This is an English adaptation of a FoodBud historical article originally published on October 28, 2021.
FoodBud argues that Heytea’s recent investment activity reflected rising capital-market expectations for the company, but also a strategic need to move beyond its core fresh-made tea business.
On September 13, 2021, Bloomberg reported that Heytea had sounded out Luckin about the possibility of a Hong Kong listing as early as 2022, targeting at least US$500 million in fundraising. After its latest financing round, Heytea’s valuation was reported to exceed RMB 60 billion.
Another market rumor suggested expectations of a HKD 150 billion valuation after a Hong Kong IPO, equivalent to more than RMB 120 billion.
FoodBud’s view was that the RMB 60 billion valuation was not necessarily excessive:
Using Nayuki’s prospectus as a benchmark, FoodBud noted that tea-drink cost structure in 2020 included raw materials at about 29% and packaging at about 9%. Raw materials mainly included tea, fruit and dairy. Since Heytea and Nayuki rely heavily on fruit-tea products, FoodBud estimated fruit procurement could account for 10%-15% of sales. Heytea had previously disclosed that its 2020 fresh-fruit consumption exceeded 1,000 tons and created up to RMB 750 million in income for upstream farmers.
FoodBud estimated Heytea’s 2020 revenue at around RMB 6 billion by triangulating reported company revenue of RMB 5 billion-RMB 7.5 billion, 695 stores, and RMB 930,000 monthly sales per store, which would imply roughly RMB 7.7 billion annual store sales. At 10x price-to-sales, the RMB 60 billion valuation was described as reasonable.
The article compared this with Starbucks and Genki Forest:
FoodBud warned that listing from a high private-market valuation could be risky as public markets were repricing consumer companies. Haidilao was used as the cautionary example:
FoodBud believed Heytea could pursue an IPO at around 10x price-to-sales based on its operating position, but if the company or capital markets expected a Starbucks China-style market value of RMB 200 billion or even RMB 300 billion, Heytea would need a much broader capability upgrade.
On October 27, 2021, new Chinese-style ready-to-drink cocktail brand WAT completed Series A financing, jointly led strategically by BAI Capital, Tomato Capital and Heytea. Heytea had also invested in wild plant-based brand YePlant, entering oat milk.
In tea drinks, Heytea acquired Wang Ning Lemon Tea through Xixiaocha, taking a combined 70% stake. It also invested in Heqitaotao, taking 5.1%.
In coffee, Heytea invested in Seesaw Coffee. YePlant’s major shareholder was also linked to coffee.
Newly established Heytea-related companies had also targeted two beverage brands, Yecuishan and Soge Fresh Tea, though the partnership companies had not completed full transaction closing or business-registration changes.
Yecuishan was described as a molecular juice brand using scientific methods to make juice. FoodBud interpreted this as selling juice through an innovative format. On Xiaohongshu and other channels, many bloggers highlighted Yecuishan’s most expensive drink, priced at RMB 1,000 per cup.
Soge 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 Touzijie that Heytea’s investments were preparation for the disappearance of the milk-tea sector’s easy-growth dividend, reinforcing moats in product, channels and brand while scaling the core business.
Heytea’s annual report released in early 2021 showed fruit consumption led by grapes, mangoes, coconuts, peaches and strawberries.
FoodBud read Heytea’s tea-drink investments as mostly fruit-related: defensive investments in proven categories, plus extensions across categories, franchise models and price bands.
The article contrasted this with Haidilao’s earlier incubation attempts. Haidilao reportedly believed that if each store manager invested RMB 3 million in a niche brand, backing 10 such attempts should produce a winner, but the restaurant brands did not break out. The more successful extensions from the hotpot business were supply-chain support companies Yihai, Weihai and Shuhai.
Heytea’s own sub-brand Xixiaocha had only 27 stores at the time, so FoodBud argued that internal incubation was slow and investment could move faster.
FoodBud reviewed Wang Ning Lemon Tea, Heqitaotao, Yecuishan and Soge Fresh Tea, while noting that Yecuishan and Soge Fresh Tea had not completed business-registration changes.
There had earlier been rumors that Heytea wanted to acquire Lelecha, which Heytea later denied. FoodBud argued that acquiring Lelecha would only raise concentration in premium fresh-made tea, where Lelecha ranked behind Heytea and Nayuki.
In August 2021, Heytea acquired 70% of Wang Ning Lemon Tea. Lemon tea was not among Heytea’s top five products by sales in 2020, but Heytea’s own lemon-tea series was highly popular in summer 2021, selling 400,000 cups on launch day. With several lemon-tea brands raising significant funding, FoodBud saw acquiring an independent brand in the category as logical.
Yecuishan, a juice brand staffed by many former Heytea employees, had already received investment from GSR Ventures. Its price band matched Heytea’s, making it look like a product-category expansion.
FoodBud described Soge Fresh Tea as a mid-priced version of Heytea with a relatively restrained franchise system. Its products focused on natural fruit tea and zero-additive fruit tea. Its brand materials emphasized store quality over store count and long-term business over windfall profits.
Soge founder Wang Biao had argued in interviews that taste was the most important form of standardization. In 2017, Soge began hand-peeling grapes in stores for Kyoho grape fruit tea, despite comments that hand-peeling was not standardized. Wang’s view was that canned grapes were standardized but not tasty, and that customers would not pay for standardization alone. He preferred product stability over total standardization, accepting some variance to satisfy demand for fresh or handmade elements.
Heytea founder Nie Yunchen had expressed a similar product view in media interviews: extremely standardized products tend to be mediocre, while products that can be excellent but cannot maintain quality are also problematic; Heytea was trying to balance the two.
Soge Fresh Tea’s product philosophy was therefore close to Heytea’s. After 10 years, it had only 117 stores, which FoodBud saw as restrained growth. The investment would extend Heytea into a similar product category at a mid-tier price band.
Heqitaotao focused on peach-flavored tea drinks. FoodBud speculated that Heytea’s valuation entry point may have been low: public PR described the round as several million RMB in angel investment, and using RMB 5 million as an estimate would imply a valuation of around RMB 100 million.
Heqitaotao had more than 300 stores, but distribution was scattered: 60 in Jiangsu, 46 in Shanghai and 41 in Zhejiang, with nearly half in Jiangsu-Zhejiang-Shanghai and other stores spread as far as Heilongjiang and Gansu. FoodBud flagged risk in store control and supply-chain coverage.
The article argued that foodservice scale effects begin at the city level before becoming national. Many brands first build density in one city to test the model and train teams, then expand once organization, store model and supply chain are strong. Heqitaotao’s franchise expansion was described as loose, with nationwide franchising and possible store-quality instability. FoodBud said a more prudent third-party franchise approach would restrict regions step by step, such as a Beijing company first opening only in Hebei and Tianjin.
FoodBud summarized Heytea’s pattern as buyouts when the subcategory and team are clear, and small minority investments when exploring categories, price bands and franchise models. It said Heqitaotao was harder to understand, perhaps because Heytea valued upstream resources from the Cha Sandai group.
FoodBud observed that Wang Ning Lemon Tea’s WeChat account, mini-program design style and employee uniforms looked similar to Heytea’s store system, and that the mini-program’s underlying template was consistent.
Reusable capabilities included digital systems, especially data middleware, plus upstream procurement for raw materials, packaging, logistics and cold-chain transport. Design teams could also be shared.
The article compared this with Jiumaojiu, which repeatedly reshaped front-end store experience and design style to meet younger consumers’ needs, building new brands in proven categories while looking for the next Taier Sauerkraut Fish and third or fourth growth curve.
A recent episode of the Crazy Investment Circle podcast compared Heytea to Europe’s Medici family, funding creative people to build product and brand innovation.
A front-end multi-brand strategy could deepen back-end supply-chain capacity, maximize reuse of back-end resources, and strengthen the company’s moat.
In 2020, Heytea began using its offline brand equity to develop retail products, including FMCG products, tea leaves and merchandise, meeting demand across scenarios and raising store transaction value.
A LatePost report made a similar point about Chayan Yuese. A person close to the brand said its store productivity improved significantly only after it began bundling new-retail products such as tea bags and souvenirs. Before that, reaching RMB 1 million in single-store daily sales was difficult. On Chayan Yuese’s Tmall flagship store, a single bag of cold-brew tea was priced at about RMB 18, close to the price of one milk tea. FoodBud said this was also why Nayuki and Heytea bundled bakery products made in central kitchens and ready-to-drink sparkling water.
Heytea’s Tmall flagship store launched in March 2020, and its JD self-operated flagship store launched in July 2020. In 2021, Heytea began placing sparkling water products broadly in convenience stores including 7-Eleven and FamilyMart, pushing both online and offline channels.
FoodBud speculated that Genki Forest’s strength in sparkling water, retail product capability and distribution could lead to a Starbucks-and-Nestle-style endgame: Heytea might sell its retail business to Genki Forest, collect brand fees, and hand non-store channels to Genki Forest for distribution. FoodBud noted that Heytea and Genki Forest shared Sequoia Capital as an investor, though decision power might not be large; some small push could be possible.
Beyond tea-drink investments and retail exploration, Heytea was investing in adjacent beverages: Seesaw Coffee, YePlant and low-alcohol brand WAT.
Public information did not disclose how much Heytea invested in YePlant or WAT. For Seesaw, FoodBud used public data for a logic check. When Baitou invested in Seesaw, it contributed RMB 45 million at a RMB 180 million valuation. Four years later, the valuation had risen by more than 6x, to more than RMB 1.08 billion. If Heytea took a 5% stake at an estimated RMB 1.1 billion valuation, the investment would be around RMB 55 million.
Seesaw’s revenue was RMB 74.6 million in 2019 and RMB 71.1 million in 2020. At an RMB 1.1 billion valuation, that implied roughly 15x price-to-sales.
FoodBud viewed coffee, especially offline coffee stores, as a long-term investment area for Heytea. YePlant’s founder was also the founder of Minority Coffee, owned a coffee roasting factory, and had a coffee-bean brand called Torch Coffee. Based on Torch Coffee’s brand philosophy, FoodBud inferred that the founder may not have wanted the coffee business to become too commercial, choosing oat milk and plant-based products as the commercial path instead.
YePlant claimed publicly that it had become China’s second-largest oat-milk supplier to business customers. FoodBud expected a normal product-extension path from oat milk into coconut milk, especially because Heytea would want this part of its supply-chain procurement controlled by close partners.
For low-alcohol WAT, FoodBud said time would be needed to see whether the investment was about retail products or about a daypart model such as cafe and milk tea by day, bar by night.
FoodBud saw Heytea’s founder Neo, born in 1991, and the team as still having high growth potential and room to make and correct mistakes. The article argued that Heytea still needed new capabilities to become more than an inspiration-led tea brand.
At the time, the investments were still small-scale experiments, and FoodBud saw the timing as favorable because consumer-company valuations were returning to more rational levels. Small investments could help Heytea understand different markets; when valuations fell further, larger buyouts could deepen and widen its moat. The harder questions were whether Heytea could integrate better, how it should cooperate with invested companies, and how it could turn inspiration into operating efficiency.
FoodBud’s closing argument was that if Heytea wanted to become a great consumer company, internationalization was unavoidable. After the domestic tea-drink battle largely ended, it would need to take Chinese tea culture global and compete with coffee culture worldwide. That would require another major capability upgrade: internationalization.
Note: IPO timing, valuation, sales-target and forward-looking figures above are historical, from the 2021 article context.