Lessons from Heytea’s return to premium positioning
In a Chinese market increasingly dominated by price wars and aggressive expansion, Heytea is taking a different approach. While many brands battle for market share through discounting and mass franchising, Heytea is doubling down on premium positioning, brand experience, and product differentiation. This bold move is not only a strategic shift for China’s leading tea brand but also a valuable case study for foreign brands looking to succeed in China’s evolving consumer landscape.
The Price War Trap in China
China’s new-style tea market has been in an intense price war for years. Competitors like Mixue, Shuyi Tealicious, and Guming have expanded aggressively, offering low-cost drinks and rapid franchise expansion to dominate smaller cities. The result? A market where prices are pushed lower, margins shrink, and quality often takes a backseat.
Heytea initially resisted this trend, maintaining its high-end, direct-owned model to preserve brand consistency and quality. However, as competitors gained traction, Heytea briefly entered the price war, cutting prices and opening franchises. Within a year, it expanded from 800 to over 3,200 locations, later reaching 4,300+ stores. But this growth came at a cost - customer complaints about inconsistent quality, poor store experiences, and diluted brand perception surfaced across social media.
Recognizing the dangers of mass franchising, Heytea has now taken a decisive turn: pausing its franchise program and shifting its focus back to brand experience, innovation, and premium positioning. This strategy offers valuable insights for foreign brands navigating China’s fast-moving, price-sensitive market.
Lessons for Foreign Brands: The Value of Premium Positioning
For years, foreign brands in China have relied on their premium reputation to differentiate themselves. But with local competitors mastering manufacturing efficiency and aggressive pricing, the challenge is to remain relevant without succumbing to the price war. Heytea’s strategy presents a playbook on how foreign brands can sustain their premium appeal in China.
1. Brand Experience Matters More Than Scale
Unlike competitors such as Mixue chasing store expansion, Heytea is refocusing on in-store experience. It has revived its high-end DP (Dream Project) store model, designed as an immersive tea experience. Its latest Chengdu DP store integrates local architecture and an exclusive Mengding Mao Feng green tea blend, creating a hyper-localized luxury tea experience.
This approach mirrors foreign luxury brands that prioritize in-store storytelling. Gucci, Louis Vuitton, and Hermès have long focused on flagship stores that serve as experiential hubs rather than simply retail spaces. Foreign brands can learn from Heytea by leveraging flagship stores as cultural and brand experience centers, rather than just expanding store counts.
2. Differentiation Through Innovation, Not Discounts
Instead of competing on price, Heytea is doubling down on product innovation. It has shifted its focus to health-conscious beverages, launching a new Superfood Tea series featuring ingredients like kale, bitter melon, and beetroot. These align with the rising “punk wellness” trend in China, where young consumers mix indulgence with health-conscious choices.
For foreign brands, this reinforces the importance of continuous product innovation tailored to Chinese consumer trends. Starbucks, for example, has successfully adapted to China by offering local flavours like Osmanthus Latte and tea-infused coffees. Similarly, beauty brands like Estée Lauder and L’Oréal have localized their skincare products to align with China’s preference for lightweight, herbal-based formulas.
Foreign brands should recognize that being premium is not just about price - it’s about offering something unique that cannot be easily replicated. Heytea’s pivot back to innovation over price wars proves that differentiation drives long-term brand loyalty.
3. Fewer, High-Impact Collaborations Over Mass Co-Branding
China’s consumer market has seen a saturation of brand collaborations, with tea brands frequently partnering with IP-driven pop culture brands (e.g., anime series, celebrities, and internet-famous snacks). However, Heytea is shifting towards higher-quality, culturally relevant partnerships. Recent collaborations include:
CLOT (high-end streetwear brand) – reinforcing Heytea’s connection to contemporary Chinese culture.
Marimekko (Finnish design brand) – aligning with minimalist, premium aesthetics.
Shangchengshi (a Chinese cultural magazine) – tapping into a more refined, intellectual audience.
For foreign brands, this shift highlights the need for purpose-driven partnerships rather than chasing short-term viral moments. Brands like Dior and Burberry, which have partnered with Chinese artists to craft meaningful storytelling campaigns, provide a blueprint for long-term cultural engagement. Foreign brands should prioritize collaborations that enhance brand storytelling and align with deeper cultural trends, rather than short-lived buzz.
4. Premium Isn’t Just About Price—It’s About Perception
Heytea has made a strategic shift in branding, aligning itself with traditional Chinese aesthetics through a Zen-inspired, minimalist visual identity. The redesigned Heytea GO app removes emojis and bright icons, opting for a cleaner, more sophisticated interface. Its new slogan, “Zen Natural Inspiration,” reflects an embrace of Chinese heritage and a return to quality over mass-market appeal.
This aligns with a broader shift in China’s luxury market, where brands like Chanel, Prada, and Fendi have increasingly incorporated Chinese cultural elements into their campaigns to appeal to national pride and premium tastes.
For foreign brands, Heytea’s strategy underscores the importance of premium branding beyond pricing. It’s about crafting an image that resonates with Chinese cultural values, aesthetics, and emotional connections. Simply being an international brand is no longer enough - foreign brands must integrate cultural storytelling to reinforce their premium status.
The Future of Premium Brands in China
Heytea’s return to premium positioning is a clear signal that China’s market isn’t just about who can offer the lowest price - it’s about who can offer the most compelling brand experience. For foreign brands, the key takeaways are clear:
Prioritize brand experience over aggressive expansion.
Invest in innovation rather than discounts.
Be selective and strategic with collaborations.
Build a premium perception that resonates with Chinese consumers.
As China’s market matures, consumers are becoming more discerning. The brands that thrive won’t necessarily be the cheapest - but the ones that offer a clear identity, a unique experience, and a meaningful connection to Chinese culture. Heytea’s pivot is a masterclass in how to navigate China’s premium market - and foreign brands would do well to take note.
