How Intense Is the Competition in China's New Tea Drink Industry?

Have you ever wondered why new tea drink giants like MIXUE (蜜雪冰城) are so eager to list on the stock market? What’s really going on behind the curtains of the Chinese tea drink market? It’s not just about serving a cup of tea; it’s about survival. In 2024, these companies aren’t just fighting to stay afloat—they’re battling to dominate in a market that’s quickly nearing saturation.

Let’s break it down, because the competition is heating up.

The Rush to IPO: Why Now?

MIXUE is back at it again. After several failed attempts to list, the company has updated its prospectus to go public. With a whopping over 45,000 stores, it's clear the company is doing well financially. In fact, its revenue and net profits have been climbing steadily. So why the rush to IPO? The reason isn’t about money—it’s about securing the future. The tea drink market is reaching a tipping point. With everyone scrambling for a piece of the pie, the real question is, how long can this rapid expansion continue?

The competition isn’t just about opening new stores. It's a game of survival where brands like MIXUE, with their franchise model, rely heavily on local partners (franchisees). But here’s the catch: as the market hits a ceiling, it’s harder for these brands to keep growing at the same pace.

Franchising: Is It Still the Golden Goose?

Let's talk about what drives the cash flow for these new tea brands. MIXUE, for example, gets 99% of its revenue from franchise stores. That’s right—franchisees are where the big money is. In 2024 alone, the company earned over 17 billion yuan from selling products to franchisees. The rest of its revenue comes from the actual store operation, but it's a drop in the bucket compared to the franchise sales.

But here's the kicker: As the market matures, franchisees are getting nervous. Store closures are up, and the growth in store numbers is slowing down. From the end of 2022 to 2023, MIXUE's store count grew by 44.5%. In 2024, however, that growth rate slowed to just 2.08%.

So, while it looks like there’s still a lot of room to grow, the pace is decelerating. That means the once-golden franchise model might not be the answer to continued expansion.

Price Wars: A Threat to Margins

Now, it’s not just about store numbers. In the world of tea drinks, it’s about the battle of pricing. Big brands are finding it harder to stand out. We’ve all seen it—companies are sinking into a price war, trying to offer cheaper alternatives to attract customers. But here’s the problem: lower prices squeeze profit margins.

Brands that once dominated the high-end market are now diving into lower-tier cities with cheaper offerings. Meanwhile, companies that traditionally sold cheap drinks are now trying to upscale and target the bigger cities. What does this mean? The entire industry is getting crowded, and prices are dropping, putting pressure on profits.

So, the IPO rush? It’s likely a strategy to raise cash reserves and make sure they have the financial muscle to survive the next few rounds of the price battle.

What's Next for New Tea Brands?

Let’s face it—the new tea drink market isn’t what it used to be. As companies push for IPOs and investors keep a keen eye on valuations, everyone is looking for an edge. But will it last? That’s the billion-dollar question. With companies like MIXUE, Auntea Jenny, Good Me, ChaPanda, NAIXUE, Sexy Tea, CHAGEE, and Heytea all fighting for market share, the next few years will be a fierce competition to stay relevant.

The key takeaway here? Competition is brutal, and it’s not just about the number of stores or fancy marketing campaigns. It’s about the ability to adapt and survive in a market that’s running out of space for new players.

Conclusion

In the end, it’s clear that the battle for dominance in China’s new tea drink industry is far from over. It’s only going to get more competitive, and the winners will be those who can adapt quickly, innovate, and navigate the challenges ahead.

So, which would you choose? The endless variety of new tea drinks, or the traditional charm of brewing with a Yixing zisha teapot?

Whichever path you take, one thing’s for sure: the tea world is evolving, and there’s something for everyone.

FAQs

Why are tea brands like MIXUE trying to go public?

They need the funds to compete in a market that’s becoming saturated. IPOs are their way of raising capital to continue expanding and dealing with growing competition.

How does the franchise model work in the tea drink industry?

Brands like MIXUE rely heavily on franchisees to operate most of their stores, which generates the bulk of their income. This model has been key to their rapid expansion.

Is the tea drink market slowing down?

Yes, growth rates are slowing down as the market approaches saturation. With more competition, companies are struggling to keep growing at the same pace.

What’s the biggest challenge for these tea companies?

The increasing price war and the need to maintain profit margins in a crowded marketplace are major challenges for these companies.

How does the IPO market affect the competition?

The IPO rush is a way for tea companies to secure funding and boost their valuations in the face of mounting competition. But whether it will be enough to keep them ahead remains to be seen.