Analysis of "HEYTEA" growth strategy!

Growth Effect

• Store size: At the end of 2018, the total number of HEYTEA stores was 163; according to data from HEYTEA's official website on November 19, 2019, including GO stores, the number of HEYTEA stores reached 401.
• Cup output per store: 2,000 cups/day; average monthly revenue per store: more than 1 million yuan (based on media interview data from Heytea founder Nie Yunchen).
• HEYTEA GO Mini Program: It was launched at the end of June 2018 and had more than 10 million users by the end of May 2019 (according to data released by HEYTEA CTO Chen Peilin).

Sources of growth

New consumer groups

According to online data from Meituan Dianping, consumers born in the 1990s account for 51.4% of the 4.2 trillion catering market, far exceeding the proportion of consumers born in the 1990s in the total population. At the same time, as the new generation of young consumers grow up in an Internet environment, they have developed clear Internet consumption habits. Not only do they have richer and more diverse demands for catering, but they are also happy to find consumption targets through the Internet.

According to the Kantar Worldpanel, the scale of China’s ready-made beverage market exceeds 100 billion yuan. Currently, the average annual per capita milk tea consumption in mainland China is only around 15 cups, and the saturation of the milk tea market has not yet reached its upper limit. The age group of milk tea customers is concentrated between 18 and 28 years old, with more than 80% being female customers. They are mainly young, fashionable people who pay attention to health and quality of life.

Growth strategy analysis

Build a 4P framework around the needs of new consumer groups

1. Products

1. Rich and constantly iterating product structure

HEYTEA has a rich product range, covering almost all branches of new-style tea drinks, including cheese tea, fruit tea, milk tea, pure tea and light desserts. Some stores also have new categories such as specialty drinks and coffee. Heytea responds quickly to market demand and upgrades its products. Based on the taste requirements of young consumers, it reverse-customizes the required raw materials from the upstream supply chain. In 2018 alone, 48 new products were released.

2. Avoid product names that are used as comparison standards

Traditional milk tea shops generally use the "ingredient combination" method when naming their products, such as honey aloe vera green tea, honey grapefruit tea, kumquat lemon tea, etc. The advantage of this naming method is that consumers can understand the specific information of the product at a glance through the name; but the disadvantage is that it is easy to form comparisons between similar products, such as taste and price.

In Chapter 16, "Developing Pricing Strategies and Plans," of Philip Kotler's "Marketing Management," there is a concept of "reference prices," which analyzes how consumers form their perceptions of prices. Few people remember the specific prices of different brands of a certain type of product, but when purchasing goods, consumers generally recall the price range of similar goods as a reference price or external reference framework for comparison to determine whether the current price of the product is reasonable.

Heytea avoids the raw material-centric naming method of traditional milk tea shops and gives its products unique names, such as Cheese Green Beauty, Cheese Berry, Bobo Tea, and Golden Phoenix Tea King. These names are not only more memorable, but also avoid the comparison standards with traditional milk tea shop products - which is conducive to setting higher prices and forming a unique sense of value (I am who I am, don't compare me with others).

3. Good-looking product packaging

A survey by DuPont, the largest chemical company in the United States, showed that 63% of consumers choose products based on their packaging. This discovery is the packaging effect, also known as the "DuPont Law."

If you want to have the potential to be shared across your friends’ circles, you must first have a high “appearance”. Social media has fueled the desire of young consumers to “show off”. It is under such demand that a group of "Internet celebrity cities" and "Internet celebrity stores" were discovered by consumers and quickly became the main means of city marketing and store marketing. Heytea's rotating cup lid, minimalist white cup, and take-out packaging all reflect the "high-value" design concept and have repeatedly become a "regular" in consumers' circle of friends.

4. Expand peripheral products based on the preferences of new consumer groups

In 2018, Heytea launched nearly 100 peripheral products, including lipsticks, clothing, shoes and hats, speakers, umbrellas, mobile phone cases, etc., covering the three major categories of beauty, clothing, and life.

Peripheral products not only enrich brand connotations, but also increase brand exposure: peripheral products have a longer life cycle than beverages, always reminding consumers of the existence of the "HEYTEA" brand; on the other hand, interesting peripheral products are more likely to stimulate social topics, such as HEYTEA's peripheral product "Stinky Tofu Socks".

2. Price

Heytea’s pricing cuts into the gap between traditional milk tea and coffee.

The average price of the products is between 20 and 30 yuan, which is higher than that of milk tea shops such as CoCo and Yidiandian, but lower than that of coffee shops such as Starbucks and Costa, forming its own brand premium.

3. Channels

1. Store layout

According to statistics, there are nearly 30,000 beverage shops in Shenzhen, making it the city with the largest number in the country. HEYTEA focuses on cities such as Shenzhen, Shanghai, and Guangzhou (81 stores in Shenzhen, 62 stores in Shanghai, 45 stores in Guangzhou, 33 stores in Beijing, and 180 stores in other cities and overseas).

2. Store design

The LOGO and store design highlight coolness, inspiration, Zen and design.

3. Online and offline linkage

Build a new membership system through the HEYTEA GO mini program. HEYTEA GO has functions such as self-service ordering, coupons, discount activities, reservation function, points redemption, and multi-store display. The mini program also promoted Heytea’s sales, accumulated hundreds of thousands of “paying members”, and continued to drive month-on-month growth in store sales. The monthly repurchase rate increased by more than 3 times after the launch of the mini program compared to before the launch. HEYTEA GO also supports product and service innovation, and provides new ideas for user operations by integrating a paid membership system and developing social games.

IV. Dissemination

Create topical phenomena and events to stimulate media coverage

1. Phenomenon: queuing for two hours, scalpers doubling their purchase price, real-name limited purchases, hot-selling products flooding the WeChat Moments, etc.

2. Events: Collaborating with Emoji and NIKE, or launching the trendy PVC Attitude Planet transparent bag, or opening black and gold stores or pink stores... Every brand event or new store opening of HEYTEA is closely linked to the social and life attitudes of young people, looking for a wider range of scene experiences beyond high-quality products.

5. Comments

Marketing is undergoing a digital revolution, the core feature of which is the "digitalization of life scenarios." Smart terminals represented by mobile phones have become the center of our lives and work. On the one hand, they enable consumers to easily obtain a large amount of information about companies, products, social responsibilities and usage experience. Consumers can now fully control the purchasing process. On the other hand, consumer behavior is recorded and analyzed by unprecedented amounts of data, which has led to a deeper understanding of consumers for companies and brought about new market strategy opportunities. Therefore, successful companies must master and use "social networks, intelligent recommendations and e-commerce", which are the core pillars of today's business society.

In interactive communication with today's younger generation of consumers, corporate brands can no longer use preaching and propaganda, but must use "experience, appearance, social interaction and technology" to communicate with the new generation of consumers through digital scenarios. Young consumers no longer like those "pretentious" brands. Young people like brands to share their views on social events so that they can gain recognition of their values. They like brands that can bring creativity to their lives, help them cultivate their interests, and help them experience life and express themselves.

Author: Brand Consulting

Source: Kotler Business School (kmg1981)