China’s Starbucks Should Be Coffee or Tea? An Exclusive Talk with HeyTea’s Founder
COVID-19 and China
Founder of HeyTea. Image credit: HeyTea

EqualOcean held an exclusive interview with Neo (聂云宸), founder of HeyTea (喜茶). This fascinating new style tea drink company has bewitched Chinese consumers with not only the finest ingredients but whimsical branding.

People would queue for hours to get one cup of tea drink or pay double price for those who engaged in wait-in-line service for others.

It has been phenomenal. With an average 1500 cups of drink sold per store and the highest single store revenue reached CNY 170,000 per day, HeyTea is good enough to cause peer envy.

What’s its secret? EqualOcean was as curious as you are to dig it out during the conversation with Neo.

Unusually sedate and precocious for his age, this post-90’s entrepreneur shared his vision and the story from the very beginning of HeyTea’s business.

Respect product is the prerequisite of being a brand

There are two stereotypes of Chinese entrepreneurs that I found somehow naïve: 1. As long as the same suppliers are found, the same product can be made. 2. It’s hard to tell any intrinsic difference between similar products. -- That I think shows indifferent to their products.

China has been running the business relying heavily on supply and sales channel for too long, yet they’re still the model applied by the majority. For example, packaged snack companies, are known for their OEM manufacturing. They merely have product R&D capability but select samples provided by the suppliers. It’s a short supply chain and imitation is possible to some extent thus made products less important than channels.

HeyTea, on the other hand, runs a brand based on good products.

Thus, the company has quite a long supply chain that no supplier is able to master the whole. They are scattered and varied, which is the result of careful selection and continuous optimization.

For HeyTea, tea leaves are purchased from suppliers in Taiwan, Guangxi and abroad. Then the raw materials will be shipped to different factories to blend. The blended tea, plus packaging material made from other suppliers will be delivered to each store. What’s more, several of HeyTea’s upstream product, are special customized that might eliminate some suppliers who are unable to provide ideal ones it needs.

Therefore, all those details are the prerequisite of HeyTea’s popularity. For those who claimed to have SOP of the company’s prescription, Neo answered at ease, “That’s a very tail-end thing. Even if someone gets it, I worried nothing.”

“Everyone is discussing the concept of new retail,” Neo added. “In contrast to new things, I would focus more on unchanged facts or some essential things. Consumers’ essential need is a cup of good drink with a good design and an integrated good feel.”

The company stays vigilant and respectful to its product.

Industry upgrade is sometimes dragged by the minority

At present, the main products in China's bubble tea market separate into two categories.

One is the traditional instant bubble tea that cupped, boxed or bagged in the form of powder or the liquid instant bottled bubble tea. Their ingredients are basically tea powder, milk powder, saccharin, coffee powder for instant production and use. Small street stores made their appearance with the same producing procedure plus manual work for most stores.

The other refers to the thriving new style tea drink, which originated from street bubble tea, is freshly made with real tea, milk and fresh fruits in stores.

Neo recalled when he started the tea drink business in a small town in Guangdong, the bubble tea would sell for CNY 5 or even lower.

Upgrade did not happen naturally in certain industries, and for some are even decline. Heytea actually boosted the industry against the trend and drove its peers and suppliers to upgrade as well. 

“At first, suppliers responded with sneers and jeer when I decided to use top-quality tea leaves, fresh milk, imported cheese as the raw materials,” he said proudly. “But when we scaled up and gained fame, these suppliers accommodated with HeyTea’s standard and upgrade with us.”

When received a freshly made tea drink from a HeyTea store, most consumers can immediately notice the difference in taste with the traditional or street bubble tea. Their taste for tea drinks evolved too.

Going global as the world-known new tea drink brand

From the very beginning of HeyTea’s foundation, Neo set the company’s strategic goal big -- to be the world-leading tea drink brand. It’s not a random idea but after thorough considerations.

In contrast with the exotic product like coffee, tea possesses a stronger culture foundation and discourse power in China and other countries in East Asia.

Chinese have enjoyed tea for millennia, The Classic of Tea (茶经) by Lu Yu (陆羽) in the Tang dynasty (around 729-804 AD) is an early work on the subject. In the Classic of Tea writing, it describes how tea plants were grown, the leaves processed and prepared as a beverage. It also describes how tea was evaluated. The civilians enjoyed its flavor while the nobility considered the consumption of good tea as a symbol of their status.

By 2018, China remains the largest country of tea with the production of more than 1 million tons per year. However, the share of traditional tea industry in China's beverage market is declining, away from its yesterday glory.

HeyTea, together with other new style tea drink brands, have awakened young people's love of tea and the confidence of consuming a cup of tea with the same price as a cup of coffee.

Now HeyTea has already entered regions such as Singapore and Hong Kong, functioning as “the window on the world.”

To be a super brand with limitless imagination

"Either you become a super platform or you become a super brand. Products, supply chains and operations are all designed to serve the brand,” Neo said with confidence. “Brand has unlimited possibilities, multifaceted, and won’t be tied to fixe d products. I don't feature HeyTea as a cheese-top tea store. I want it to be a cool brand.

Since the second half of 2018, HeyTea has frequently released sidelines. Some are seasonal delicacies. Examples include the moon cakes consumed on Mid-Autumn Festival and zong zi, a glutinous rice dumpling usually eaten to mark the Dragon Boat Festival. Some are released along with related new products. The debut of new drinks is often timed with the unveiling of accessories. For instance, the Bobo bag and the mobile phone case were launched around the same time as the new drink "Milk Tea Bobo Ice." Likewise, the Hong Kong-style bags and vintage cups were sold on the occasion of debuting "HeyTea Coffee." Besides new product, in order to quickly establish its brand image when entering a new city, HeyTea would also develop limited editions of sidelines to attract new consumers.

For HeyTea, the co-branded products are never a major revenue generator; their most important role is to strengthen the brand image.

Neo said he won’t use the word marketing inside the company or name any department in HeyTea as marketing. “I prefer the word 'content'. Though it's also advertising, the focus differs from companies which value channel the most. Content does not necessarily trigger consumption or even display any products, the purpose is to convey the style of the brand.” he explained.

The balance of branding and expansion speed

HeyTea now runs more than 250 stores in China and plans to expand to 400 by the end of this year. When asked about the rumored new round of financing that valued company to CNY 9 billion, Neo didn’t provide funding information.

He told EqualOcean that HeyTea is operating on very healthy cash flow and the CNY 9 billion is undervalued for sure.

The valuation before the listing only requires the approval of a few people and does not have any practical significance to me. In the short run, people definitely wish to have a higher valuation, but in the long run, the operating pressure brought by the high valuation will appear. To ensure that companies can grow healthily. I don't want to hold things high.

“It’s easy to launch expansion strategy, what’s not easy is to expand while remaining a high revenue for every new store,” he added. “I’ve been always tried to balance the mental occupation of consumers and the physical stores opening. This is crucial in the information age. The recognition of consumers is not always relevant to one's physical scale.”

Now Neo mainly occupied in product R&D, branding and operation. Being a young entrepreneur who manages a startup, EqualOcean admires his passion in new style tea drink market and the vision about being the real culture exporter as China's Starbucks. The author will end this article with more sayings from Neo recorded from this interview.

HeyTea has an R&D team of 30 people. We only hire graduates with no work experience but great passion in what we do. The company will organize product competition every month to try fancy creations from our R&D team regardless of product standardization.

I love history, not just ancient ones but also some new stories. From a business perspective, the biggest enlightenment is the story of Apple. Our generation is also experiencing Apple's history. Apple has taken its own path when encountered countless doubts. It inspired me to care less about the present, and the results will prove itself.

I challenged myself every day on the idea that I thought was right. My teammates know that I'm a person like to alter things on products, contents we made and my own theories. And I think it's necessary.

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