In 2012, HEYTEA originated from an instant inspiration of mixing cheese with tea. It is a mixture of tea, either green, black, or fruit, and a cheese foam. This cheese top tea is the product that HEYTEA has been selling through its marketing campaign since 2012 and has become what they are known and successful for.
The company’s strengths and weaknesses as well as the macroenvironment will be analysed using the SWOT analysis with mention of the 4Ps marketing mix.
The main strength of HEYTEA is its promotion which is through social media marketing and reliance on E-word-of-mouth marketing. Over the years, HEYTEA has managed to gain a large social media presence as people would post pictures of their tea on social media platforms such as WeChat, Weibo, and Instagram. An example of their successful social media marketing can be seen on their RED (小红书) brand account which is their major marketing channel. Since launching its brand account in June 2018, HEYTEA has now over 80k search results and over 115k followers, which is significantly more than other similar brands (doublevconsulting, 2019). Exposure on social media was a successful hunger marketing strategy as it targets people’s desires to not only taste the tea that everyone is talking about but to also be able to show it off on their social media. Creative store décor, which is unique to each location, further appealed to the social media world; “it [HEYTEA] has understood the importance of innovation in terms of taste, appeal and packaging format, in line with the demographic” (Globaldata., 2019). Furthermore, the popularity of HEYTEA has created a long queue phenomenon. People posting pictures of them waiting in a queue or having HEYTEA has ignited a curiosity within their social circles. “Long queues… created a sense of scarcity in the minds of customers and upped the brand value” (Prasad, 2020), “it’s a sense of achievement and satisfaction” (Vice, 2017). Another strength is the product. The innovative idea of the cheese cap tea (奶盖茶) and the use of high-quality ingredients and packaging. The creativeness of HEYTEA’s signature product has gained a lot of attention and praise such as “This is creative…The cheese cap actually tastes good” (Forbes, 2019). The quality and freshness of the ingredients further appeal to consumers, as analysts have found “HEYTEA’s success can be attributed to its choice of using natural ingredients, sourcing of oolong tea leaves from Taiwan and cheese from New Zealand, 100% natural fruit juices, natural rock sugar, and free from artificial flavors” (GlobalData, 2019).
However, although the long queues have been identified as a strength, they are also a weakness for the brand. HEYTEA has been accused of creating ‘false hype’ around its products and hiring people to queue outside (daxueconsulting, 2017). This brings a bad image for the brand. Moreover, most consumers are not fans. If the image is bad and they are offered better options at better prices they would move along and others would follow as suggested by Chen Rei, a researcher at the Communication University of China, “people want to show they are on-trend and unique. If all your friends are talking about a product then other young people will be curious” (Grigg, 2017). Another weakness of this brand is false claims that they invented the cheese cap tea, conveying a false sense to the consumer that they were trying something new (daxueconsulting, 2017). This lack of transparency can be off-putting to potential and existing consumers. Moreover, the price of HEYTEA’s product is higher than its competitor’s, each cup of HEYTEA costs between 11 to 29 yuan, with an average of 25 yuan. In comparison, Yi Dian Dian (一点点), HEYTEA’s competitor, offers tea at prices ranging from 6 to 18 yuan per cup, with an average price of 14 yuan (daxueconsultating, 2017).
With globalization, the eating and drinking habits of young Chinese people are evolving and they seek unique and differentiated products (BusinessWire, 2019). This is a big opportunity for brands to capitalise on this and create new and different products which is exactly what HEYTEA did. HEYTEA modernised the Chinese concept of traditional tea drinking as millennials have shifted to try different tastes such as coffee (BusinessWire, 2019). This is a perfect opportunity for HEYTEA to introduce their cheese cap tea product which had brought them attention as is evident by the fact that 72.7% of consumers knew HEYTEA for their cheese cap tea (HeyTea Customer analysis, 2020). HEYTEA shops display fancy and refined interiors. To increase the perceived value of its products, the brand operates from premium locations at the top malls of Chinese cities (daxueconsulting, 2017). Operating from first-tier locations is a great opportunity for HEYTEA to attract customers and encourage them to post on social media because the location is premium and picture-worthy.
There are several threats to HEYTEA. In the market, HEYTEA does not only compete with regional competitors such as Coco (都可茶饮) or Yi Dian Dian (一点点) but also global brands such as Starbucks (daxueconsulting, 2017). HEYTEA’S competitors offer lower prices and due to the success of the cheese cap tea many tea shops have now incorporated the product into their own menu which reduces the uniqueness of the cheese cap tea, this is a major threat of losing consumers.
Starbucks is a big threat to HEYTEA as they are their main competitor. The potential size of the milk tea industry is close to 100 billion yuan, which is roughly equivalent to China’s coffee market (chinatalk, 2019), which is a good thing for HEYTEA to be able to match their competitor however Starbucks made a huge impact on the coffee industry due to capitalising on the emergence of the Chinese middle class who would like to experience the western coffee experience making it incredibly popular in China and successfully opened more than 570 stores in 48 cities since it first entered (Forbes, 2012). Starbucks carried out accurate market and product positioning and found that the emerging middle class was a good opportunity. After entering the market Starbucks did not stop there. They continued to research consumption preferences and made appropriate adjustments. Starbucks has launched coffee varieties more in line with Oriental taste, firmly targeting the target group in China. In terms of product mix, Starbucks authorizes each chain to mix and match drinks and food freely to better meet the taste of local customers (Zhihu, 2020). After entering into the Chinese market, Starbucks has cooperated with local industries in different regions. For example, Starbucks has established a joint venture with Beijing Meida Coffee Company in northern China (Zhihu, 2020) which shows its efforts for expansion in the Chinese market. In terms of brand image, Starbucks has always had an elegant and positive image, maintaining a first-class brand image and status. To maintain this image Starbucks provides consumers with the most authentic coffee, the most abundant varieties, the most mellow taste, and the most first-class service (Zhihu, 2020). As for marketing, Starbucks has already established its global success, so they needed to bring the experience to China. The employees are at the heart of delivering the “Starbucks Experience” to customers. They are the best marketing ambassadors for the company (Forbes, 2012).
As for the market segmentation, it is split into geographical, demographic, and behavior (consumer investigation data report, 2020). Geographically, HEYTEA has 401 stores in total as of 2019, with most of its stores being in Shanghai and Shenzhen. Many of these stores are located in top-tier malls which target young, middle-class consumers. The Gender demographic shows that there are more female consumers (55.13%) than males (44.87%), therefore, the packaging is pleasing to look at as well as the interior as female consumers will be more likely to want to post it on social media. As for the age demographic, the highest percentage of consumers are aged 20 – 31 years old (68.59%), this shows that marketing of the product must be aimed at the young demographic who are open to trying new things and this is why HEYTEA has heavily adopted the internet to market its products as its targeted consumers, have grown up with the use of the internet” (scmp, 2018). Young commuters take up the highest percentage of the occupation demographic (63.46%) as they want to grab something tasty to drink to have time to relax. As for the behavior, consumers enjoyed coming to HEYTEA to enjoy a friendly atmosphere with their friends and to relax.
HEYTEA carried out audience research and found that 33% of Chinese internet users consume brewed tea; in Shenzhen, that figure is more than 40% (customer investigation data report, 2020). HEYTEA has a large number of stores opened in Shenzhen due to this. To get a customer satisfaction report, HEYTEA cooperated with Tencent CDC to explore and understand consumer behavior and attitudes. HEYTEA had also done a database analysis to conduct psychological profiling which helped their segmentation. One tool that HEYTEA could use is online surveys. Online surveys are a low-cost way to do market research about whether an idea or a product will be appealing to consumers (Inc, 2020). This offers more in-depth knowledge of what the consumer wants and expects of the brand to be able to further develop the product.
In 2012, the owner started the business with an investment of $22,000 and the idea of the cheese cap tea, in 2017 HEYTEA registered revenues of US$87.2m (Global Data, 2019). Revenues are a good indicator to show the cheese cap tea was a successful idea. HEYTEA refuses to release more data on their success however other KPIs can show success as they get a lot of attention on social media and the brand’s turnover shows a clear indication that it is a successful campaign as turnover has reached, on average, over 1 million yuan per month per store – roughly 2000 cups per day (daxueconsulting, 2019).
2020-11-6-1604683986