Why I am optimistic about Heytea's opening up to franchising | New interpretation of consumption

Heytea recently opened up for franchising. Is this a right move or a wrong attempt? Let's see what the author says~

In my opinion, opening up to franchising is a right move for Heytea.

If I were to choose which brand understands Chinese young people best, I would first recommend Heytea. Their founder, Nie Yunchen, who was born in the 1990s, really understands young people and knows how to please them with the brand.

As early as 2017, Heytea founder Nie Yunchen shared his practice of brand positioning theory at IDG Capital’s New Consumption Era Summit. “At that time, we pioneered cheese milk tea, and we really wanted young consumers to know this, so we wrote in the slogan that Heytea is the pioneer of cheese milk tea. But we found that this kind of publicity is very weak. In fact, consumers often buy products for resonance.” Later, Heytea’s slogan was adjusted to “A cup of Heytea inspires inspiration.”

In just a few words, we cover brand strategy, user insights, and market practices. Let’s talk about brand strategy first.

To develop a brand strategy, you need to solve three problems:

1. Who are you?

2. Who to sell to?

3. Do competitors give in?

Heytea’s initial idea was to strengthen its product advantages. Since it had created the cheese milk tea sub-category that was very popular among consumers, it used the “pioneer of cheese milk tea” to make the most of its first-mover advantage to establish a mental advantage. This was the most standard application of brand positioning theory that could not be more standard.

However, after discovering in practice that its core consumer group, young people in developed areas with Guangdong as the core, were not interested in cheese milk tea, Heytea quickly changed its strategy, shifting from the original emphasis on products to an emotional expression, which is the "resonance" that Nie Yunchen repeatedly emphasized on many occasions. This formed the prototype of "Tea of ​​Inspiration" and really won the resonance of young people.

02

Why does positioning theory fail but emotional strategy works? This has to do with human needs.

In my book "Trend: The Secret Behind Brand Explosion and Going viral", I summarized and organized the needs into two categories based on Maslow's hierarchy of needs theory, namely basic needs and cultural needs.

Basic needs: As the name suggests, it refers to the most basic needs for human survival, such as physiological needs and safety needs. It includes needs such as being well fed, well clothed, and having water when thirsty, which are necessary for survival. It also covers the pursuit of an innovative category from scratch. For example, for smartphones, people’s focus on basic needs is cost-effectiveness, that is, whether the product can be obtained at a lower cost.

Cultural needs: With the increase of similar products, the differences in basic attributes are becoming smaller and smaller. On the other hand, with the increase in people's income and living standards, the demand for personalized consumption is becoming more urgent. Therefore, they begin to pursue stimulation points beyond product functions. This personalized demand is often reflected at the brand level, whether it is impressive, whether it conforms to the preferences of a certain group of people, and whether it has a clear brand proposition (values).

Just like Maslow's description of the hierarchy of needs, when the lower level of needs are met, people begin to pursue higher level needs. The changes in basic needs and cultural needs are closely related to economic development and people's income levels. When the income level is low, people pay more attention to prices. The more developed the economy, the more people pay attention to cultural needs, that is, brand feeling.

The tea beverage track just proves this logic.

Heytea was born in Guangdong, one of the wealthiest regions in China. It targets the core group of young people in Guangdong, who have never lacked food and clothing since childhood. A small innovative product is unlikely to impress them. What they pursue is spiritual satisfaction, that is, cultural needs. Therefore, compared to the "pioneer of cheese milk tea" who emphasizes the product, they are naturally more interested in "a cup of Heytea inspires inspiration". It is also because it meets the cultural needs of this group that the price of Heytea at the beginning of its establishment can be as high as nearly 30 yuan, making it a veritable high-end milk tea.

From this perspective, let’s look at the other end of the tea beverage track. Mixue Bingcheng, which started from the sinking market, has a product pricing strategy of 4 yuan for a cup of lemonade and 2 yuan for an ice cream because it targets user groups in underdeveloped areas.

In fact, Nie Yunchen also had a similar description of basic needs and cultural needs. When he was interviewed by Jiemian, he divided the needs into two categories: food, clothing, housing and transportation, and food, drink and entertainment:

Food, clothing, housing and transportation are rigid needs, so consumers will shop around and consume rationally. All rigidly needed products come from platforms, such as Meituan for food, Taobao for clothing, and Didi for transportation.

Eating, drinking and having fun are higher-level needs. People have a rigid need to eat, but many times we eat not to avoid starving to death, but because we think the food tastes good. This is why HEYTEA has many interesting activities, such as food trucks. They look like fun and have nothing to do with HEYTEA, but in fact they are part of a larger field we are in.

Interesting activities like fast food trucks are just a microcosm of brand building. Heytea is particularly good at using unexpected activities to resonate with young people. For example, in the early days, Heytea would secretly launch new products by placing posters in stores to obtain first-hand feedback from young people. It would also establish a 5-person content team in the early days to produce content on various new media platforms, and combine with various trendy cultures and trendy activities to get closer to young people. It would play with various elements of the Heytea brand and make personalized products, such as a city-themed logo... In order to win over young people, Nie Yunchen even worried that excessive popularity would arouse young people's rebellious psychology, and was afraid of excessive attention from the media.

With the combined effect of these measures, young people have become HEYTEA's most valuable brand asset.

Why are Fendi, Fujiwara Hiroshi and other international first-tier luxury brands and fashion brands willing to launch joint brands with HEYTEA? It is also because they see the special position of HEYTEA among young people, so they use HEYTEA to impress young people in China. It can be said that the cooperation between Fendi and Fujiwara Hiroshi is the best affirmation of the HEYTEA brand.

03

So, what are the benefits of branding?

There are many interpretations from the perspectives of recognition, loyalty, and reputation, but I prefer to understand why companies build brands from the perspective of commercial value. On the one hand, brands play the role of moats, forcing competitors to compete with themselves at higher costs. On the other hand, brands can bring tangible benefits to companies. Take Heytea as an example. Even after a round of substantial price cuts, the price of its single products is mainly concentrated at nearly 20 yuan, ahead of other ready-made chain tea brands. In fact, Heytea's brand advantage has also driven the prices of bottled water, popsicles, tea bags and other products. The unit price of Heytea sparkling water is 6 yuan, similar to Yuanqi Forest. In addition to the premium, the brand also brings higher repurchases. Official data shows that the repurchase rate of Heytea's mini program has reached 300%.

It can be said that the high premium and high repurchase brought by the brand constitute an important cornerstone of Heytea's business model, and also an important reason why Heytea has attracted much attention from the capital circle. However, no matter how high the premium or repurchase is, it is impossible to maximize the commercial value without the support of the number of stores.

04

Scale is more important for chain tea brands.

Here comes the key: what should tea beverage brands do to fight in the sinking market?

I started from the end in mind. After systematically sorting out the successful elements of super brands such as Coca-Cola, Nike, LV, and Moutai, I summarized a "T"-shaped super brand model. The "一" above represents the circulation capacity of a brand, which is composed of three main elements: product power, price power, and channel power. As the name suggests, the lower the price, the better and more effective the product, the wider the sales channel, and the stronger the circulation capacity. The "丨" below represents the scarce capacity of a brand, that is, whether there are some unique and irreplaceable elements in the minds of its consumers, such as drinking Wanglaoji when afraid of getting angry, Nike's "Just Do It", Apple's "Think different", LV's sense of dignity, and Supreme's trendy logo. I summarize it as positioning power, spiritual power, and social power.

Using this model to analyze the entire chain tea beverage track, we can find that affordable tea beverage brands represented by Mixue Bingcheng, Yidiandian, and Guming first establish distribution capabilities, that is, open stores on a large scale. After reaching a certain scale, they begin to build their scarce capabilities "downward". The most outstanding of these is Mixue Bingcheng. Whether it is the "Snow King" Logo or the catchy "You love me, I love you, Mixue Bingcheng is sweet", they have left a deep impression on consumers.

On the other hand, high-end tea brands represented by Heytea and Nayuki first establish scarcity capabilities and occupy a special place in people's hearts, and then build circulation capabilities "upwards", which is what we see as price cuts to increase sales, joint launches of new products, and most importantly, opening stores.

All roads lead to Rome. These two strategies were merely choices made by the companies under the circumstances at the time. From the results, focusing on circulation capacity first is the optimal solution for sinking markets, while focusing on scarcity capacity first is the optimal solution for economically developed regions. However, as Mixue Ice City and others move downward and Heytea moves upward, the clash between the two forces has already begun, and the battlefield is not the first-tier cities where Mixue Ice City and others have entered, but the third- and fourth-tier cities.

It can be said that whether or not a brand can influence consumers in third-, fourth- and fifth-tier cities determines its success or failure.

Tea drinks are no exception. The main battlefield is sinking, and the size of the store determines the outcome. Therefore, we see that many players are vying for the sinking market. Brands that already have advantages, such as Mixue Ice City, Shanghai Auntie, Gu Ming, Cha Baidao, and Bawang Cha Ji, are further increasing their advantages and aiming for 10,000 stores (Mi Xue Bingcheng has exceeded 25,000 stores). In order to sink, Heytea and Nayuki have also launched a franchise system and actively recruited franchise partners. In addition, coffee brands such as Starbucks and Luckin Coffee are on the same track. To use the words in "Bright Sword", the sinking market has become a mess.

However, opening a store is not difficult, but making the store make money is difficult. Why is Mixue Bingcheng so powerful? Because its store closure rate is only 3%, much lower than other tea brands.

05

Therefore, we still need to figure out what the sinking market needs.

First, the price is low. As mentioned earlier, the third, fourth, and fifth-tier groups are extremely sensitive to prices, and low prices undoubtedly have a huge advantage. Therefore, we can see that most of the freshly brewed tea drinks do not exceed 10 yuan, and even Mixue Bingcheng, which can be priced at 4 yuan, has established a huge advantage in the sinking market. Affordable brands such as Yidiandian and Coco have also become a force that cannot be ignored in the sinking market by virtue of their price advantages.

High-end brands such as Heytea are also adjusting their prices. After several adjustments, 10 to 20 yuan has become the mainstream price range for core products of many brands. As shown by the T-shaped brand structure, price cuts can definitely enhance their circulation capacity, but it is obvious that no matter how much they cut their prices, they can never get close to Mixue Bingcheng. Besides, the lower-tier markets do not need another Mixue Bingcheng. They are not without consumption capacity, but they just lack reasons to consume.

Let me share a story. My wife's hometown is in a third- or fourth-tier city. Ten years ago, when we were already used to Pizza Hut in Beijing, Shanghai, Guangzhou and Shenzhen, the newly opened Pizza Hut in that place still had a queue at 9 pm. Seven or eight years ago, her friend boasted to us that we finally had a Starbucks in our place, and we could go there for afternoon tea and be a white-collar beauty for a day. You know, before Pizza Hut, there was pizza there, and Pizza Hut was not cheap either. Starbucks was 30 yuan per cup, which was much higher than the price of local coffee. But why are young people flocking to these brands?

After asking, I realized that, in their eyes, Pizza Hut and Starbucks are not just regular food and drinks, but a lifestyle conveyed by first-tier cities, white-collar workers, and even European and American film and television dramas. Owning these means having the life of a first-tier city or European and American country, and they are willing to pay a high price for it.

Does it sound familiar? In fact, just like luxury brands and fashion brands, it is more of a packaged identity symbol than a product.

In fact, this is the biggest advantage of Heytea now.

Heytea has taken root in first-tier cities, and has coupled itself with young people and white-collar workers in first-tier cities through product sales, brand building, and various interesting activities. Now it only needs to package this relationship as a scarce value in its process of sinking, just like Fendi and Fujiwara Hiroshi recognize them, and it is possible to occupy a special position in the hearts of third-, fourth-, and fifth-tier consumers. Coupled with the construction of a franchise system, it is possible to build scale in the sinking market and become another pole of tea brands. These are also what Mixue Bingcheng, which has been drunk by sinking consumers for more than ten years, does not have.

Many people often use the product as 1 and the others as 0 to emphasize the importance of the product. Products are of course important, and chain tea brands are also stimulating their consumers with one hit product after another. However, if there is no brand, operation, and supply chain, no matter how strong the product is, it is only 1.

As I have always believed, the competition among chain tea brands is always beyond the cup of tea. And it is only a matter of time before Heytea succeeds in sinking into the lower-tier cities.

Author: Yang Ze; WeChat public account: Zero State LT