The first place and the second place compete in multiple dimensions.
Text丨Zhu Kailin Zeng Shiya
Editor丨Qian Yang
On January 2, the two major tea brands, Mixue Bingcheng and Gu Ming, submitted their statements for the first time on the Hong Kong Stock Exchange. At present, they are the first and second largest freshly made tea brands in China. In the prospectus, Mixue Bingcheng claims to be "China's No. 1 and the world's No. 2 ready-made beverage company", with Starbucks as a reference. Gu Ming, on the other hand, claims to be the No. 1 market share of "mass freshly made tea shops", and in its classification criteria, Mixue is in the category of "affordable freshly made tea". They started in the county seat of Henan and the small town of Zhejiang. Zhang Hongfu, the founder of Mixue Bingcheng, once said that he admired Hey Tea and Ancient Tea the most among his tea peers.
Not long ago, on December 21, the Hong Kong IPO of Chabaidao, which is regarded as the third in the industry, was filed with the China Securities Regulatory Commission, four months after it submitted its prospectus in August. For tea companies that want to move to Hong Kong stock listings, this "Filing Notice" releases a more positive signal.
The last time Mixue Bingcheng submitted a prospectus was on the Shenzhen Stock Exchange in 2022, but it did not succeed. After more than a year, this time I switched to Hong Kong stocks, and the number of Mixue stores almost doubled compared with before. The competitive landscape of the beverage market in which it is located has also undergone tremendous changes - ancient tea, tea Baidao, and Shuyi burning fairy grass are close to the scale of 10,000 stores, and Heytea, which was once directly operated, has also opened up to join and entered the sinking market.
A careful reading of the prospectuses of the first and second places can see the competition between the two sides in multiple dimensions of supply chain, products and stores. Their common strengths are heavy investment in the supply chain, strict selection of franchisees, and rich experience in store operations in lower-tier markets.
The difference is that Gu Ming is facing more fierce competition in the price segment, so Gu Ming has invested heavily in R&D and logistics to speed up the inventory turnover of franchisees, and it seems that it does not care so much about the speed of expanding stores, and there are currently 19 provinces to be developed, like a well-known brand in the "south". The consensus of the two brands is that there is still huge room for the domestic tea market in the future. Mixue said that the density of tea shops in lower-tier cities is "much lower than the 460 stores per million people in first-tier cities", while Gu Ming stressed in the prospectus that there is still a lot of market space for it to develop. Founder Wang Yunan also judged a few years ago that China's third- and fourth-tier markets could still accommodate 20 ancient teas.
They all believe that Chinese will drink more cups of milk tea or coffee every day in the future, and that these drinks will become a relaxing and enjoyable and indispensable part of daily life – and they also believe that there is currently "insufficient supply and a lot of demand to be met", at least as expected in the prospectus.
Here are 15 notable aspects of two of China's largest tea brands analyzed by LatePost.
More than half of the tea sold by Gu Ming is fruit tea, and Michelle is the king of lemonade and bubble tea
Mixue Bingcheng mainly sells fruit drinks, tea drinks, and ice cream in the price range of 2-8 yuan. The top three best-selling ones are lemonade at 4 yuan, ice cream at 2 yuan, and bubble tea at 6 yuan. According to the prospectus, more than 8 cups of freshly made lemonade in China, more than 3 cups of ice cream for every 10 cups, and more than 3 cups of bubble tea for every 10 cups are from Mixue Bingcheng.
Ancient tea, on the other hand, is priced between 10 and 18 yuan, and mainly sells fruit tea, milk tea and coffee. Among them, the best-selling was fruit tea, accounting for 51% of the cups sold, followed by milk tea with 38%, and finally coffee and tea coffee with 11%. According to the CIC Consulting report cited in the prospectus, Gu Ming is already the largest freshly made tea shop brand in China's 10-20 yuan price range.
Gu Ming's fruit tea is often referred to as the "flat replacement" of Hey Tea. A cup of Gu Ming cheese berry berry costs 20 yuan, while Heytea Zhizhi berry berry is 28 yuan. Flat cheese fruit tea has become a popular product of Gu Ming, and the grape series has sold a total of 130 million cups so far.
Despite selling billions of cups a year, both brands make money mainly by selling ingredients and equipment to franchisees
If you want to know how much people love to drink milk tea now, you can refer to these figures: Gu Ming sold about 1.2 billion cups of drinks in 2023, with a GMV of 19.2 billion yuan, and Mixue Bingcheng sold 5.8 billion cups of drinks in the first three quarters of last year, with a store turnover of about 37 billion yuan.
Mixue Bingcheng and Gu Ming have 36,000 and 9,001 stores respectively, almost all of which are franchised stores. Both brands make money mainly by selling raw materials and equipment to franchisees.
According to the prospectus, Gu Ming's total revenue in the first three quarters of 2023 was 5.571 billion yuan, with a gross profit margin of 31%.
During the same period, the revenue of Mixue Bingcheng in the first three quarters of last year was 15.393 billion yuan, with a gross profit margin of 29.7%.
It is equivalent to each franchise store contributing 69,000 yuan and 47,000 yuan of revenue to Gu Ming and Mixue Bingcheng every month last year (the first three quarters).
Gu Ming is pushing new products more than twice as fast as Mixue, but Mixue is also 5 times faster than two years ago
Gu Ming, which is in the price range of 10-18 yuan, is squeezed by the competition between the lower-priced Mixue, the higher-priced Heytea and Naixue, and the pressure can be read from the frequency of launching new products.
In the first nine months of 2023, Gu Ming launched an average of 11.8 new products per month, while Mixue Bingcheng launched 5.2 new products per month. The menu of the Gu Ming store usually contains about 30 products, and in 2021, 2022 and the first nine months of 2023, it launched 94, 82 and 107 new products.
For Mixue, which maintains extreme parity and a large store scale, it is not easy to get a new product. Therefore, it is not easy to launch 5.2 new products per month. In 2021, there were only 10 new products in the whole year.
According to a market research report compiled by tea supplier Jun Chajia, in October 2023, Heytea launched 3 new products, Nai Xue 5, 7 tea Baidao, 6 Shanghai aunts, 8 ancient teas, 7 Lele teas, 2 Shuyi Yao fairy grass, 1 tea Yan Yuese, and 8 a little bit.
The product determines the supply chain: Mixue production bases are all over the country, and the cold chain of Guming extends to towns and villages
Gu Ming said in the prospectus that it was the largest fruit buyer in China's ready-made tea chain in 2022, purchasing more than 81,600 tons of fresh fruit.
Tea products determine the supply chain. Because of the ace product of lemonade, Mixue Bingcheng purchased a large number of lemons and built a lemon base. Mixue Bingcheng has five production bases, distributed in Henan, Hainan, Guangxi, Chongqing and Anhui, and produces sugar, milk, tea, coffee, grain, and even plastic cups.
The logistics and distribution services of Mixue Bingcheng are characterized by wide coverage and in-depth. According to the latest data from the prospectus, its distribution network covers 300 prefecture-level cities, 1,700 county towns and 3,100 townships, and delivers within 12 hours in more than 90% of county-level areas in China.
Gu Ming has a stronger cold chain logistics capability, which is related to the proportion of fruit tea on its menu. The prospectus officially discloses more specific figures: more than 70% of Gu Ming stores are within 150 kilometers of the warehouse, and the average distribution cost of Gu Ming from 21 warehouses in 15 provinces and cities across the country to each store accounts for only about 0.9% of the revenue per store - "We are the only company that can frequently deliver short-term fresh fruit and fresh milk to stores in lower-tier cities." ”
Gu Ming also has a direct delivery fleet of 327 vehicles, rather than relying on working with freight companies in the market. In 2023, Mixue Bingcheng will also start to launch its self-operated fleet delivery model.
In the eyes of tea merchants, "Gu Ming is the milk tea brand with the deepest understanding of tea"
Gu Ming said in the prospectus that consumers in different provinces have different taste preferences for tea bases, and they will match different tea leaves in different regions on the same product. For example, the same lemon tea is made with oolong tea in Zhejiang, Hubei, Hunan, Sichuan and other provinces, but in Guangdong, Fujian, Jiangxi and other places, duck feces-flavored single fir tea will be used.
Today, when it is becoming more and more difficult to differentiate fruit tea, tea has become a breakthrough. In order to develop Super A Cheese Peach, Gu Ming spent 9 months sourcing fresh peaches from 22 different sources in 7 provinces, testing 210 oolong teas and evaluating more than 100 tea blend recipes before selecting the final tea base.
"LatePost" learned that Gu Ming has its own tea factories in Linping, Zhejiang and Heng County, Guangxi, and Gu Ming will also sell tea products to tea brand peers. A director of a tea company said, "Gu Ming is the milk tea brand with the deepest understanding of tea in the industry. ”
In the prospectus, Gu Ming said that it has a product research and development team of more than 110 people, of which more than 40 people focus on the research of tea and extraction processes.
The supply chain also decided to expand: the "key size" of Gu Ming's expansion was 500 stores
In a live conversation two years ago, Wang Yunan, the founder of Gu Ming, said: "There are basically no stores north of the Yellow River, and there are almost no stores in first-tier cities, such as Beijing and Shanghai, so many friends don't know much about Gu Ming." ”
Gu Ming's national popularity is not as good as that of Mixue, because its main stores are concentrated in Zhejiang, Jiangxi, Fujian and other provinces, and it has not expanded in a large area in the north.
Gu Ming has a solid expansion strategy. They believe that if the number of stores in a single province exceeds 500, it means that there is a basis for scale effect in the region, and then they will be considered to enter neighboring provinces - hence the fact that 500 stores are called "key scale" in Guming.
In 2018, Gu Ming was the first to reach 500 stores in Zhejiang Province, followed by Fujian and Jiangxi, and as of the end of last year, there were 8 provinces where Gu Ming reached more than 500 stores, all of which were neighboring provinces. This is particularly stable in the tea industry, which is expanding nationwide, but it also enables it to provide cold chain delivery services for more than 97% of its stores every two days.
In the provinces where Gu Ming first reached the "key scale", such as Zhejiang, Fujian and Jiangxi, Gu Ming's market share of tea shops in the same price segment can reach more than 45%. On this basis, Gu Ming plans to continue to increase the density of stores in the 15 provinces where it has been deployed.
Tea Baidao with a similar price and a similar number of stores has long been spread all over the country. Gu Ming's quest for critical scale has allowed it to establish a higher scale effect in the provinces in which it is stationed. A franchisee in Jiangsu told LatePost that the net profit of the newly opened Gu Ming store in the local area is 3-5 points higher than that of the tea Baidao store.
By the end of 2023, the density of Gu Ming's stores in Zhejiang has reached 2,000 in one province. This makes them need to control the dissatisfaction of franchisees caused by the density of stores and avoid the cannibalization effect.
The distribution of stores in Guming and Mixue Bingcheng confirms the consumption power of the sinking market
Nearly 80% of Gu Ming's stores are located in second-tier cities and below, of which 38% are township stores.
The annual GMV of a single store is RMB 2.4 million, which is 100,000 yuan higher than that of a single store in fourth-tier cities and below, which to a certain extent proves the consumption potential of the township market.
In the prospectus, Gu Ming described its founder, Wang Yunan, as having "deep empathy" for individual merchants. Daxi Town, Wenling City, Zhejiang Province, the starting point of its entrepreneurship, is a typical sinking market, but thanks to the economic development level of Jiangsu and Zhejiang, residents have sufficient consumption power.
The founders of Mixue Bingcheng, Zhang Hongchao and Zhang Hongfu, also started in Wenxian County, Henan Province, and then came to Zhengzhou for development. Today, Mixue Bingcheng has covered all county-level cities in China, mobilizing a large number of township entrepreneurs with families as the unit.
Different store types of Mixue Ice City. The area is usually between 15-60 square meters.
As of today, Gu Ming still has no stores in Shanghai or Beijing. However, after gaining popularity, Mixue Bingcheng has accelerated its expansion in first-tier cities such as Shanghai and Beijing.
The Snow King sings brainwashing songs, and Gu Ming becomes the "local street lamp"
The consultants behind Michelle and Gu Ming are H&H and Wah and Pony Song. According to the two prospectuses, the company's spending on brand promotion in the first nine months of 2023 reached 180 million yuan, accounting for 18.4% of sales and distribution expenses, compared to 8.8% in the previous year. In the same period in 2023, Gu Ming's brand promotion expenses will be 42.71 million yuan, accounting for only 0.8% of sales and distribution expenses.
In 2018, Mixue Bingcheng spent about 5 million yuan to find Hua and Hua to design a "super symbol": the Snow King. Along with Snow King, there is also a melody that is simple and repetitive but haunting, but it wasn't until two years later that Snow King became popular. In June 2022, in order to promote the new mulberry series, Mixue launched a marketing campaign called "Snow King Blackening", which sold about 22 million cups in one month.
Gu Ming's store in a certain township is very conspicuous in a darker environment. Image source: Screenshot of the video account of Gu Ming's franchise home
Gu Ming's marketing consultant, Xiao Ma Song, shared a simpler and more direct promotion case. Wang Yunan once said, "Ancient tea should become a local street lamp." He felt that the lights in Gu Ming's shop must be twice as bright as others, and the light bulbs should also be twice as bright. H&H also has a similar strategy, insisting that the brand's "super symbol" should be big, bright and numerous.
Most of Gu Ming's stores are opened in county-level cities and towns, and the street lights are dim, which is easier for customers to find than how beautiful the doors are.
Each franchisee has an average of 2.2 stores, and Gu Ming has an average of 1.95 stores per franchisee
The catering industry generally believes that the "second store rate" can measure the operation and management ability of a franchised brand. Because franchisees are only willing to open a second one if they make money and believe that the brand is worth investing in.
Dividing the number of stores by the number of franchisees, the average number of franchisees in Mixue Bingcheng is 2.2 stores per person, and the average number of stores opened by Gu Ming franchisees is 1.95 per person based on the same caliber.
Michelle sees franchisees opening second stores, but doesn't want them to grow into big franchisees. As of October 2022, only 5% of the large franchisees with more than 30 Mixue stores are located. The reason for Michelle to do this is to prevent large franchisees from defecting to other brands overnight and directly losing the fruits of a city. This has been taught before.
Michelle Bingcheng has suffered several "betrayals" from franchisees in its history. As early as 2012, someone mobilized relatives and friends to join Mixue one after another, and one day, all the signboards of these stores were replaced with "Baidu Drinks". Wang Wei, the founder of Tianlala, was once a big franchisee of Bengbu, Anhui Province. Zhoukou brand Mikolanqi and Xinxiang brand Bingjie drink are all remodeled by Mixue's former franchisees.
Therefore, the headquarters of Mixue has an invisible restriction on franchisees - a single franchisee cannot have more than half of the total number of stores in the place.
Gu Ming has another statistical caliber in the prospectus, if new franchisees are excluded, as of September 30, 2023, among the franchisees who have operated Gu Ming stores for more than 2 years, the average number of stores per person is 3.1, and 75% of franchisees operate two or more franchise stores.
Mixue Bingcheng and Gu Ming created 500,000 and 130,000 jobs respectively, with a franchise pass rate of only 5% and 1%
Strict screening of franchisees is the basic requirement for such a large-scale tea brand. After 5 links of "project consultation, application submission, video interview, invitation to visit, and store review", Mixue Bingcheng wrote in the prospectus that less than 5% of the franchise applications could be approved.
A senior executive of Michelle once summed up the potential of franchisees as a simple criterion - whether they want to "buy Mercedes-Benz". It means being willing to pursue wealth and being willing to invest. For example, Mixue Bingcheng requires franchisees to be in the store for more than 6 months when they open their first store, and also requires them to perform basic operations like store assistants, and after 6 months, they cannot be in the store for less than 90 hours per month.
Gu Ming prefers to choose people who are hard-working and can cooperate for a long time. The success rate of becoming a Guming franchisee is even lower. Qi Xia was previously the person in charge of Gu Ming's franchise, and she mentioned that "Gu Ming's selection probability of franchisees is about 100 people applying, and 1 can be passed", and the pass rate is equivalent to 1%. Applicants are required to take a 150-question multiple-choice aptitude model test, upload a photo of the highest academic certificate or a screenshot of the academic information on the academic information network, etc.
The opening of bubble tea shops has created new jobs. Mixue Bingcheng and Guming provided 500,000 and 130,000 jobs respectively, including agricultural product procurement in the upstream of the industrial chain, production, logistics, and terminal stores. The above-mentioned second-hand recyclers of catering equipment also found that there are many novices who have opened bubble tea shops in the past two years, and many of them have previously experienced layoffs in industries such as finance, Internet, and online education.
How much do the franchisees of the two companies make in a year?
In 2023, the average revenue of Gu Ming per store will be RMB 2.5 million, and the operating profit of a single store of franchisees will be RMB 376,000, with a profit margin of 20.2%.
The product pricing of Mixue Bingcheng is lower, if calculated in the first year of joining, deducting the cost of materials, equipment procurement, water and electricity rent and other fixed costs, through previous interviews with a number of Mixue Bingcheng franchisees, "LatePost" learned that a Mixue Bingcheng franchise store opened in a prefecture-level city, the annual profit margin is about 22.7%, and the profit is about 700,000 to 1.1 million yuan.
Three 37-year-old Gu Ming core characters
In 2010, in Daxi Town, Wenling, Zhejiang, the first ancient tea opened. The founder, Wang Yunan, who has just graduated from Zhejiang Sci-Tech University with a major in materials science and engineering, relies on his own taste to develop new products, tasting 100 ml at a time and repeating dozens of times a day. The average daily turnover of the store in the first year was only 400 yuan. On the bleakest day of the business, he only sold 98 yuan, and his partner Ruan Xiudi paid 5 yuan for a cup of milk tea, which brought the turnover to triple digits.
Wang Yunan was born in 1986, and his parents were in the haberdashery business. When he was in college, he sold radios, quilts, and credit cards among his classmates, and after four years, he accumulated hundreds of thousands of yuan in entrepreneurial capital for himself.
Joining Wang Yunan in starting a bubble tea shop is his high school friend Ruan Xiudi, who is now the co-founder of Gu Ming. Another co-founder, President Qi Yan, joined Guming in 2014 and is in charge of the Jiangxi branch. He was Wang Yunan's partner in college.
All three executives are now 37 years old and have been in the bubble tea industry for 14 years. Wang Yunan talked about the future of Gu Ming in an interview, saying that "slow work makes fine work". In Gu Ming's prospectus, Wang Yunan is described as a "young and visionary entrepreneur" who leads the company with a simple and sincere communication style and atmosphere. Gu Ming's executives still make 1,000 phone calls a year to franchise store managers to find out what's going on.
The average age of the founders and management team is 38 years old, with an average of more than 16 years of industry experience. Mixue Bingcheng was founded by two brothers in Henan, Zhang Hongchao and Zhang Hongfu. Zhang Hongfu and Wang Yunan are the same age, and he once said that he appreciates Hey Tea and ancient tea the most among tea drinkers. For more information about the history of Mixue Bingcheng, you can read our previous article.
Automation is the next step in increasing efficiency
In Gu Ming's 2021 annual report, store clerks have peeled more than 1 billion grapes by hand, and now cut almost 290 million mangoes, 56.22 million oranges, and about 27.31 million peaches.
Between 2020 and 2021, Heytea began to try to replace more raw materials with pulp and canned fruit, and developed automated equipment to solve the problem of inefficient manual peeling of fruits.
Today, Gu Ming's prospectus says that the store uses automatic tea machines, grape processors and lemon processors. The automatic tea brewing machine can automatically adjust the brewing parameters according to the pH of the water quality and the type of tea leaves in different regions to ensure that the tea soup tastes the same in each store.
Mixue Bingcheng is also constantly developing new technologies and basic equipment, such as the formula and related processes of quick-boiled pearls, and the production method of ice cream spray drying. It is also the only semi-automatic coffee machine enterprise in the industry that provides independent research and development and production for franchisees.
However, a former franchisee of Lucky Coffee (a freshly ground coffee brand launched by Michelle in 2017) told LatePost that semi-automatic coffee machines need to grind, press, spread and then extract their own powder, and compared to the one-click extraction of Luckin automatic coffee machines, it takes more than a minute to extract a single piece of coffee.
Another second-hand recycler of catering equipment recently recalled to LatePost that around 2021, Luckin upgraded almost all the coffee machines in the store to fully automatic coffee machines. On the day Luckin opened its 10,000th store in June last year, he sold all the semi-automatic coffee machines in the warehouse and decided not to recycle them, "because they may be broken in the future".
Mixue Bingcheng has opened nearly 4,000 stores overseas, and Gu Ming still has 19 provinces to be developed in China
In the prospectus, Mixue Bingcheng revealed the latest number of overseas stores: 3,973 stores, more than 300 employees, distributed in 11 countries, mainly in Southeast Asia.
Despite having a large factory in Hainan dedicated to overseas expansion, Mixue Bingcheng's overseas store expansion still encountered supply chain challenges. If you want to achieve the same scale, price and supply capacity as the domestic market overseas, you need more financial support. As a result, the company plans to use the millions of Hong Kong dollars raised to build an international supply chain platform, including a multi-functional supply chain center in Southeast Asia to produce locally sourced raw materials.
Gu Ming has not yet indicated that it has plans to go to sea. Domestically, they still have 19 provinces to be developed (not reaching the "critical scale" of 500 stores), and the founder was optimistic three years ago that there is still room for 20 ancient teas in China's third- and fourth-tier markets.
By 2027, 9.9 drinks per person per day?
In the Gu Ming prospectus, CIC Consulting's optimistic forecast for the freshly made tea market was quoted as saying that Chinese would be able to drink 3.3 cups of freshly made tea per person per day in 2022, but by 2027, each person would drink 9.9 cups per day.
Mixue Bingcheng has a similar judgment about the future, but it has laid out more data facts: as of the end of 2022, the density of tea shops in lower-tier cities was 247 stores per million people, "far lower than the 460 stores per million people in first-tier cities". By 2028, the size of the restricted tea market in lower-tier cities will account for half of the total Chinese market – currently only 43%.
Gong Fangyi and Qiu Hao also contributed.
Title picture: From the Internet