SAGE SAGE Business Cases
© Raffaele Filieri and Yangjing Xu 2022
Abstract
This case study focuses on the tea industry in China and specifically on HEYTEA, a Chinese
company pioneering the new-style tea concept. The case analyzes the marketing mix adopted
by HEYTEA to differentiate its brand from its competitors and create a unique brand image.
In detailing HEYTEA’s marketing mix, the case suggests that, to successfully target Gen Z
consumers in China, beverage companies should pay particular attention to product appearance
and design, digital technology, and brand image.
Case
Learning Outcomes
By the end of this case study, students will have an understanding of:
• The tea market and its trends in China, including those surrounding the new-style tea.
• The practical implementation of marketing mix elements, with a specific focus on the tea industry in
China.
• Young Chinese consumers’ attitudes and behaviors towards food and drinks, and the marketing
actions taken by brands to meet these needs.
HEYTEA and the New-Style Tea
The Tea Industry in China
Tea is said to have originated in southwest China as a medicinal drink, and has for centuries played an
important social and cultural role in the region. Tea is one of the most popular beverages globally, especially
in Asia. China, whose national drink is tea, is the world’s largest producer and exporter of the beverage. In
2020, 2.97 million tons of tea were grown domestically across the country, more than in the other major tea-
producing nations of India, Sri Lanka, and Kenya combined (Statista, 2021). China exports only 15% of the
tea it produces as the country’s production is not enough to meet demand, which has increased by an average
of 10% per year for the past decade (Bolton, 2019). The growth of the market has encouraged the Chinese
to try relatively new formats such as ready-to-drink tea (i.e., jasmine tea) and concentrates for preparing iced
tea (Bolton, 2019).
Tea market revenues in China in 2019 amounted to approximately USD 86 million (Statista, 2019). Retail
sales value of tea beverages in China in 2024 is expected to reach CNY 93.6 billion from CNY 78.7 billion
in 2019 (Statista, 2019). Growing disposable incomes as well as an enhanced awareness of the health
benefits of tea are likely to continue increasing Chinese tea retail sales and consumption. China produces
1.772 million tons of green tea, which is considered the healthiest tea drink option. Green tea is believed
to provide various health benefits such as anti-aging, anti-inflammatory, and antioxidant properties, and may
help reduction of body fat and blood sugar as well as lower the risk of cardiovascular and other diseases.
Chinese consumers, especially wealthy adults, increasingly search for high-quality (i.e., hand-picked) tea
products and brands. High-quality tea in China can be expensive, costing up to USD 1,000 for 500 grams
(Daxue Consulting, 2020). China has recently faced a shortage of tea pickers, in part due to a lack of interest
among young Chinese people (Bangkok Post, 2020). Many of them are shunning the highly seasonal and
labor-intensive work, opting instead for companies that offer a stable year-round salary (Bangkok Post, 2020).
Company Overview
HEYTEA, which originated in the Guangdong Province of southeast China, is a popular tea beverage brand
that, since 2012, has pioneered a new-style tea, combining elements of the Chinese tea tradition (i.e., tea
leaves) with a modern and preppy image that resonates with young audiences. Min Feng, the founder of a
The New-Style Tea in China: The Marketing Strategy of HEYTEA
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SAGE SAGE Business Cases
© Raffaele Filieri and Yangjing Xu 2022
brand named Taste of Gaga, first introduced the idea of mixing different ingredients to produce new tea flavors
(i.e., fresh fruit teas and new tea series) inspired by the Spanish drink sangria.
In China, traditional tea includes seven types of tea leaves: green tea, yellow tea, white tea, oolong tea, black
tea, dark tea, and floral tea (Daxue Consulting, 2020). New-style tea or naigai-cha (i.e., cheese tea) is different
from both traditional and bubble teas (Table 1) and can be considered the “Western” version of tea, being
fashionable, colorful, and innovative to consumers’ eyes. Accordingly, the new-style tea combines tea with
“Western” ingredients such as cream cheese foam, which is almost unknown to Chinese consumers, and also
with cream, milk, and various toppings like fruits, jellies, and tapioca pearls. The new-style tea is among the
new innovative tea products recently launched in the market that have become increasingly popular among
young consumers, which include colorful bubble tea, Hong Kong milk tea, and Western-style blends, tea
espressos, and fusions (Bolton, 2019).
At the start, HEYTEA was just a small shop of less than 30 m2. In 2015 it set up a store in Shenzhen, a
first-tier city, then in 2016 the company received investment of CNY 100 million. The following year HEYTEA
entered the Shanghai market, with its first Shanghai store opening in the Raffles City shopping center. In
2018, HEYTEA started to provide a takeaway service to boost sales, and also developed its online sales
(iiMedia, 2020).
In recent years, the company quickly expanded into different parts of China, opening 390 stores in 43 cities
in 2019, with a growth of 170% compared with 2018 (Grigorian, 2020). Stores sold an average of 2,000 cups
of tea per day, and the monthly turnover of a single store averaged over CNY 1 million (Linkshop, 2020).
HEYTEA’s annual sales reached CNY 1 billion in 2018, and saw a net profit of CNY 385 million in 2019 (Mulia,
2020). In the latest round of financing in 2019, the valuation of HEYTEA was as high as CNY 9 billion, making
it the highest valuation company in the new-style tea field (Mulia, 2020).
Target Segment
In China, tea products face the challenge of differentiation as there are so many brands offering similar
products that all look the same to customers’ eyes. For this reason, some companies have decided to invest
in creating brands that are innovative and modern, fulfilling the desire of young consumers to experience new
products and lifestyles. Tea companies increasingly target the younger consumers because they are growing
more prominent demographically, they are more willing to spend, and they are more technologically savvy
than the older generations. Young Chinese consumers are novelty-seekers, hence they constantly search for
and try new products, even if these products break with the past and tradition.
Urban white-collar women under 40 years old are particularly keen to sample new-style tea, with only 30%
of consumers male (Daxue Consulting, 2020). By pricing each cup of tea between USD 3.70 and USD
4.50, HEYTEA is targeting the same type of young, affluent consumers who would buy Starbucks’ USD 5
Frappuccino in China (Wang, 2019). Hence, HEYTEA targets China’s young affluent consumers or students
aged from 18 to 25 who seek fashionable and trendy experiences. The younger consumer segment in fact
accounts for more than 80% of HEYTEA’s customers—the latter are keen to buy drinks with aesthetically
appealing packaging, and prefer products that are sweet over bitter ones (Mulia, 2020). Moreover, HEYTEA
also taps into consumers’ new eating habits, whereby milk tea is becoming a part of daily life for many
Chinese people (Daxue Consulting, 2020). HEYTEA’s main consumer groups can thus be divided into three
categories: fashion-seeking students, refined business white-collar workers, and experience-oriented high-
end consumer groups (Foresight Industry Research Institute, 2019).
Table 1. Types of Tea
Category Products Creation method
Traditional tea Oolong tea, black tea, etc. Tea brewing
The New-Style Tea in China: The Marketing Strategy of HEYTEA
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