Heytea Denies Reported Layoffs Affecting 30% of Staff

This is an English adaptation of a FoodBud historical article originally published on February 8, 2022.

Sina Finance reported, citing multiple Heytea employees, that the Chinese tea chain had begun internal layoffs before Lunar New Year 2022, with further cuts expected after the holiday. Heytea’s relevant department responded to Sina Finance that it had “not heard of layoffs.”

What Sina Finance Reported

According to Sina Finance’s employee interviews, the reported restructuring included the following claims:

• Layoffs had started before the holiday and would continue afterward, affecting around 30% of employees overall.
• Some employees said no year-end bonus would be paid, while another account said bonuses had been “delayed.”
• The information security department was reportedly eliminated, and the store expansion department was reportedly cut by 50%.
• Departing employees would receive standard N+1 compensation, or could choose internal transfers to other departments, such as moving from technical roles to business roles.
• Employees described dissatisfaction with the annual meeting, saying there was no meal, limited benefits, and staff were required to stay from 10 p.m. until midnight. During the livestream, comments about salary increases and year-end bonuses reportedly filled the screen.
• Founder Nie Yunchen reportedly criticized competitors’ shortcomings at the annual meeting, which some employees viewed negatively.

Possible Drivers Cited by Employees and Industry Sources

Sina Finance reported that employees offered different explanations for the alleged cuts. A common view was that Heytea’s performance had weakened over the previous year: the company was still profitable, but net profit growth was negative. Some employees speculated that the company may have been trying to improve its financial statements ahead of a potential listing.

An industry source close to Heytea’s senior leadership also told Sina Finance that the alleged layoffs may have been preparation for pre-IPO financial reporting.

Financing, Valuation, and Store Economics

In July 2021, Heytea completed a US$500 million Series D financing round. Its post-financing valuation was reported to be as high as RMB 60 billion, nearly six times the valuation of Nayuki.

However, Sina Finance cited data from Jiuqian Consulting showing that from July 2021, Heytea’s nationwide sales per square meter and average store revenue began to decline. In October 2021, average store revenue and sales per square meter were down 19% and 18% respectively versus July 2021, and down 35% and 32% respectively year on year.

The article framed the reported layoffs as a possible way to reduce labor costs and offset profit pressure after store expansion.

Price Cuts and Market Positioning

Shortly before the report, Heytea had adjusted prices on multiple products. In total, 14 items saw price reductions of varying degrees, including:

• Pure tea products cut by RMB 3-5
• Five fruit tea products cut by RMB 2-3
• Cheese topping cut by RMB 1
• Pure Green Yan Tea reduced to RMB 9

After the adjustment, Heytea’s product price range covered RMB 9 to RMB 30-plus, suggesting a shift from a purely premium tea-drink positioning toward serving more mid-market customers.

Sina Finance noted that outside observers saw the price cuts as a signal that Heytea was trying to expand order volume and make financial metrics look stronger.

Note: IPO, financing, valuation, and forward-looking financial interpretations above are historical as of February 8, 2022.