Two decades ago, a modest restaurant in one of China’s poorest provinces gained popularity after selling soft serve for just 1 yuan (15 cents) per cone. Today, Mixue Bingcheng, which translates to honey snow ice city, has surpassed McDonald’s and Starbucks to become the world’s largest food and beverage chain by number of stores, with over 45,000 outlets globally as of last September. The company, now renowned for its affordable bubble tea, saw its shares surge more than 40% on its first trading day in Hong Kong, raising $444 million in an initial public offering, according to the Hong Kong Stock Exchange.
“The demand from retail and institutional investors has been strong, as expected,” said Devi Subhakesan, co-founder at equity research firm Investory Pte. This marked the largest listing in Hong Kong so far this year and the fifth-largest in the past year.
Mixue’s signature drinks are priced between 2 to 8 yuan (30 cents to $1.20), accompanied by a catchy theme song and a snowman mascot. This strategy has attracted a vast customer base since its founding nearly three decades ago in Henan province. Founder Zhang Hongchao, born into an impoverished family, emphasized affordability as his core strategy, stating, “Let people around the world eat well and drink well for just two American dollars.”
Affordability remains Mixue’s primary appeal, especially amid China’s economic challenges. Wang Li, a 42-year-old retail worker in Hong Kong, praised its wallet-friendly offerings. “I don’t even bother checking the price,” she said.
Over 99% of Mixue’s stores are franchised, with most revenue coming from selling materials, equipment, and packaging to franchisees. In the first nine months of 2024, Mixue’s net profit rose 42% to 3.49 billion yuan ($479 million), while revenue increased 21% to 18.7 billion yuan ($2.6 billion) compared to the same period in 2023.
Founded in 1997 as a shaved ice shop in Zhengzhou, Mixue initially struggled. Zhang, alongside his brothers from a farming family, pivoted to selling 1-yuan ice cream cones in 2005, which proved successful. The brand expanded rapidly, adding bubble tea and later a coffee brand called Lucky Cup in 2017. Zhang’s younger brother, Zhang Hongfu, joined in 2007 and now serves as CEO. According to the Bloomberg Billionaire’s Index, the IPO has given the Zhang brothers a combined fortune of $8.1 billion.
Despite high demand for Mixue shares, smaller competitors like Guming and Sichuan Baicha Baidao have struggled to sustain momentum due to fierce competition. June Zhao, a Beijing-based investor, noted that Mixue’s future growth hinges on overseas expansion. “Investors are betting on Mixue with the broader hope of seeing Chinese companies succeed abroad,” she said.
Mixue’s business model relies minimally on franchise fees, focusing instead on franchisee sales. The company aims to leverage its scale to outpace rivals in China’s tea market, projected to reach $66.5 billion by 2027. While nearly 90% of Mixue’s outlets are in China, its overseas presence spans Indonesia, Vietnam, and Malaysia. Despite its store count surpassing global giants, Mixue’s sales still trail behind Starbucks and other major brands.
— news from CNN