Heytea Opens Partner Stores Outside Tier-One Cities and Shuts Down Xixiaocha

This is an English adaptation of a FoodBud historical article originally published on November 3, 2022.

FoodBud reported two related moves from Heytea on November 3, 2022: the brand confirmed it would open a franchise-style business-partner model in non-tier-one cities, and it had closed all stores of its lower-priced sub-brand Xixiaocha.

Heytea Opens a Business-Partner Model

Heytea confirmed that it would develop a business-partner operation in non-tier-one cities using suitable store formats. The company said it would support partners across brand, product, quality control, food safety, operations, training and supply chain.

Heytea said the goal was to let more consumers access the brand more quickly. After rolling out a store-partner mechanism across its directly operated network, the company said it would use the experience, capabilities and resources accumulated over ten years to expand through selected partners.

The company said partners would be strictly screened and supported, and that they should strongly identify with Heytea's brand spirit and company culture. Heytea described the intended offer as consistent with its positioning of “real quality, not expensive.”

Xixiaocha Stores Close

Heytea also said the final store of Xixiaocha, its lower-priced tea-drink sub-brand, had closed at Guangzhou Chengtou Tower.

According to Heytea, Xixiaocha had been an exploration of product and price bands. As Heytea lowered its own pricing, the company said Xixiaocha had completed its historical role. Heytea said the experience accumulated through Xixiaocha would support its future product and brand experience.

FoodBud's Operator Takeaways

FoodBud viewed the move in the context of weaker consumer demand. It noted that both Heytea and Nayuki had said they were not cutting prices, but overall product pricing was moving downward. In the market's view, Heytea was becoming more like Guming, while Guming's direct-store development was increasingly resembling Heytea.

FoodBud also noted that Heytea's monthly new-store openings in 2022 had not exceeded 10 in any single month. Pandemic volatility that year made direct-store expansion difficult. Heytea's core market remained tier-one cities, and as the brand moved into lower-tier markets, a store model built around a relatively high average ticket became harder to sustain. Sharing expansion risk through franchising was therefore understandable.

FoodBud attributed store-opening data to Zhai Men Can Yan.

Heytea had already spent time testing mid-priced products and brands, including Xixiaocha, and had also invested in Heqi Taotao and Suge Fresh Fruit Tea. FoodBud said Heytea held a 45% stake in Suge Fresh Fruit Tea, and that an acquisition could be possible if the business developed well.

FoodBud's final read was that competition was intensifying as more players moved into the middle price band. Among mid-priced tea-drink brands, it viewed Guming as the strongest. Guming had done relatively little in some tier-one markets such as Shanghai, while Heytea was moving downward from tier-one cities. FoodBud expected smaller players to face the greatest pressure.

Note: Expansion plans, shareholding details and potential M&A comments are historical as of November 3, 2022.