Guangdong teahouse chain draws huge crowds in Shanghai after brand goes viral

PUBLISHED : Monday, 20 February, 2017, 9:30pm
UPDATED : Monday, 20 February, 2017, 11:04pm

A newly opened teahouse in Shanghai has drawn thousands of local residents who spend at least three hours queuing up for a cup of fruit tea, painting a rosy picture of the mainland’s buoyant consumer market.

Guangdong-based Heytea, a chain-store operator for instant milk, fruit and traditional Chinese tea products, has been doing huge business at its first Shanghai outlet at Raffles City on Fuzhou Road since opening only a week ago.

The company is funded by IDG Capital and angel investor He Boquan, founder of bottled water maker Robust Group.

On Sunday afternoon, more than 300 people, most aged between 30 and 40, were waiting in zigzag lines to get a taste of the tea which cost from 11 yuan (US$1.6) to 29 yuan per cup.

Heytea has become a talk of the town in the past week as consumers, despite admitting that the brand was unheard-of before, expressed their keen interest in tasting it.

“We saw online news about the tea’s popularity and it is not bad to try it ourselves,” said Feng Tao, a 30-year old Shanghai resident. “Milk and fruit tea products are well received by people of my generation.”

The mainland has about 80,000 milk and fruit tea shops whose products sport a price tag of about 20 to 30 yuan a cup.

“Heytea’s initial success in Shanghai is a snapshot of the country’s fast-changing commercial landscape” said Ray Lu, a director with Hotung Ventures. “People regard a cup of milk tea as part of the fashion that shows their attitude toward an enjoyable life.”

Customers queuing up for the tea said they didn’t actually have high hopes for the tea, but wanted to be frontrunners in Shanghai to have first-hand experience with it.

“I was swamped by news about the tea shop on the internet and I decided to test it,” said a customer surnamed Zhang, who queued up at Raffles City. “It is worth a few hours waiting no matter how the tea tastes.”

Heytea’s store in Shanghai covers about 200 square metres with more than 10 employees making tea for customers.

The dining area inside the store can serve about 30 clients but most of the consumers choose to take their cups of tea away.

Last year, IDG and He invested a combined 100 million yuan into Heytea which was established by Nie Yunchen, in Jiangmen city, Guangdong in 2012.

Neither IDG nor He could be reached for comment.

Heytea now runs more than 50 outlets in China, with the majority of the stores based in the Pearl River Delta.

It is one of the major chain-store operators in mainland China’s instant tea market.

Key rivals include Coco, 85 Degree Bakery and Café and Igong Cha, which are attracting millions of mainland customers, competing against coffee shops run by global giants Starbucks and Coffee Bean in a market where soft drink sales were close to 600 billion yuan (US$87.4 billion) in 2014, according to online consultancy chyxx.com.

“The increasing penetration of the internet to help promote the products and the strong financial support from venture capitalists are the main driving forces for those big brands to expand at a quick pace,” said Lu. “Affordability is no longer a concern since 20 to 30 yuan a cup is seen as a small amount by most of youngsters.”

Analysts estimated that each instant tea outlet could rake in up to 1 million yuan in sales a month with 2,000 cups sold each day.

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