Heytea's Battle to Defend the Premium Market After Strategic Contraction

Based on the collected information, I will systematically analyze how Heytea maintains its premium tea beverage market share after strategic contraction.

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As a brand that once defined the “benchmark of premium tea beverages”, Heytea is undergoing unprecedented strategic adjustments. As of October 2025, its total number of stores has dropped to approximately 3,930, a net decrease of over 680 compared to the same period in 2024, representing a year-on-year decline of over 15%[1][2]. This contraction reflects the deep-seated predicament faced by mid-to-premium tea beverage brands:

: There is an inherent conflict between the premium brand positioning and the sinking expansion strategy. After opening up franchise opportunities in 2022, Heytea expanded rapidly; although the number of stores once exceeded 4,500, the high material costs and complex operation system of the franchise model eroded franchisees’ profits[1][2]. Meanwhile, the advantages of product innovation are quickly imitated, and the scenario advantages of services are difficult to retain amid product homogenization.

In an internal company-wide email sent in February 2025, Heytea clearly stated “do not participate in digital games and scale involution, return to users and the brand”[1]. Its core strategies include:

• In-depth Supply Chain Integration
  : The essence of industry competition has evolved into supply chain competition. Heytea needs to continuously strengthen the supply chain stability of high-quality raw materials such as “real fruits, high-quality tea, fresh milk” to balance quality, cost and efficiency. Compared with Mixue Ice Cream & Tea’s vertical integration model with a self-production rate of core raw materials as high as 60%, Heytea still has room for improvement[1].
• Health-Oriented Product Innovation
  : Data shows that the usage rate of sugar substitutes in milk tea has exceeded 61% in 2025, and the application ratio of plant protein milk continues to rise. Heytea’s persistent “low sugar, zero calorie” positioning aligns with this trend, and health-oriented products will become the core battlefield for innovation in the future[1].

The essence of Heytea’s strategic contraction is

, rather than simply closing stores:

• Focus on High-Value Business Districts
  : Contract inefficient stores, concentrate resources on core business districts in first-tier cities and strategically significant locations, and preserve the consumption scarcity of the brand[2].
• Reshape Spatial Experience
  : In the past, the social experience formed by relying on the high-end brand image and design-oriented large stores was the core differentiator of Heytea from mass brands. The small store model of 40 square meters is difficult to fully reflect this advantage; in the future, it is necessary to deepen experience scenarios under the large store model[2].

Overseas expansion of new-style tea beverages has become a common choice for leading brands to seek growth. According to statistics, Heytea has opened more than 70 overseas stores[1]. For successful overseas expansion, attention should be paid to:

• Localization Adaptation
  : Overseas supply chain challenges should not be underestimated; brands need to carry in-depth localized operations instead of simple model replication[1].
• Balance Between Increment and Stock
  : Industry experts suggest that the domestic market with a scale of 50 billion RMB is still a “cash cow”, while the overseas market with a scale of 10 billion RMB, although growing rapidly, is fragmented and has volatile policies, so it should be regarded as a “profit center” rather than a “scale story”[2].

Facing the industry’s “involution” situation, Heytea needs to jump out of the quagmire of price wars:

• Reject Meaningless Scale Competition
  : Clearly state that the industry’s “digital game has come to an end”, and shift the focus of development from the number of stores to brand content and user experience[1][2].
• Establish a Win-Win Mechanism for Franchisees
  : The brand should focus on earning brand premiums, and realize deep interest binding with franchisees through raw material cost optimization, sales-based tiered rebates, and unified digital operation management[2].

The current new-style tea beverage market has entered the stage of stock competition. According to data from iiMedia Research, the scale of China’s new-style tea beverage market reached 354.7 billion RMB in 2024, with the year-on-year growth rate slowing down to 6.4%, and the industry as a whole has bid farewell to the high-growth period[1]. Leading brands are adjusting their paces one after another: Chabaidao only had a net increase of 59 stores in the first half of the year, and the total number of Nayuki’s Tea stores shrank from 1,798 to 1,638[2].

Against this background, Heytea’s strategic contraction is not an isolated case, but a microcosm of the value return of the entire premium tea beverage industry. Industry analysts point out that although this decision increases operational difficulties and asset investment, it is a correct strategic choice from the perspective of healthy industry development and long-term profitability[2].

The contraction and strategic adjustment of more than 680 stores by Heytea is a landmark event that marks China’s new-style tea beverage industry bidding farewell to its adolescence and entering the mature stage[1]. Whether it can maintain its premium market share in the future depends on the following key factors:

Strategic Dimension	Core Measures	Expected Outcome
Product Innovation	R&D of health-oriented and differentiated new products	Reconstruct consumption scarcity
Supply Chain	Increase self-production rate of raw materials, optimize costs	Support premium pricing
Channel Strategy	Focus on high-value business districts, large-store experience	Strengthen brand tonality
Overseas Expansion Strategy	Localized operations, profit-oriented	Open a second growth curve

: If Heytea cannot effectively balance quality, cost and efficiency, or continues to lag behind competitors in product innovation, its premium market position may be further eroded by brands such as Nayuki’s Tea and CHAGEE.

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[1] Investor Network - Thinking Finance - “Heytea’s "Slimming Down": Instead of Competing on Store Count, What Will It Compete On?” (https://www.donews.com/article/detail/8189/94373.html)

[2] China Business Journal - “Behind Heytea’s Mass Store Closures: The Imbalance Between Revenue and Expenditure in New-Style Tea Beverages Needs to Be Resolved” (https://view.inews.qq.com/a/20251220A01GCA00)