Starbucks Challenger Heytea Lowers Prices, Vows Less than CNY 30 per Drink

Chinese milk tea giant Heytea (Chinese: 喜茶) wrapped up fine-tuning its drink prices that started a month before, the company said in an announcement. It also pledged not to introduce drinks of over CNY 29 (USD 4.59) or raise the prices of existing products this year.

The teashop had cut drink prices, including for fruit tea, milk tea, and coffee, by CNY 1 to CNY 10 as early as January. Following the tweaks, product prices except those for some special or limited editions fell to less than CNY 30. Products priced between CNY 15 and CNY 25 accounted for over 60% of the total  offerings.

After Heytea’s price changes, its domestic arch-rival Nayuki (02150) (Chinese: 奈雪的茶), the first Chinese tea drink brand to be listed, also lowered product prices by as much as CNY 9. 

The company traded at HKD 6.28 (USD 0.804) per share as of Friday’s trading, with a market cap of HKD 10.771 billion. Its shares have plunged 68.3% from the issue price of HKD 19.8.

Meanwhile, other tea drink brands in China raised their prices due to rising costs amid global inflation. Since mid-2021, popular Chinese fruit tea chains have increased drink prices. Chabaidao (Chinese: 茶百道), a second-tier brand in the league of Mixue (Chinese: 蜜雪冰城) and Lelecha (Chinese:乐乐茶), hiked some product prices by CNY 2. 

Other brands such as CoCo (Chinese: 都可), Yi Dian Dian (Chinese: 一点点), and Chayan Yuese (Chinese: 茶颜悦色) also raised prices. Coffee chains such as Starbucks and Luckin Coffee followed suit, due partly to the soaring cost of coffee beans.

“ The price drop was a normal adjustment by Heytea within its mainstream product price range, thanks to its brand value, size and supply side advantages,” Heytea  said, adding that it had never been an upscale tea brand. 

In reality, however, for a long time customers have considered its drinks as a status symbol on par with Starbucks or Costa. In an online survey led by users on Douban, a Chinese film, book and TV review website, 98% of the 3,973 respondents said they perceived Heytea products as "expensive."  

Data from iiMedia Research, a business intelligence firm, showed that  medium-to-high-end Chinese tea drink brands, those priced at CNY 20 per drink, accounted for 14.7% of the tea drink market.

Eyeing a larger market with more price-sensitive consumers, the company, valued at CNY 60 billion after the latest founding round in July last year, seemed to be shifting its strategy. 

In view of the changing market landscape, Heytea's dialed down its store expansion over recent years. According to canyandata.com, a catering industry data provider, the Shenzhen-based startup added stores at a slower pace, falling from a year-on-year increase of 139% in 2019 to 78% in 2020, and further to 26.3% in 2021. 

As of early February 2021, the teashop had 893 establishments in 70 cities across China and four in Singapore.