This is an English adaptation of a FoodBud historical article originally published on January 8, 2022.
In early 2022, many Chinese beverage and foodservice brands were passing higher raw-material costs on to customers. Helen's had already raised prices, though its products remained under RMB10. milk-tea brand Chayan Yuese announced on January 5 that most of its milk-tea products would rise by RMB1, with the new pricing effective after January 7. On the evening of January 4, Xiangpiaopiao confirmed a 2%-8% price increase for its solid instant milk-tea products, including the Classic and Good Ingredients series, effective February 1.
Heytea moved in the opposite direction. It made a strategic price cut across three product areas: pure fruit-pulp tea, the "affordable" series, and the "simple" series. The lowest-priced product, "Pure Green Yan Tea Queen," fell to RMB9.
Heytea's previous price increase came after the 2020 pandemic, when cost pressure led it to raise five drinks by RMB1-RMB2: Dou Dou Bobo Tea, Succulent Mango Mango Pomelo, Taro Bobo Fresh Milk, Lava Custard Bobo Ice, and Milk Tea Bobo Ice.
At the start of 2022, Heytea appeared to be shifting from a phase defined by external investments toward testing lower product price bands.
In Heytea's product adjustment, pure fruit-pulp tea was mainly repriced by removing cheese foam from the base drink and making it an optional add-on. That made the headline price look lower. In the "simple" and "affordable" ranges, the core products were plain tea drinks, while Jinfeng Tea King Milk Tea actually rose by RMB1.
Even so, the move created a mid-priced product line beneath Heytea's premium positioning. Heytea had already entered convenience stores with bottled drinks, effectively pursuing a RMB5-RMB10 mass-market consumer-goods route.
That gives the brand a more continuous pricing architecture: mass-market bottled drinks, mid-priced store drinks, and premium store drinks. The harder question is why freshly made plain tea in a tea shop should command a higher price than a convenience-store bottled drink, and what consumption occasion justifies cup-based preparation and a store-level premium.
For Heytea, reaching down from premium pricing into the mid-market through new product series is relatively easy for consumers to accept. Coffee chains such as Starbucks and Luckin also sell plain Americano-style products at prices far below milk-and-coffee beverages such as vanilla lattes.
For value brands, moving upward is harder. Mixue Bingcheng had considered higher-end products, but the corresponding stores closed not long after opening. Operators built around efficiency businesses often struggle to shift into brand-tonality plays.
Other sectors show that value-to-mid-market moves can work. Huazhu Group began with the economy hotel chain Hanting and gradually shifted business focus toward the midscale Ji Hotel brand. That transition benefited from a broader consumption-upgrade trend, but also from Huazhu's strong operating capabilities.
For tea brands already used to brand-building, scale can gradually improve operating efficiency. The main lever is price reduction, though that can create a negative side effect: weakening how consumers perceive the brand's positioning. Heytea chose to lower prices through new product series, allowing the main brand to reach further into lower-tier markets.
A Nayuki PR line framed the contrast as: "Heytea does VC; Nayuki does products." Both Heytea and Nayuki began as premium freshly made tea chains, but their subsequent strategies diverged.
Heytea used investment and M&A to test adjacent business boundaries while also adjusting its own price architecture to reach the mid-market.
Nayuki remained more focused on tea drinks, internal efficiency improvements, and extensions into bakery and snack product lines. Its store strategy had taken detours, but after adjustments, its future path remained worth watching.
According to data seen on Narrow Door Canyan, Heytea had 878 stores, mainly concentrated in Guangdong and the Jiangsu-Zhejiang-Shanghai region. First-tier cities accounted for 43% of stores, and new first-tier cities accounted for 31%.
Both Heytea and Mixue Bingcheng faced the question of where the next stage of high-speed growth would come from. Mixue had already reached 20,000 stores in China, so it extended into coffee through Lucky Cup, ice cream through Gelato, and overseas markets including Vietnam and Indonesia.
Heytea explored new boundaries through investment. Its investment in Seesaw pointed to coffee; its acquisition of Wang Ning Lemon Tea reflected confidence in lemon tea; its acquisition of Ye Cuishan reflected the potential of juice; and its stake in ready-to-drink cocktail brand WAT tested the low-alcohol market.
Its stake in Wild Plants had two possible angles: plant-based products as part of its supply chain, and the potential to launch Heytea-branded oat milk. Its stake in Heqi Taotao may have helped it study both mid-priced markets and franchised chain expansion into lower-tier markets.
Heytea's own lower-priced sub-brand, Heytea Small Tea, expanded stores relatively slowly. Broadening the main brand's price bands may have been a way to expand the consumer base the brand could serve.
Only once Heytea's consumer base grows meaningfully can it open more stores in lower-tier markets.
Competition in the mid-priced tea segment was already intense. Brands such as Guming, Shuyi Grass Jelly, Yihotang, and Chabaidao had each exceeded 5,000 stores. Beyond these national scaled players, Heytea would also face regionally scaled competitors in different markets.
A previous analysis of Mixue Bingcheng noted that the company initially opened stores densely in Henan province. By the time it reached 1,000 stores, supply-chain scale effects were already visible. According to Mixue's internal forecasts, these scale effects usually require around 3,000 stores to appear.
Heytea's largest regional base was Guangdong, with fewer than 300 stores. Further supply-chain efficiency gains would still require greater scale.
According to Heytea's own disclosures, store-level serving efficiency improved in 2021. After online ordering, pickup waiting time kept shortening. Average in-store pickup waiting time per order was about five minutes shorter than in 2020, and intelligent pickup cabinets had been installed in more than half of stores.
Front-end efficiency improvements usually require corresponding back-end technology investment. Heytea had not disclosed where its back-end technology investments were focused. By comparison, Nayuki's latest announcement said its self-developed automated tea-making equipment began selecting manufacturers and trial production at the end of the fourth quarter of 2021, was being used during off-peak periods in some stores, and was expected to be formally deployed across national stores before the third quarter of 2022.
Given Nayuki's self-developed equipment, Heytea would likely also develop similar systems. Plain tea products can be made more automated and efficient at store level, while manual tea-making creates challenges for output efficiency, daily cup volume, and production cost.
That helps explain why Heytea cut prices on plain tea products while maintaining higher prices on fruit teas. Many fruits used in tea shops still need to be freshly peeled or prepared.
To build a stronger moat in the mid-priced market, Heytea still needed more scale. Stable front-end volume would create the incentive to keep improving back-end supply chain and store-level production efficiency. The intended cycle was: high and stable sales volume, improved supply chain and store output efficiency, lower prices with higher product quality, and then continued stable high sales volume.
Note: investment, M&A, store-count, price, and forward-looking deployment figures are historical as of the January 8, 2022 source article.