China's New-Style Tea Pioneer Hey Tea May Deep in Trouble as Major Layoff Rumor...

China's New-Style Tea Pioneer Hey Tea May Deep in Trouble as Major Layoff Rumor Spreads

BEIJING, February 11 (TMTPOST)— Hey Tea, a pioneer of the most popular new trend in China’s tea beverage market these years may be in deep trouble as rumors this week revealed it seems have a massive layoff.

Source: Visual China

Hey Tea has started a major layoff prior to the Chinese New Year and the downsizing plan, totally affecting 30% of its workforce, would resume after the seven-day holiday starting from February 1, Sina Finance, the news media outlet of Chinese tech company Sina, learned. Hey Tea was said to liquidate the information security department and cut 50% of employees at a department for expansion of its retail stores as the startup believed these departments are no more important for the business since it was suffering growth bottleneck. Insiders also told the media that the company didn’t offer any annual bonus for any employee, while other sources said the bonus was just put off. The sacked staff can receive a typical severance package and an additional payment equivalent to one-month salary or choose to accept a transfer to other departments, according to the report.  

15% of Hey Tea’s workers at functional departments, mainly from logistics management, was optimized ahead of the Chinese New Year, affecting about 200 people, and the optimization plan won’t cover the operation department, another Chinese media The Paper later cited many Hey Tea workers.

Neither of the abovementioned news was true, Hey Tea responded to TMTPost. There was not any major layoff at all, and the adjustment involved a few people preceding the holiday was just normal optimization based on the year end performance appraisal, the company clarified. As to the annual bonus, it has been rewarded before the holiday, it added. However, netizens at Chinese social media felt disappointed as some of them said the company didn’t give clear explanation.

As China’s leading tea drink chain, Hey Tea had a total of five funding rounds in five years and completed its latest round of US$500 million in last July, backed by Tencent, Sequoia China, Hillhouse Capital, Singapore’s state investor Temasek and other investors. Its post-money valuation was reported to reach RMB60 billion, setting a new record for China’s tea drinking unicorns, and the last funding that lasted several months was so attractive that  a number of well-known venture capitalists were said to have interest in investments. In the mean time, it maintained a buying spree, investing in many beverage brands in China during the second half of last year, such as boutique coffee Seesaw, mixed drink WAT, peach milk tea brand Heqitaotao.

“With the help of investment capital, Hey Tea was so fast to turn into a leader in new-style tea beverage sector, and it has to create its own business logic since it needs the capital’s support from everywhere, either operation of retail stores or marketing, ”Jiang Han, a senior fellow of China-based public policy think tank Pangoal Institution, noted, ”from a broader view of the whole sector, Hey Tea has relatively high pressure for innovation, so it seeks investments (in other brands) to increase competitiveness and consolidate market share position.”