Revealed: Why is Mixue Bingcheng cheap?

Exhibit|Sangon Pro

After the A-share listing failed, Mixue Bingcheng is going to switch to Hong Kong stocks again.

On the evening of January 2, Mixue Bingcheng officially submitted a listing application to the Hong Kong Stock Exchange.

According to the prospectus, as of September 30, 2023, the store network developed by Mixue Bingcheng through the franchise model has more than 36,000 stores, covering 11 countries in China and overseas. In the first nine months of 2023, the store network of Mixue Bingcheng has achieved a total of about 5.8 billion cups.

It can be seen how fierce the Honey Snow Ice City, which sells a few dollars of "bargains".

So, what other information about Mixue Bingcheng can be interpreted from the prospectus?

Why is it cheap?

Build a supply chain

The ingredients of the core drink are 100% in-house

According to the prospectus, Mixue Bingcheng focuses on providing high-quality freshly made drinks with a unit price of about 6 yuan (about 1 US dollar). Building a supply chain with the optimal combination of cost, quality, and service is the key to achieving and maintaining its value proposition of high quality and parity.

In terms of procurement, through a procurement network covering 35 countries on six continents, Mixue Bingcheng integrates high-quality resources and adopts digital tools to ensure the quality and stable supply of raw materials.

The raw materials purchased by Mixue Bingcheng upstream mainly include food bulk commodities, agricultural products and other auxiliary materials. Its global sourcing network and industry-leading sourcing scale enable it to source a wide range of core raw materials at prices below the industry average. The extremely advantageous procurement cost makes it attractive to consumers and franchisees to produce more cost-effective products.

In order to control procurement costs, the main measures taken by Mixue Bingcheng include: integrating various supply resources of Chinese and overseas suppliers, extending its global procurement network to the origin of raw materials to eliminate intermediate costs, and establishing long-term partnerships with upstream suppliers.

In addition to this, the company also agrees on a price or price range with selected suppliers in advance, thus ensuring that sufficient supply is available at a reasonable cost.

In terms of logistics, Mixue Bingcheng's self-operated warehousing system and exclusive distribution network support its store layout. The warehousing system consists of 26 warehouses with a total area of more than 300,000 square meters. Its distribution network covers 31 provinces, autonomous regions and municipalities directly under the central government, about 300 prefecture-level cities, 1,700 county towns and 3,100 townships in China.

In terms of R&D, the R&D of Mixue Bingcheng is divided into application R&D related to product taste and formula, as well as basic R&D of technology, production process, formula and equipment related to ingredients. Applied R&D and basic R&D are closely linked. This holistic R&D capability not only leads the industry in the research of core beverage ingredients, but also enables it to continue to provide consumers with high-quality and affordable ready-made beverages.

As of September 30, 2023, the company's annual comprehensive production capacity reached approximately 1.43 million tons and held 84 patents.

Mixue Bingcheng claims that it is one of the very few brands in China's ready-made beverage industry that realizes 100% of the beverage ingredients, packaging materials and equipment purchased by franchisees from the brand. About 60% of the beverage ingredients it provides to its franchisees are self-produced, which is the highest in China's ready-made beverage industry, according to CIC's report, and 100% of the core beverage ingredients are self-produced.

What's in the list of raw materials and ingredients? 

Do you use food additives?

According to the prospectus, the seven categories of ingredients commonly used in the production of ready-made beverages include sugar (such as molasses, fruit honey, etc.), milk (such as ice cream powder, oat milk, thick coconut milk, etc.), tea (such as jasmine tea, etc.), coffee (such as roasted coffee beans, etc.), fruit (such as fresh fruit, frozen fruit products, fruit pulp, etc.), grain (such as taro paste, red beans, etc.), materials (such as pearls (tapioca flour balls), coconut fruit, etc.) and other related finished products.

However, the prospectus did not mention whether food additives were used in the ingredients used.

However, the author found that many netizens who have worked or worked part-time in "Mixue Bingcheng" shared the ingredient list and recipe of Mixue Bingcheng ingredients on social platforms.

For example, the Beijing News investigation team has photographed the ingredient list of Honey Snow Bingcheng passion fruit pulp, which contains citric acid, DL-malic acid, sodium citrate, xanthan gum, sodium sulfite, acesulfame potassium, cyclamate, neotame, aspartame (containing phenylalanine), sucralose, potassium sorbate, sunset yellow and other food additives.

Some netizens shared the ingredient list of the coconut milk used in Mixue Bingcheng, including sodium caseinate, sugar fatty acid esters, mono- and diglycerol fatty acid esters, sodium stearoyl lactylate, microcrystalline cellulose, sodium carboxymethylcellulose, xanthan gum, sodium hexametaphosphate, sodium carbonate, sodium bicarbonate, potassium chloride and other food additives.

Some netizens also shared the ingredient list of the milkshake powder used in Mixue Bingcheng that they secretly photographed, which also contains a large number of food additives.

In addition, there are many people who have long questioned what the "pearls" (tapioca flour balls) of Michelle Ice City are made of.

According to the official website of Mixue Bingcheng, pearls are made of tapioca flour, and the special skill of tapioca flour is that it can swell when exposed to water and become soft and glutinous, so it was put into milk tea by Taiwanese partners in 1988, because it resembles pearls, round and clear, and is named pearl. Michelle's pearls are made in a pearl pot specially developed for pearls, and they are boiled for 1 hour before they can be sweet and chewy.

Its own supplier "Big Coffee International" surfaced

It also serves other tea brands

In the prospectus of Mixue Bingcheng, it was also disclosed that a subsidiary company called Dajia International Food, whose main business is the production of ingredients and packaging materials.

Founded in 2013, Daka International Food Co., Ltd. is a modern technology enterprise specializing in the research and development, production and sales of all categories of beverage raw materials, serving a number of tea, coffee and catering head brands. Now it has four production bases in Henan, Anhui, Guangxi and Hainan.

Judging from the product ingredient list of Dajia International, the food additives in the ingredient list of the sucrose-flavored beverage concentrated pulp produced by it include citric acid, sodium citrate, potassium sorbate and cyclamate.

The ingredient list of the frozen kiwifruit pulp produced by it includes sodium D-erythorbate and ascorbic acid.

In the ingredient list of the quick-cooking pearl balls, food additives include hydroxydistarch phosphate, caramel color, sodium carboxymethylcellulose, citric acid, xanthan gum, sodium alginate, guar gum, and ethyl maltol.

In the ingredient list of the fruit juice companion drink concentrate produced by the company, food additives include citric acid, sodium citrate, DL-malic acid, cyclamate, aspartame (containing phenylalanine), acesulfame potassium, and sucralose.

However, the ingredient list of the jasmine tea produced by it is very clean, only roasted green tea/jasmine flowers.

As for whether these food additives in the above article are harmful, please check by yourself.

What are the top bestsellers and recipes?

According to the prospectus, in the first nine months of 2023, the top five best-selling evergreen products accounted for about 42.3% of its total cup sales in China.

The top five best-selling evergreen products are chilled lemonade, fresh ice cream, bubble tea, peach four seasons, and a full cup of passion fruit.

According to reports, "chilled lemonade" is made from fresh, high-quality lemons. Its price is usually 4 RMB. In the first nine months of 2023, Mixue Bingcheng sold about 913 million cups of chilled lemonade in China.

"Fresh ice cream" is freshly made based on high-quality milk powder. Its price is usually 2 RMB. Including fresh ice cream, Mixue Bingcheng sold about 1.2 billion ice cream products in China in the first nine months of 2023.

"Bubble tea" is a carefully blended of freshly brewed black tea, freshly boiled pearls (tapioca flour balls), and high-quality milk powder. The price is usually 6 RMB. In the first nine months of 2023, Mixue Bingcheng sold about 326 million cups of bubble tea in China.

"Peach Four Seasons Spring" is carefully blended with freshly brewed Four Seasons Spring Tea and a fruit pulp rich in peach pulp. Its price is usually 7 RMB. In the first nine months of 2023, Mixue Bingcheng sold about 273 million cups of peaches in China.

The "Full Cup of Passion Fruit" is made with freshly brewed jasmine tea and a puree rich in passion fruit pulp. Its price is usually 7 RMB. In the first nine months of 2023, Mixue Bingcheng sold about 260 million full cups of passion fruit in China.

How many franchisees and employees are there?

According to the prospectus, as of September 30, 2023, Mixue Bingcheng had more than 16,000 franchisees, and as of the latest practicable date, about 35% of Mixue Bingcheng's franchisees and 68% of store employees were women.

As of September 30, 2023, Mixue Bingcheng had a total of 6,490 full-time employees.

By function, the number of supply chain employees was 2,678, accounting for 41.3%, the number of store operation and management employees was 2,102, accounting for 32.4%, the number of administrative and management employees was 1,120, accounting for 17.2%, the number of brand and impact employees was 351, accounting for 5.4%, the number of application and basic R&D employees was 147, accounting for 2.3%, and the number of digital employees was 92, accounting for 1.4%.

By geographical location, the number of domestic employees was 6,133, accounting for 94.5%, and the number of overseas employees was 357, accounting for 5.5%.

What about revenue figures?

Net profit for the first nine months of 2023 was 2.5 billion

More than 90% of revenue comes from merchandise sales

According to the prospectus, for the whole year of 2022 and the first nine months of 2023, Mixue Bingcheng achieved revenue of 13.6 billion yuan and 15.4 billion yuan respectively, a year-on-year increase of 31.2% and 46.0%.

For the full year of 2022 and the first nine months of 2023, the net profit of Mixue Bingcheng was RMB2.0 billion and RMB2.5 billion, respectively, representing a year-on-year increase of 5.3% and 51.1%.

Mixue Bingcheng continued to generate net cash flow from operating activities, with RMB1.7 billion, RMB2.4 billion in 2022 and RMB3.1 billion in the first nine months of 2023, respectively.

Specifically, the revenue of Mixue Bingcheng is divided into commodity sales, equipment sales, and franchise and related services.

According to reports, the revenue from commodity sales mainly comes from the sale of store materials to its franchisees in the course of daily business, including ingredients (such as sugar, milk, tea, coffee, fruit, grain, materials and other products), as well as packaging materials. In addition, a small part of the revenue of Mixue Bingcheng comes from the sales of directly operated stores and various e-commerce platforms, as well as the sale of certain products to some corporate customers.

The revenue from equipment sales is mainly derived from the sale of store equipment, such as refrigerators, ice cream machines, ice machines and coffee machines, to its franchisees.

The income from franchise and related services mainly includes fixed franchise fees, management fees and training service fees. Mixue Bingcheng collects such fees from franchisees every year, and this fee has nothing to do with the franchisee's business performance.

Mixue Bingcheng said that the vast majority of its revenue comes from the sale of goods and equipment, mainly including the income from providing store materials and equipment to franchisees.

However, judging from the data, in 2021, 2022, and the first nine months of 2022 and 2023, the revenue from goods sales accounted for more than 90%, while the proportion from equipment sales was only 6.7%.

Michelle Bingcheng VS Gu Ming

It is worth mentioning that on the same day as Mixue Bingcheng, the new tea drink brand Gu Ming also submitted a listing application to the Hong Kong Stock Exchange.

So who is better?

According to the Gu Ming prospectus, Gu Ming focuses on three types of drinks: fruit tea drinks, milk tea drinks, coffee and others.

Gu Ming's fruit tea drinks are made from tea and a variety of fresh fruits, including a variety of fruits with a short shelf life. Gu Ming's milk tea drink can be served with pearls and/or a range of other ingredients.

The raw materials purchased by Gu Ming include fresh fruits, fruit juices, teas, dairy products and sugar products.

In terms of the number of stores, as of December 31, 2023, Gu Ming has 9,001 stores. In 2023, Gu Ming stores will sell 1.2 billion cups of ready-made beverages, with a GMV (merchandise sales) of more than 19.2 billion yuan.

In terms of store layout, Gu Ming has covered about 200 cities at the line level in various cities in China. Among them, about 79% of the stores are located in second-tier cities and below. In addition, the GMV generated by Gu Ming's stores in second-tier cities and below reached 14.7 billion yuan, accounting for about 22% of the market share.

In terms of the number of employees, as of September 30, 2023, Gu Ming had a total of 2,373 employees. Almost all of Gu Ming's employees are located in Chinese mainland.

There are also many netizens who share the ingredients and raw materials of ancient tea on social platforms.

Some netizens said that the first place in Gu Ming's cream ingredient list is water, and the second place is hydrogenated vegetable oil.

Some photos shared by netizens show that among the ingredients of Gu Ming, there are boxes of seasoned syrup, non-dairy creamer and other raw materials.

Judging from the number of stores and the number of employees, Gu Ming is slightly inferior.

But in terms of revenue, Mixue Bingcheng's revenue in the first nine months of 2023 is 15.4 billion, while Gu Ming's annual GMV in 2023 will exceed 19.2 billion.

Judging from the proportion of merchandise sales in more than 90% of revenue, the annual revenue of the two in 2023 should not be much different.

Although there are food additives in the ingredients of the two, perhaps because of the difference in the products, or the different types of raw materials photographed, the food additives in Mixue Bingcheng seem to be more than Gu Ming.

Since Nai Xue's tea was listed as the "first share" of new tea drinks, the position of "second shares" of new tea drinks has been vacant, and who can win the title of "second shares" of new tea drinks?