This is an English adaptation of a FoodBud historical article originally published on October 28, 2021.
Heytea’s recent burst of investment activity is not surprising. Capital markets were already attaching higher expectations to the company in 2021.
On September 13, Bloomberg reported that Heytea had explored with advisers the possibility of a Hong Kong listing as early as 2022, with a fundraising target of at least US$500 million. After its latest financing round, Heytea’s valuation was said to have exceeded RMB 60 billion. Another market rumor put its hoped-for post-listing valuation at HKD 150 billion, or more than RMB 120 billion.
The question for operators and investors is whether that valuation was justified, and what operational capabilities Heytea would need to build if it wanted to move from a strong beverage brand into a broader consumer platform.
By the end of 2020, Heytea had opened 695 stores across 61 cities in China and overseas. According to Narrow Door data cited in the article, Heytea had 848 stores at the time of writing, implying 153 new openings in the year to date. At that pace, passing 900 stores by year-end 2021 looked possible.
Based on current store data, monthly sales per store were estimated at about RMB 930,000. Including Heytea’s sub-brand Xixiaocha and retail products, annual transaction volume approaching RMB 10 billion no longer looked difficult. On that basis, a 12x price-to-sales multiple would support a valuation of around RMB 120 billion.
Nayuki’s IPO prospectus provides useful cost benchmarks for the fresh tea category. In 2020, raw materials accounted for roughly 29% of costs, while packaging accounted for about 9%. Key raw materials included tea, fruit and dairy.
Heytea and Nayuki both relied heavily on fruit tea products. If fruit purchasing represented 10%-15% of revenue, Heytea’s own disclosed 2020 figures suggested significant upstream impact: the company said it consumed more than 1,000 tons of fresh fruit during the year and generated up to RMB 750 million in income for farmers in its supply chain.
The article estimates Heytea’s 2020 revenue at around RMB 6 billion, triangulating between a possible RMB 5 billion-RMB 7.5 billion range and store-level sales of 695 stores at roughly RMB 930,000 per month, or about RMB 7.7 billion in annual sales. At 10x price-to-sales, a RMB 60 billion valuation appeared reasonable.
For comparison, Starbucks’ market capitalization was US$133.8 billion at the time. If Starbucks China represented 25% of that value, it would imply a valuation of RMB 213.8 billion, or US$33.45 billion. Starbucks China’s annual revenue was above RMB 20 billion, implying roughly 10x price-to-sales.
Genki Forest was another reference point. Media reports cited a 2021 sales target of RMB 7.5 billion and rumored latest-round valuation of US$15 billion, or about RMB 96 billion, close to 13x price-to-sales.
The risk was that high private-market valuations could become difficult to sustain in public markets. Haidilao’s 2021 share-price correction was a warning. On October 27, 2021, Haidilao opened lower and continued falling, dropping more than 8% intraday at one point and hitting a year-to-date low of HKD 23.10 per share. It was later quoted down 7.33% at HKD 23.40, with market capitalization of HKD 127.7 billion, or about RMB 104.8 billion.
On February 16, 2021, Haidilao had reached a historical high of HKD 85.779 per share and a market capitalization of HKD 468.2 billion, or about RMB 384.251 billion. By October 27, its share price had fallen about 72% from the year’s high, and roughly HKD 340.5 billion, or RMB 279.4 billion, in market value had evaporated. Haidilao’s 2020 revenue was RMB 28.61 billion, while net profit fell 86.8%, well below market expectations. After the correction, its valuation was only around 3x-4x price-to-sales.
For Heytea, a 10x price-to-sales IPO valuation in 2022 could have been plausible based on the operating picture described. But if the company or the market wanted to benchmark it closer to Starbucks China and pursue a RMB 200 billion or even RMB 300 billion market value, Heytea would need a deeper transformation.
On October 27, 2021, new Chinese-style ready-to-drink cocktail brand WAT completed a Series A round jointly led strategically by BAI Capital, Tomato Capital and Heytea. In addition to low-alcohol beverages, Heytea had invested in YePlant, entering the oat milk field.
Within tea drinks, Heytea acquired Wang Ning Lemon Tea through Xixiaocha, with a combined 70% shareholding. It had also invested in Heqi Taotao, taking a 5.1% stake.
In coffee, Heytea invested in Seesaw Coffee. YePlant’s major shareholder was also from the coffee sector.
New Heytea-related entities also pointed to two beverage brands, Yecuishan and Suge Fresh Tea, although the partnership companies had not yet completed full closing or business-registration changes at the time.
Yecuishan positioned itself around “molecular juice,” using a more scientific or innovative approach to juice. On Xiaohongshu and other channels, bloggers often highlighted its most expensive drink, priced at RMB 1,000 per cup.
Suge Fresh Tea was a 10-year-old milk tea brand with stores mainly in Guangdong and Hunan. Narrow Door data showed 117 existing stores.
Meituan Longzhu founding partner Zhu Yonghua told Investment China that Heytea’s investments were preparation for the fading of the milk-tea industry dividend. In his view, the company was trying to strengthen its moat across products, channels and brands while continuing to build the main business.
Heytea’s annual report released earlier in 2021 showed fruit consumption led by grapes, mangoes, coconuts, peaches and strawberries.
Its beverage investments were largely fruit-related. This looked like defensive investment in relevant categories, while also extending Heytea’s reach across product types, franchising models and price bands.
The article argues that investing at this stage was a smart choice. Haidilao’s experience showed the limits of internal incubation. Haidilao had once assumed it could incubate subcategory brands by letting store managers invest RMB 3 million each: if one failed, invest in ten and one would eventually succeed. That did not happen. The more successful extensions from Haidilao’s hotpot business were supply-chain support companies such as Yihai, Weihai and Shuhai.
Heytea’s own sub-brand Xixiaocha had only 27 stores at the time, still small in scale. Internal incubation was slow; investment could move faster.
From Wang Ning Lemon Tea and Heqi Taotao to Yecuishan and Suge Fresh Tea, Heytea’s targets showed different strategic uses, even though Yecuishan and Suge Fresh Tea had not completed business-registration changes.
Earlier rumors said Heytea might acquire Lelecha, which Heytea later denied. Among premium freshly made tea brands, Lelecha ranked behind Heytea and Nayuki. An acquisition of Lelecha would mainly have increased concentration in the premium made-to-order tea segment.
In August 2021, Heytea acquired 70% of Wang Ning Lemon Tea. Lemon tea had not been among Heytea’s top five products by 2020 sales volume, but Heytea’s own lemon tea series was very popular in summer 2021, selling 400,000 cups on launch day. At the same time, several lemon tea brands were raising large financing rounds. Acquiring a brand to develop independently in that category was strategically reasonable.
Yecuishan, meanwhile, was a juice brand with many former Heytea employees. It had received a first investment from GSR Ventures, and its pricing sat close to Heytea’s own band, making it look like a product-category extension.
Suge Fresh Tea looked more like a mid-priced version of Heytea. It used a restrained franchise model and focused on natural fruit tea with zero additives. Its brand handbook said it did not target store count, but store quality; it did not pursue excessive profit, but long-term business.
The brand also emphasized handmade preparation. Founder Wang Biao said in an interview that his definition of standardization differed from others: good taste was the highest form of standardization. He cited Suge’s hand-peeled Kyoho grape fruit tea, launched in 2017, despite criticism that hand-peeled grapes were not standardized. His view was that canned grapes may be standardized but do not taste good, and consumers would not pay for that. Suge preferred to talk about product stability rather than absolute standardization, accepting some variation where fresh or handmade inputs met new consumer needs.
Heytea founder Nie Yunchen had expressed a similar view in media interviews: extremely standardized products are often mediocre, while products that can be excellent but cannot maintain quality are also problematic. Heytea had been trying to balance the two.
Suge Fresh Tea’s product philosophy was therefore close to Heytea’s. After 10 years, it had only 117 stores, reflecting restraint. Strategically, Suge represented a mid-price extension within a similar product philosophy.
Heqi Taotao focused on peach-flavored tea drinks. The article speculates that Heytea’s valuation basis may have been low. Heqi Taotao’s public PR described the financing as a “several-million-renminbi angel investment.” If estimated at RMB 5 million, the implied valuation would be around RMB 100 million.
Heqi Taotao had more than 300 stores, but they were geographically scattered: 60 in Jiangsu, 46 in Shanghai and 41 in Zhejiang, with nearly half in the Yangtze River Delta but others as far away as Heilongjiang and Gansu. That kind of distribution could create store-control and supply-chain challenges.
In foodservice, scale effects usually start at city level before becoming national. Many brands therefore densify in one city first, testing the model and training teams before accelerating expansion with stronger organization, sharper store economics and supply-chain capability.
The article criticizes Heqi Taotao’s franchise expansion as disorderly, with openings spread broadly across the country and franchise recruitment apparently handled by third parties. A more stable approach would have been to restrict franchise territories regionally and expand step by step.
Overall, Heytea’s investment pattern appeared to be: buy control where a subcategory and team had clear strategic value, and take minority stakes where it wanted to study category, price-band or franchise-model extensions while making defensive investments. The article found Heqi Taotao harder to interpret, speculating that Heytea may have valued its upstream resources.
Wang Ning Lemon Tea’s WeChat account and mini-program showed design similarities to Heytea stores, including visual style and staff uniforms. Its mini-program also used a similar underlying template.
Digital capabilities, including a data middle platform, and upstream supply-chain procurement, including raw materials, packaging, logistics and cold-chain transportation, were all reusable. Design teams could also be shared.
Jiumaojiu offers a comparable multi-brand example: it repeatedly reshaped front-end store experience and design style to appeal to younger consumers, then developed new brands within validated categories, hoping to find another growth curve after Tai Er Sauerkraut Fish.
A recent episode of the podcast “Fengtouquan” described Heytea as somewhat like Europe’s Medici family, funding creative people to build product and brand innovation.
A front-end multi-brand strategy can reinforce back-end supply-chain capabilities and improve utilization of shared resources, deepening the company’s moat.
In 2020, Heytea began exploring retail products based on its offline brand equity, including fast-moving consumer goods, tea leaves and peripheral products. This served more consumption occasions and could also raise store transaction value.
A LatePost report made a similar point about Chayan Yuese: a person close to the brand said its sales per square meter improved significantly only after it started add-on sales of new retail products such as tea bags and gifts. Before that, reaching RMB 1 million in daily sales per store was difficult. On Chayan Yuese’s Tmall flagship store, a single cold-brew tea bag was priced at around RMB 18, similar to a cup of milk tea. This also explained why Nayuki and Heytea sold add-ons such as central-kitchen baked goods and ready-to-drink sparkling water.
Heytea opened its Tmall flagship store in March 2020 and its JD self-operated flagship store in July 2020. In 2021, Heytea began rolling out sparkling water products widely in convenience stores such as 7-Eleven and FamilyMart, pushing online and offline retail channels at the same time.
The article offers a speculative scenario: given Genki Forest’s strength in sparkling water retail products and distribution, Heytea could eventually follow a Starbucks-Nestle style model, selling or licensing its retail business to Genki Forest, collecting brand fees and letting Genki Forest handle channels outside stores. Sequoia Capital was a common shareholder behind both Heytea and Genki Forest, which might allow some facilitation, though not necessarily full control.
Beyond tea-drink investments and retail exploration, Heytea also invested in adjacent beverage categories: Seesaw Coffee, YePlant and low-alcohol brand WAT.
Public information did not disclose how much Heytea invested in YePlant or WAT. For Seesaw, the article uses public information to estimate the logic. When Baifu Holdings invested in Seesaw, it contributed RMB 45 million at a RMB 180 million valuation. Four years later, valuation had risen more than sixfold, to above RMB 1.08 billion. If Heytea entered for a 5% stake at about RMB 1.1 billion valuation, the investment would be around RMB 55 million.
Seesaw’s sales revenue was RMB 74.6 million in 2019 and RMB 71.1 million in 2020. At an RMB 1.1 billion valuation, that was about 15x price-to-sales.
Coffee, especially offline coffee stores, deserved longer-term attention from Heytea. YePlant’s founder also founded Minority Coffee, had a coffee roasting factory and owned the coffee bean brand Torch Coffee. Based on Torch Coffee’s brand philosophy, the article suggests the founder may not have wanted to commercialize coffee too aggressively, instead using oat milk and other plant-based products as the commercial path.
YePlant claimed publicly that it had become China’s second-largest oat milk supplier to business customers. Extending from oat milk to coconut milk was seen as a natural path, especially because Heytea would prefer this part of supply-chain procurement to sit with trusted partners.
For low-alcohol beverages, the open question was whether Heytea’s investment would support retail products or experiments such as daytime coffee and milk tea stores becoming evening bars. That would require time to validate.
The article viewed Heytea’s founding team as highly adaptable. Founder Neo Nie was born in 1991, giving the team room to make mistakes and adjust.
At that point, Heytea’s investments were still small-scale experiments, and the timing was favorable because valuations for consumer companies were becoming more rational. By using small investments to understand different markets, then potentially pursuing larger buyouts when valuations fell, Heytea could deepen and widen its moat.
The harder question was integration: whether Heytea could combine these brands effectively, what cooperation model it would use, and whether it could turn creativity into higher operating efficiency. Inspiration alone would not be enough; business success would determine whether the company could become truly excellent.
For Heytea to become a great consumer company, internationalization would also be unavoidable. After the domestic tea-drink war largely ended, going overseas to export Chinese tea culture and compete with coffee culture would require another major capability shift: global execution.
Note: IPO expectations, valuation figures, financing details and forward-looking targets in this article are historical references from 2021.