its tea is supposed to be drunk in a certain way. Stirring or using a straw, for instance, is not recommended.

To increase the perceived value of its products, HEYTEA has also developed eye-catching packaging. Through a transparent cup, the customer is able to observe two differently coloured layers, sometimes topped by golden leaves. The only thing that is truly new to this product, however, is its adjustable plastic cover. This design allows the consumer to concurrently savour both layers of the tea, thus maximizing the product’s taste. This way of drinking is also recommended by the brand, as it creates a mustache of cream on the consumer’s upper lips. As a result, many consumers are incentivized to share photographs of their experience on social media, adding to the HEYTEA’s buzz in China.

HEYTEA's secret recipe

A cup of HEYTEA, with tips on how to drink it. Photo Credit: Daxue Consulting.

The strategy behind HEYTEA’s launch to fame in 2017

Unique promotional campaign targeting Shanghai

As the result of our research on Weibo, we found that HEYTEA’s buzz in China appeared in late February 2017.

Prior to February, there were very few references of HEYTEA on social media, and effectively none on formal media. At the time, it did not take hours to buy a cup of HEYTEA. On February 9, however, a single post about HEYTEA from “The Morpheus”, a food and cosmetics critic with 30,852 followers on Weibo, managed to reach a large number of likes — which was unusual in view of the scant number of likes the critic usually received.

Weibo Post from the cosmetics and food taster “TheMorpheus” on February 9. Source: Weibo

The exceptional post by “TheMorpheus” on February 9 received 5,196 shares, 3,567 comments, and 2,169 likes. These numbers may invoke suspicion, however, as the critic’s post usually attract just 200 likes and 100 shares or comments. TheMorpheus said in the post that “HEYTEA is coming, the story between me and ‘Yi Dian Dian’ is ended.” In this post, the reference to Yi Dian Dian—another famous cheese milk tea brand based in Shanghai —is especially interesting. Indeed, two days later, on February 11, HEYTEA opened a new store in Raffles City (来福士广场), also in Shanghai.

After the instant fame of “TheMorpheus”, several of China’s renown KOLs (Online Key Opinion Leaders) began to echo the critic’s opinion of HEYTEA within just a few hours. This increased attention may suggest that HEYTEA had paid to raise awareness of its brand. Through an analysis of the comments, shares, and likes related to the post, we concluded that the company had received help from two groups of online influencers to spread its name and credibility on social media.

A source for credibility: professional food tasters

Firstly, HEYTEA hired professional food tasters to raise the brand’s credibility. In China, promotional campaigning via industry experts is an efficient way to gain credibility, as the public is inclined to trust the legitimacy of experts in assessing the product. Several public accounts on WeChat (微信) that provide food recommendation — many of them based in Shanghai — shared articles regarding HEYTEA. However, this strategy is not without cost. This type of KOLs usually collects a fee ranging between 392 and 4,900 yuan per post on Weibo. For instance, the WeChat account “Chichihuo365” (吃货我最大365), which had also shared an article about HEYTEA, commonly demanded 1,300 to 3800 yuan for soft advertisements.

A source for visibility: humorous bloggers

HEYTEA also aimed to spread its message to as many consumers as possible. Although some bloggers well-known for their humorous style may not be experts in the brand’s specific market, their large number of followers make them even more valuable than food experts in increasing a brand’s visibility. This phenomenon is evidenced by the much higher advertisement fees these bloggers collect. For instance, KOLs who had taken part in HEYTEA’s buzz in China, likely fetched from 300 to 23,184 yuan per post.

The advertisement prices of KOLs vary depending on their followers’ numbers, characteristics and degree of involvement in sharing, commenting and liking posts. The major problem with promotions through KOLs, however, is that they do not provide guarantees regarding the effects of their advertisements.

HEYTEA digital buzz-KOL

“M大王叫我来巡山”(English : “The King Asked Me To Patrol The Mountain”), followed by 4.961.342 netizens, is one of the humorous KOLs who commented on “TheMorpheus” post. Translation:”There is a new store opening in Shanghai, wait for me to have a try.” This KOL posts his own customer reviews on Weibo. For each post he makes on behalf of a company, he receives a commission of 23,000 yuan. Source: Weibo.

Bringing bustle to the shop

To the aim of translating the online buzz into real-life business, HEYTEA also employed a less-known but effective method. Although the brand apologized for the hours consumers had to spend in line, many articles have revealed that hiring people to line up in front of a shops is an effective means that has been used to create HEYTEA’s buzz in China. In the January 1999 debut of Starbucks in China, the American brand had been accused of the same practice. Nonetheless, despite part of the queue had been hired to arouse public curiosity, the strategy did eventually attract real consumers to join the queue. As customers share pictures while waiting in line, the queue leads to a snowball effect that brought more and more consumers to join the wait. For this reason, most social media posts regarding HEYTEA at the beginning of the buzz were in fact related to the queue. Additionally, the brand had limited the maximum number of purchases per customer to 2 cups in order to avoid “yellow cattle” (黄牛; pinyin:Huang Niu) re-sales. The term refers to someone who earns money by illegally hoarding and re-selling items on demand at a very high price. Moreover, HEYTEA’s limitation on purchase quota had also become a hot topic, which further contributed to the sense of the brand’s prestige.

HEYTEA resellers-HEYTEA Success

Illegal resellers dealing with client next to a HEYTEA shop near Taikang Road (泰康路). They are selling HEYTEA’S products more than twice the price to avoid customers to queue. Credit Photo: DaxueConsulting

As a result, we can see that HEYTEA has used a diverse marketing mix to maximize the perceived value of its products. Indeed, in terms of the tangible products, HEYTEA did not seem to offer a menu much different from its competitors. Despite promises of premium products, ingredients used by HEYTEA cannot be qualified as premium. Additionally, HEYTEA’s self-proclamation as the inventor of cheese tea appears to be false. Siyun Naigai Gongcha (四云奶盖贡茶), another tea brand, has sold cheese milk cap tea in China since 2007. HEYTEA’s first store opened only much later in 2011.

Thanks to its marketing mix, however, HEYTEA has managed to boost the perceived value of its products through intangible features. Firstly, they conveyed to the consumer a sense that they were experiencing something new. Then, the brand supported its high product pricing by located its stores in top-quality malls associated to luxury brands. Even so, -apart from the Shenzen-based concept store- the brand only reached exceptional popularity in Shanghai. Their success in this city is likely a result of the KOL groups’ influence. HEYTEA has obtained credibility and visibility by relaying word of their unique product online. Together, these marketing strategies successfully solidified the brand’s image of merit in the minds of consumers.  This strategy succeeded in attracting buyers to line up in front of HEYTEA shops, realizing the online buzz in Shanghai.

HEYTEA’s China market strategy to maintain a buzz-worthy status

Strategy 1: customized tone for different social platforms

HEYTEA produces different content for each social media platform that complements each other. On WeChat, it posts about new product launches and a preview of seasonal products. HEYTEA utilizes WeChat as its official website, to redirect traffic to other social platforms by including links to its content on Bilibili. Then, HEYTEA leverages Bilibili as its major platform to attract Gen-Zs by posting Vlogs and customized comics. Sometimes, HEYTEA also collaborates with other brands such as Sexy Tea to make videos together based on different trends and engage fans on both sides.

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, HEYTEA has customized content for different social platforms

On Xiaohongshu, HEYTEA targets young women by sharing its milk tea in a fashionable style and ways of creating different drinks, such as how to DIY a cup of HEYTEA drink at home. Additionally, HEYTEA publishes short videos on Douyin with strong visual impact and encourages its followers to recreate the same style of videos. These videos attract on average over 200,000 likes and 14,000 comments per video. On Weibo, HEYTEA follows hot topics and utilizes them to introduce new products and spread the information to a larger potential market. This is a strategy that many of HEYTEA’s competitors fail to utilize. For an average post, HEYTEA attracts over 2000 likes and comments.

Strategy 2: premium location

To stay align with the premium brand positioning strategy, HEYTEA operates in premium locations in luxurious shopping malls in top-tier Chinese cities to have easy access to a clientele of trendy, high-income 30-year-olds. Interestingly, this strategy is comparable to that of Starbuck’s. In Shenzhen, HEYTEA employs a similar strategy by locating its store in a unit next to a Prada outlet in the MIXC Mall (华润万象城). This premium positioning strategy is much easier and more prevalent to apply in other tier-1 cities, such as Shanghai and Beijing.

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, HEYTEA chose premium store locations in order to fit its brand positioning strategy

Strategy 3: an optimized customer experience

As the Chinese in modern cities live a fast-paced lifestyle that requires convenience and rapid service, HEYTEA has designed its mini program on WeChat and mobile app to meet the overwhelming consumer demand. This strategy has decreased average customer waiting time by a third. In addition, HEYTEA also launched HEYTEA GO offline stores that service customers who live in residential districts that are far from city center or large shopping malls. A total of 102 new HEYTEA GO stores opened in 2020 alone.

Source: Daxue Consulting and Double V. Training & Consultancy; F&B market in China report, HEYTEA’s mini program and app brings convenience to customers and cuts down waiting times

Strategy 4: continuously offer new products

To attract more consumers, HEYTEA launches new produces very frequently. After the success of new product launches, HEYTEA fed its momentum by updating old products to enhance the stickiness of regular customers. To capture wider potential market demands, HEYTEA also developed bottled, on-the-go drinks and tea bags, and both had successful sales.

In 2020, HEYTEA launched a new product roughly every 1.2 weeks and sold out 500,000 bottles in total in 2020. In terms of packaged tea bags, 130,000 boxes were sold out. Additionally, peripheral products are also launched on e-commerce platforms such as JD, Tmall and other convenience stores. Sales data of Tmall flagship store shows a total of 620,000 followers, 40,000 pieces of straw cups and 1.4 million bottles of soda water sold.

Source: HEYTEA; designed by daxue consulting, top selling new products in 2020

Strategy 5: launched sub-brands to expand consumer base

Besides developing new products, HEYTEA also developed its sub-brand: a new tea store named hey tea by HEYTEA (喜小茶). This sub-brand has much lower prices than HEYTEA and competes with brands that target consumers with less purchasing power, such as CoCo (都可奶茶) and Yi Dian Dian (一点点). Top selling products of hey tea by HEYTEA are also similar to those offered by its competitors, such as grass jelly milk tea, tofu pudding milk tea and original cake milk tea.

As of Dec. 2020, hey tea by HEYTEA developed rapidly, having opened up 18 offline stores in 6 cities in Guangdong with 1 million cup sales.

Source: HEYTEA Annual report; designed by daxue consulting, locations for heytea by HEYTEA

Obstacles: stress from strong competitors and high fixed costs

HEYTEA has some strong competitors such as Nayuki (奈雪的茶), Chabaidao (茶百道) and Honey Snow City (蜜雪冰城), all of which are new competitors since COVID-19 started. This is an interesting observation as these competitors have different price ranges and thus have a different target market. The stiffest competition exists between competitors that are in the same price range as HEYTEA, such as LELECHA and Nayuki. Many customers often compare their products and share reviews online.

Source: HEYTEA Annual report and official website; designed by daxue consulting, pricing of new-style tea stores in China. HEYTEA is among the most expensive

Another obstacle that HEYTEA is currently facing is the high fixed costs. By being heavily relied on fruits as ingredients, HEYTEA doesn’t have the means to cut down the production costs other than negotiating for a lower purchasing price of these ingredients. In 2020, HEYTEA incurred about 750 million RMB in fixed costs. To lower fixed costs and increase profit, HEYTEA began cultivating its strawberry and tea garden which may increase the fixed costs in the short run but benefit from a reduction in ingredient costs in the long run.

The “web celebrity food” (网红食物) phenomenon

This phenomenon of “Wanghong Shiwu” (网红食物), literally “web celebrity food”, is derived from the term “Wanghong” (网红), which refers to web celebrities. Wanghongs are defined by a large following and large volume of online attention in the form of comments, sharing, and likes. Additionally, Wanghongs often appear in the “hot topic” section of Weibo. Web celebrity food, however, refers to food brands that garner high public attention through social media and quickly become hot topics through WeChat’s social circles and microblogs. According to Evelyn Chen, project manager at the Daxue Consulting research team, whereas the term “Wanghong” developed around the year 2010, its derivative “Wanghong Shiwu” emerged about just five years ago. In China, it is common for social media “friends” to discuss their purchases with each other even if they may not be familiar in real life. This occurrence incentivized Chinese netizens to share pictures as they shop, which in turn led to trends that created sizable queues in front of stores. While the long wait for a single product may come across as unusual to the foreigner, many Chinese consumers view the practice as a statement of their social status and fancy lifestyle.

HEYTEA’s buzz in China is not the first new-food phenomenon. Some Chinese consumers have become so experienced in handling the queue that they even downloaded applications such as “Linqu”(邻趣), through which they hired someone to stand in line for them at a rate of 0.5 yuan per minute.

A few Chinese restaurant chains, including Gelaoguan Bullfrog Hot Pot (哥老官重庆美蛙鱼头) and Xinghualou Qingtuan (杏花楼青团) –– a shop selling traditional Chinese desserts –– have also experienced the same sudden enthusiasm last year, and have maintained their fame even as the queue faded. Success is not always the case, however, as some brands like Yang Wang Bao Jiao Bu (仰望包角布)–– which produce traditional Chinese cakes –– died as the queue did. Indeed, many brands face decreasing preference after just several months since its heyday. These failures usually result from either the loss of prestige or increased accessibility from the opening of new shops. In this process, consumers come to think more rationally of the brand even as they continue to purchase from it.

Chinese consumers have become so experienced in handling the queue that they even downloaded applications such as “Linqu”(邻趣), through which they hired someone to stand in line for them at a rate of 0.5 yuan per minute.

The new style tea sector is incredibly lucrative

The number of new-style tea retail stores and market size are both increasing steadily. By the end of 2020, the number of new-style tea consumers has reached 340 million and is still growing. By the end of 2021, this figure is estimated to be 365 million. This significant growth has resulted in a decreasing demand in tea bags and instant coffee category, as the CAGRs of both markets have reduced to 2%.

Source: CBN Data; designed by daxue consulting, market size of new-style tea industry shows a steady growth

HEYTEA’s rebranding, exchanging six years in the shadow for indefinite fame

Although ROYALTEA had been renamed HEYTEA in February 2016, the brand has remained largely invisible throughout the year following the event. Then, the tide turned on February 11 this year, after the brand received the help of KOLs:

  • One week later, on Weibo, HEYTEA-related messages written by well-known social media users boomed meanwhile more and more newspapers and social media users began to talk about the brand, creating HEYTEA’s queue.
  • One month later, the brand reached maximum fame, and more detailed descriptions and reviews about its products were published. In the meantime, KOLs started to share HEYTEA photographs through their pages.

However, HEYTEA’s buzz in China now experiences decreasing popularity, as indicated by Baidu Index. Titles of news in China showed that the discussion on HEYTEA has evolved greatly since the maximum fame in March:

  • When the brand first opened its new shop in Shanghai, the news mainly focused on the waiting time for its products or on the limited purchase quota. On March 30, for instance,Sohu.com (搜狐科技) published an article titled “HEYTEA becomes a new ‘Wanghong’ and can be bought by costumers only upon presentation of their government-issued ID cards,” Referring to the yellow cattle phenomenon.
  • Overtime, the focus shifted to the downward trend of HEYTEA’s popularity, as well as assessments on its tangible product quality compared to its competitors. On May 5, the same site published another article “HEYTEA is committing suicide,” which alleged that HEYTEA is maintaining the buzz by hiring people to line up.

As said previously, the firm had raised 100 million yuan. Observing the effort to keep the hype alive, articles speculated that HEYTEA may be meeting difficulties in paying back investors. Moreover, as HEYTEA’s products are neither unique nor difficult to copy, the firm may need to revise the menu often to preserve consumer interest. The brand is not yet dying, however. It may be noted that, despite the negative assessments, numerous consumers are still waiting in line for HEYTEA even after four months into the hype. Nonetheless, as is the case in many sectors, the eruption of a new trend will likely lead to the end of the previous one. This observation is especially common regarding Wanghong Shiwu.

What brands can learn from HEYTEA’s marketing strategies

HEYTEA differentiates itself from its competitors by creating a sub-brand to fit demands of a larger target market. In a country where purchasing power in different tiers of cities greatly varies, this strategy helps HEYTEA moves into new categories of products and quickly claiming a new niche.

HEYTEA is also an expert in matching location strategy with its premium brand positioning strategy, as the prices of drinks are relatively high, and the majority of its stores are in premium malls or shopping centers. HEYTEA excels in leveraging social media and providing optimal customer experience, just as most well-known new-style tea drink brands do.

On the other hand, HEYTEA struggles with lowering its fixed cost including ingredient cost and rent. This is a foreseeable problem mainly caused by HEYTEA’s premium brand positioning. By setting up its own strawberry and tea garden, this problem would be ameliorated in the long run.


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