Can Heytea be saved by "joint venture"?

Following cross-border collaborations with film, television, animation, and sports brands, HEYTEA's cross-border collaboration with Fendi has once again put HEYTEA in the spotlight. In today's saturated tea market, can the continuous cross-border collaborations bring new vitality to HEYTEA? Let's take a look at this article to see what changes HEYTEA's various new actions have brought. Recommended for friends who are interested in brand marketing.

How else can new tea beverage brands collaborate?

Recently, Heytea, which has been silent on social media for a while, has started to make some moves again. It has cooperated with the luxury brand Fendi to launch a co-branded drink, which is accompanied by yellow paper cups, coasters and badges, as well as a handbag printed with the Fendi English logo.

“I paid the full amount for just over a dozen dollars, this is the closest I’ve ever been to FENDI”, “I didn’t expect that my first Fendi in life was given by Heytea”... Soon after the product was launched, it was flooded on social media, and consumers placed orders to buy it. The popularity was so great that Lei Jun even made a special Weibo post to “cash in on the popularity”.

In addition, within two days of the launch of the event, the official mini program crashed due to overcrowding, and stores in various cities showed that the co-branded products were sold out on the same day. On the one hand, the popularity of the social media continued to rise, with pictures, memes, and secondary creations emerging one after another, while on the other hand, the products in offline stores were quickly sold out, and the co-branded packaging was directly out of stock. What consumer needs did this co-branding hit?

1. A premeditated joint signature

This collaboration was not without warning. As early as May 15, Heytea released a poster previewing that it would be officially announced the next day. Although the brand name was not released in the preview, for those familiar with the fashion circle, the highly saturated bright yellow poster design and the new logo of the Heytea boy on both sides have made the answer FENDI obvious.

On the evening of May 16, FENDI created a special Heytea tea room area at the "Hand in Hand Craftsmanship Art Exhibition" event held in Beijing, showing guests in advance the limited edition special blends and four baked products in collaboration with Heytea, which are paired with Yi Litsea cubeba spices and yellow fruits. The products will be open to the public from May 19 to June 16.

On May 17, several hours after the entry #FENDI喜茶合作# became a hot search on Weibo, the official account of HEYTEA announced that the collaboration will work with the "FENDI'hand in hand' Craftsmanship Art Exhibition" to bring the "hand in hand tea room" and limited product experiences with Chinese Yi characteristics, and will also specially present the "FENDI Joy Yellow" special blend in HEYTEA's mainland stores.

In contrast, FENDI's official Weibo and other accounts focused on promoting the "FENDI 'hand in hand' Art Exhibition" and did not mention any joint activities, maintaining the luxury brand's usual "aloof" tone.

A closer look at this collaboration reveals that in addition to Heytea changing the visual style of its brand's social media accounts to a limited co-branded version, the company also made a themed cup that combines FENDI yellow and Heytea black. The FENDI and Heytea boy's logos are placed on both sides of the cup to reflect the collaboration.

The product "FENDI Joyful Yellow" draws on the classic yellow DNA of FENDI. It is made of three yellow fruits, mango, orange and passion fruit, with a green tea base. The cups and handbags are also Fendi yellow. Although the taste is not amazing, it is still acceptable among many co-branded products.

According to incomplete statistics, since 2017, Heytea has launched cross-border collaborations many times. Its partners include Maybelline, iQiyi, L'Oreal, Nike, Ovaltine, Kiehl's, Peacebird, Durex, Adidas, Dove, QQ Music and hundreds of other brands, covering multiple fields including gaming and e-sports, catering consumption, film and television culture, clothing, cosmetics and so on.

In fact, it is not just Heytea. In the new tea beverage track, joint ventures have always been a favorite marketing method of major brands. Heytea, Nayuki Tea, Luckin Coffee, Shanghai Auntie, Chabaidao, COCO... All major new tea beverage brands love to expand brand voice and product sales through joint ventures. The reason behind this is related to the characteristics of the industry. When the new tea beverage track enters a highly competitive node, it requires continuous output of brand culture with a unique tone.

If it is not possible to establish a brand moat by creating a gap with competitors through taste, then co-branding can to some extent cater to the interests of young consumers.

2. Is Heytea making a fortune behind the collaboration?

What is ridiculous is that the packaging of this co-branded product has set off a buying craze on second-hand platforms, with a set of FENDI brand yellow-label "coaster + paper bag + badge + cup holder" priced at nearly 100 yuan.

This shows that young people are chasing after luxury goods. For many young people, luxury goods are too expensive for their wallets. On the FENDI official website, a handbag costs at least 10,000 yuan, and the cheapest ring costs more than 2,000 yuan. In the co-branded model, you only need 19 yuan to get the "FENDI entry-level model". Who can refuse "the closest opportunity to luxury goods"?

As an industry insider said in an interview with 36Kr: "Luxury products' attitude and price create a sense of scarcity, which is itself a kind of social currency. The first joint venture between tea drinks and luxury goods is also a kind of scarcity. The combination of the two scarcities naturally forms a dimensionality reduction attack." From the perspective of brand revenue, joint marketing has a significant pulling effect on the brand. Heytea's social marketing strategy is essentially creating a "socialite product":

On the one hand, IPization can give it a longer-lasting brand vitality, while increasing the company's risk resistance at the product level; on the other hand, IP licensing has even become a source of business for HEYTEA.

For example, Heytea's flagship stores on e-commerce platforms such as Tmall mainly sell brand-related products. As early as 2017, Heytea launched the "Heytea Inspiration Store" which mainly sells Heytea brand-related products. In 2018, Heytea launched 69 times and nearly 100 peripheral products, covering three categories: beauty, clothing, and daily life.

In this joint marketing, Heytea used FENDI's brand potential to complete a screen-sweeping marketing campaign, at least in terms of sales. By co-branding with international luxury brands, it has significantly increased its brand value without raising product prices or changing product strategies. However, for FENDI, the results of this joint marketing are not that great, and the main problem is still in the focus on brand awareness.

As we all know, the original intention of brand co-branding is to spread beyond the circle and build its own IP image. But the problem is that when a brand interacts with a large number of brands/IPs in different fields, users may have a vague understanding of the brand, which ultimately leads to the phenomenon of having brand awareness but no brand recognition.

For FENDI, more than 90% of the buyers of the co-branded products are not the target customers. This publicity is likely to be a wedding dress for HEYTEA. And the fact that FENDI's social media accounts did not publish a lot of information about the co-branded products also shows that it attaches great importance to maintaining its own brand tone. After all, tea products are just tea products. But no matter what, this co-branding still brought a lot of popularity to both parties. From this perspective, this co-branding marketing is undoubtedly a success.

3. There is not much time left for HEYTEA

Behind this hot collaboration, in fact, Heytea's own operating conditions are more worthy of our in-depth exploration. An unoptimistic reality is that although the scale of the new tea beverage market is rising year by year, the growth rate is also declining significantly. Although Heytea is not listed, taking Nayuki's Tea, which has a similar product positioning and number of stores to Heytea, as an example, the growth rate of single-store revenue has declined significantly in recent years.

Figure: Market size and growth rate of ready-made tea, source: Qianzhan Industry Research Institute

Figure: Naixue’s annual revenue and growth rate for a single store, source: Choice Financial Client

Once upon a time, Heytea, which boasted "real fruit, real tea, and real milk", was once a darling of capital. In the D round of financing in 2021, Heytea received a valuation of up to 60 billion yuan, setting a new record for domestic new tea drinks. But since then, the situation has taken a sharp turn for the worse, and capital "darlings" such as Heytea and Nayuki have begun to fall into the predicament of layoffs, price cuts, and stock price declines.

According to data from Jiuqian Consulting, Heytea's sales per square meter (sales per square meter) and average store revenue across the country began to decline from July 2021. In October of the same year, Heytea's average store revenue and sales per square meter fell by 19% and 18% month-on-month from July, and fell by 35% and 32% year-on-year.

Until the beginning of 2022, some employees broke the news that Heytea had a large-scale layoff involving 30% of employees, and even some departments were completely laid off. In response, the company said that some employees were indeed dismissed before the New Year, and it was a small staff adjustment. Then, half a month later, Heytea posted a "price reduction" message on Weibo, saying that it would say goodbye to the names starting with 3.

This price reduction strategy is undoubtedly a "backhand card" to cope with the current uncertain economic environment. After the price reduction news was released, Heytea entered the mid-range price range of CoCo, Yidiandian, Shuyi Shaoxiancao, and Chabaidao. 15-19 yuan became the mainstream beverage, accounting for 79.7% of the products in 2022. Previously, in the 2021 Heytea menu, products priced at 15-19 yuan accounted for only 8.9%, and products priced above 20 yuan accounted for as high as 88.8%.

Judging from the results, the price reduction strategy has increased Heytea's product sales to a certain extent, but the company's revenue does not seem to have grown synchronously. According to Jiuqian's data, Heytea's sales in the first 10 months of 2022 were 3.912 billion yuan. In response, the innovative economic service platform "Chuangyebang" estimates that Heytea's annual sales in 2022 will be about 4.7 billion yuan, which will be lower than the revenue of 5.352 billion yuan in 2021.

It can be seen that Heytea is currently facing a situation of slowing growth and fierce market competition. After opening up for franchising, how to help franchisees truly make money has become a question that it needs to think carefully about. Therefore, it seems that there is not much time left for Heytea.

In summary, when co-branding becomes a normal marketing move and consumers are no longer surprised, instead of racking their brains to create a "fresh feeling", brands should clarify their interim goals: is it to ship goods, do event marketing, or take advantage of the opportunity to promote the brand's transformation to a younger age? If the purpose is to sell goods, then co-brand with a popular IP to promote new products; if the purpose is to create topics, then find a brand with a strong sense of contrast to play cross-border.

When co-branding becomes worthless, avoiding co-branding for the sake of co-branding is an issue that all new tea brands need to think carefully about.

Author: TopKlout

Source: WeChat public account "TopKlout"