This is an English adaptation of a FoodBud historical article originally published on March 5, 2022.
Spring is the lead-in to the summer peak season for freshly made tea drinks, and brands were again testing less common fruit flavors. Heytea launched guava, while Shuyi Tealicious promoted roxburgh rose. The author noted a recurring operating issue: niche fruit products can be difficult to support consistently. At one Shuyi store, the promoted roxburgh rose product was out of stock while the store’s advertising still focused on it.
That supply-chain fragility had shown up before with sweet emblic products, which also suffered shortages. The point is operational: as tea brands use more distinctive fruit SKUs to create differentiation, supply reliability becomes harder.
At the start of 2022, coffee chains such as Starbucks and Tims were raising prices. Heytea moved in the opposite direction, cutting prices.
Based on Heytea’s investment activity in 2021, the author argues that the company likely understood the opening limits of a high-end freshly made tea positioning. At the time, neither Heytea nor Nayuki had exceeded 1,000 stores. This challenged some secondary-market projections that both brands could reach 3,500 stores.
Those projections often compared tea chains with Starbucks, but the author questions the comparison. Starbucks has a strong “third place” role in shopping centers and business meetings. Even non-coffee drinkers may buy coffee as a kind of entry ticket to use the space.
Fresh tea stores have not built the same space-based consumption habit. Many Heytea and Nayuki stores are primarily takeaway-led, and the store environment can be less predictable. Customers may play games or chat loudly, reducing the reliability of the space as a business-meeting venue.
According to Zhaimen Canyan data cited in the article, Heytea opened 220 new stores in 2019 and 320 in 2020. In 2021, the pace slowed to 198 new stores, below the 2019 level. The new-store growth rate was about 140% in 2019, but only 26% in 2021.
There had also been market rumors that Heytea planned to list in Hong Kong with a hoped-for market value of HK$150 billion. The author contrasts this with Nayuki’s post-IPO share performance, describing it as weak and below the issue price after listing.
Heytea had raised substantial capital, and investor expectations created pressure for growth. For an offline store business, performance growth still depends mainly on faster store expansion; retail products can only be a supporting line.
On February 24, Heytea announced that it had completed a full product price adjustment that began in January 2022. It said it would not launch new drink products above RMB29 during the year, and promised not to raise prices on existing products during the year.
Heytea’s mainstream store menu had moved fully below RMB30, with the lowest-priced product at RMB9. Products priced RMB15-25 accounted for more than 60% of its full product range.
The author notes that Heytea’s menu was starting to look closer to Guming’s. Guming’s fruit tea products were viewed as competitive.
Whether Heytea can use lower pricing to gradually enter the mid-priced tea market still needed time to prove. The author’s store observations at lunchtime suggested that orders did increase after the price cuts, but this was anecdotal and limited to that period.
Heytea had already invested in or acquired several brands in 2021, including Ye Cuishan and Wang Ning Lemon Tea. Ye Cuishan remained positioned at the higher end, with its most expensive product reaching RMB1,000 and mainstream products generally above RMB30. Wang Ning Lemon Tea sat closer to the mid-priced band. Heqitaotao, another Heytea investment, also used mid-range pricing.
For Heytea’s core products, such as Very Grape, the new price positioning was described as carefully placed: slightly below Nayuki, but slightly above Guming.
The mid-priced products inside the Heytea main brand include long-tail series focused on lighter, simpler, or more affordable drinks. Whether those products can move from long-tail SKUs into mainstream drivers remained uncertain.
Beyond its main brand, Heytea’s mid-priced portfolio already included Xixiaocha, Wang Ning Lemon Tea, Heqitaotao, and Suge Fresh Tea. Xixiaocha was priced lower than brands such as Heqitaotao and Wang Ning Lemon Tea.
On March 2, 2022, Heytea increased its stake in Suge Fresh Tea from 10% to 45%. The author argues that if Suge performs well, the path could lead toward acquisition.
Among Heytea’s four mid-priced brand bets, Suge Fresh Tea was described as having stronger and steadier momentum. It also shared a geographic origin with Heytea: both began in Xiaolan, Zhongshan. The author suggests Suge could become Heytea’s main mid-priced expansion vehicle, using franchising to accelerate growth.
When announcing the price cuts, Heytea said it had optimized parts of its supply chain, giving it room to lower product prices.
For restaurant operators, the three major cost lines are ingredients, labor, and rent. Tea brands are no exception. In freshly made tea, the largest cost is usually ingredients, followed by labor, then rent.
For Heytea’s fruit tea products, the main ingredient cost is fruit, followed by tea, then dairy. The biggest optimization opportunity is fruit, in three areas.
First is fruit procurement cost. Potential approaches include developing new fruit varieties or contracting supply in advance, similar to how coffee beans are sourced. But fruit is a primary agricultural product, and sweetness, acidity, and other attributes are difficult to price with clear standards. More time is needed to standardize the process.
Second is fruit loss, especially during cutting, preparation, transport, and distribution. One possible model is shifting more cutting and preparation to suppliers before delivery to stores. If loss occurs, suppliers bear more of the cost. This forces suppliers to reduce waste and optimize costs outside the store.
The author compares this with Nayuki’s investment in Tianye, where the goal was for Tianye to process fruit and deliver it to warehouses before allocation to stores.
Third, if fruit preparation is moved upstream to suppliers, stores can reduce labor requirements.
There is less room to optimize tea and dairy procurement. Heytea had already built an organic tea garden and had invested in Wild Plant, with co-branded products sold in stores.
On labor cost, the key is replacing manual store tasks with equipment and making the front-end store lighter. Examples include automated milk foaming and automated tea brewing. Store workflow improvements can also raise efficiency.
On rent, the key variable is store-opening success rate. This becomes more visible when store density rises and brand momentum weakens. When brand momentum is strong, even weaker locations can generate strong performance. When momentum declines and density rises, store-level pressure increases.
Consulting research cited by the author suggested that fruit tea brands broadly face supply-chain loss issues. More critically, as store networks grow, fruit procurement costs do not necessarily fall. Loss is one reason; unstable short-term demand and supply-chain markups are another. Demand forecasting and supply stability remain insufficient.
The author sees Heytea’s price cuts reflected most clearly in fruit products. In the RMB10-plus price band, some products were described as already tasting thin, a negative effect of price reduction. Whether the strategy is correct remained unclear. One possible outcome is higher revenue without higher profit.
The article closes by comparing price cuts with a “more volume, same price” strategy.
The author cites Jiahua Capital’s Song Xiangqian discussing Dongpeng in 2017. When Dongpeng planned to compete with Red Bull through price cuts and reduced package size, Song reportedly argued that the strategy was likely wrong. His view was that Chinese consumers respond not only to lower prices but also to more volume. Dongpeng instead increased package size from 350ml to 550ml without cutting price, which Jiahua said helped Dongpeng Special Drink achieve 35% compound annual growth. Jinmailang was cited as another company using a similar approach.
The article also summarizes discussion from Jike users. One view was that “more volume, same price” feels more directly valuable to consumers than “less volume, lower price,” because the latter requires customers to reassess both value and cost while also learning a new package or product format. Another view was that price cuts reduce average transaction value; even if volume rises, total sales may not improve. More volume at the same price may expand cash flow and potentially take demand from competing beverages.
The unresolved operator question is whether Heytea’s lower-price, lower-volume route can work, especially if it drives traffic but compresses margin.
Note: IPO, valuation, ownership, store-count, price, and forward-looking figures are historical as of the March 5, 2022 source article.