Mixue Bingcheng rushes to IPO again, does the capital market still "love to drink milk tea"?
"Snow King" is finally going to be listed?
Author | Liu Liang
Edit | Fun about business
On January 2, the "new tea drink" company Mixue Bingcheng submitted a listing application to the Hong Kong Stock Exchange.
As early as September 2022, Mixue Bingcheng applied for an A-share listing and planned to land on the main board of the Shenzhen Stock Exchange to raise 6.496 billion yuan, but ultimately failed.
Nowadays, the industry competition has entered the development window period, and many companies have begun to hit the 10,000 stores and the sinking market, and the industry pattern is becoming clearer.
At present, in addition to the "first share of new tea drinks" Nai Xue's tea has been successfully listed on the Hong Kong Stock Exchange in June 2021, Tea Baidao has also submitted a prospectus to the Hong Kong Stock Exchange in August 2023; "Volume listing" has become a major attraction of the new tea beverage industry in 2024.
Mixue Bingcheng chose to hit the Hong Kong stock IPO at this time, what are the odds? Who will end up with the "second share of new tea drinks"?
01. The supply chain business of "Snow King" with more than 30,000 stores
According to the prospectus, as of September 30, 2023, there are more than 36,000 stores worldwide, including more than 32,000 domestic stores. In terms of the number of stores, Mixue Bingcheng is the only enterprise in the domestic ready-made beverage industry with 30,000 stores, with a huge scale.
In comparison, the number of stores of Gu Ming, which submitted its prospectus on the same day as Mixue Bingcheng, reached 9,001 by the end of 2023, while Chabaidao, which submitted its prospectus in 2023, had a total of 7,117 stores nationwide as of August 8, 2023. According to the CIC report, in terms of the number of stores as of September 30, 2023, the number of stores in China is close to the sum of the second to fifth stores in the industry.
Image source: Screenshot of the prospectus of Mixue Bingcheng
As of September 30, 2023, more than 99.8% of its stores are franchised stores.
The threshold for joining Mixue Bingcheng is low compared to other tea brands, which is one of the reasons why it can attract many franchisees. According to the comparison of the franchise information on the official websites of many tea brands, without including rent and decoration costs, tea Baidao franchisees need to invest about 250,000-280,000 yuan to open a new store, Gu Ming needs about 226,000-246,000 yuan, and Mixue Bingcheng is about 150,000 yuan. In terms of decoration and store rent, because the store area of Mixue Bingcheng is smaller and more distributed in third-tier cities and below, the requirements for site selection are relatively low, so the investment in the store is also lower.
At the same time, there are only four categories so far: ice cream and tea series, milk tea & special drink, milk cover tea & original tea and real fruit tea series, with fewer product categories, easy recipes and simpler production, which also greatly reduces the operation threshold and training cost of store staff.
Image source: Canned Gallery
Relying on the huge store volume and the average price of products of 6-8 yuan, the product sales of Mixue Bingcheng have also achieved a unique ride in the industry.
According to the prospectus, the three highest-selling items in China's ready-made beverage industry are the chilled lemonade, fresh ice cream and bubble tea in terms of the number of cups produced. Among them, the best-selling "Chilled Lemonade" in China is priced at 4 yuan, and a total of 913 million cups have been sold in the first nine months of 2023, according to the CIC report, more than 8 out of every 10 cups of fresh lemonade in China come from Mixue Bingcheng.
According to the prospectus of Mixue Bingcheng, judging from the data of cup output, Mixue Bingcheng has become the first in China and the second in the world.
Compared with Tea Baidao and Ancient Tea, which are also sprinting Hong Kong stocks, Mixue Bingcheng's revenue and net profit are higher. In 2021, Mixue Bingcheng, Gu Ming and Cha Baidao achieved revenue of 10.351 billion yuan, 4.384 billion yuan and 3.644 billion yuan respectively, and net profit of 1.910 billion yuan, 770 million yuan (Gu Ming is adjusted profit) and 779 million yuan respectively in the same period, and in 2022, Mixue Bingcheng, Gu Ming and Cha Baidao achieved revenue of 13.576 billion yuan, 5.599 billion yuan and 4.232 billion yuan respectively, and the net profit in the same period was 1.997 billion yuan and 1.997 billion yuan respectively. 788 million yuan (adjusted profit for Gu Ming) and 965 million yuan.
Image source: Screenshot of the prospectus of Mixue Bingcheng
But in fact, the main source of income for these three tea companies is the sale of store materials and equipment to franchisees, but Mixue Bingcheng has done a better job in this regard.
According to the prospectus, taking the first nine months of 2023 as an example, Mixue Bingcheng will have less than 300 million yuan in franchise and related service revenue, accounting for less than 2% of the total revenue, and the sales revenue of store materials and equipment sold to franchisees will account for about 98%, higher than 80% of Gu Ming and 95% of Tea Baidao.
Image source: Screenshot of the prospectus of Mixue Bingcheng
What can support this source of income is the huge and complete supply chain system of Mixue Bingcheng.
On the one hand, as a tea beverage company founded in the last century, Mixue Bingcheng has been moving earlier than its peers in building its own supply chain, with its central factory set up in 2012 and its logistics system since 2014.
According to the prospectus, Mixue Bingcheng's global procurement network covers 35 countries on six continents, with five production bases in Henan, Hainan, Guangxi, Chongqing and Anhui, and its distribution network covers about 300 prefecture-level cities, 1,700 counties and 3,100 towns in China.
On the other hand, as mentioned above, the product category of Mixue Bingcheng is very simple, which makes the raw materials required for Mixue Bingcheng's products simpler in the production, management and transportation of the supply chain than fresh milk and fresh fruits, making Mixue Bingcheng more self-built supply chain genes.
According to "Fun Solution", about 60% of the beverage ingredients sold to franchisees are self-produced, of which 100% of the core beverage ingredients are self-produced.
Image source: Screenshot of the prospectus of Mixue Bingcheng
At this point, we can regard Mixue Bingcheng as a super factory, and its main products are standardized products such as fruit pulp and milk tea powder, as well as store equipment and facilities. Through a low threshold for joining and a strong national degree, Mixue Bingcheng has absorbed a large number of franchisees, and sold a large number of their products through their stores on the streets and alleys of the country, so as to reap tens of billions of revenue.
However, although Mixue Bingcheng has built the most mature supply chain in the industry, it does not have much cost advantage compared to Chabaidao. From 2021 to 2022, the gross profit margin of Mixue Bingcheng in terms of goods and equipment sales will be 30.6% and 27.3% respectively, while the gross profit margin of Tea Baidao will be 32.8% and 31.8% in the same period, and the gross profit margin of Gu Ming will be relatively low, 16.8% and 15.5% in the same period.
Image source: Nandu Bay Finance Society
02. There are hidden worries about the franchise model, is it "armor" and "weakness"?
In September 2022, when Mixue Bingcheng first submitted its prospectus, the new tea beverage industry was in the midst of a development boom.
As the market becomes saturated, the growth rate of China's ready-made tea market will continue to slow down, and according to iiMedia Research, the growth rate of China's ready-made tea market will be 13.4%, 6.4% and 5.7% respectively from 2023 to 2025.
Image source: Screenshot of the prospectus of Mixue Bingcheng
In the new round of market competition, the number of stores may become the biggest bargaining chip of Mixue Bingcheng.
For Mixue Bingcheng, relying on the rapid replication of the franchise model, the number of its stores has grown rapidly, however, franchisees are its "armor", and at the same time, it may also be the "weakness" of Mixue Bingcheng.
First of all, the low-threshold franchise model of Mixue Bingcheng is easy to have certain contradictions with franchisees. Since Mixue Bingcheng does not participate in the operation of the store, nor does it take a cut to the franchisee, correspondingly, the franchisee must also be responsible for its own profits and losses; at the same time, Mixue Bingcheng sells raw materials to the franchisee, even if the raw materials are pressed due to the poor operation of the store, the risk and cost must be borne by the franchisee. This may be one of the reasons why Michelle Bingcheng is frequently exposed to use expired ingredients in stores.
Image source: Weibo screenshot
Secondly, the main low-price model and the low-cost rapid expansion under the franchise system have led to the lack of detailed management, especially quality management. In the prospectus, Mixue Bingcheng directly pointed out that "we may not be able to detect the breach of contract or misconduct of the franchisee and its employees in a timely manner, and may not be able to fully recover the compensation for the damage caused by such breach of contract and misconduct from the franchisee, which may have a material adverse impact on our reputation, operating results and financial performance." ”
According to the news released by the Beijing Consumers Association, in the first half of 2023, in the Beijing food safety inspection, there were 28 chain restaurants with food safety problems in the first half of the year. In the face of food safety issues, Mixue Bingcheng also disclosed the risk point in the prospectus.
Image source: Weibo screenshot
In addition, the large number of stores means that the density of franchisees is high, and there will even be competition between franchisees in the same region. Mixue Bingcheng has opened more than 30,000 stores, and there are so many good locations in a region, and the 500-meter protection policy of Mixue Bingcheng is almost inevitable for franchisees to "fight their own families".
According to Red Star News, some franchisees said that about 5 Mixue Bingcheng were opened on the commercial pedestrian street in a fourth- and fifth-tier city, competing for business with each other. In October 2023, Vietnamese media reported that the franchisees of Mixue Bingcheng Vietnam pulled banners to protest against Mixue Bingcheng's request for price reduction, and some franchisees said that they had to compete not only with local brands, but also with their own brands - "the distance between the stores is at least 50 meters, which is too dense".
Image source: Screenshot of Xiaohongshu
After all, with today's profit model and net profit, the performance growth of Mixue Bingcheng depends largely on the expansion of stores, and once the number of stores reaches its peak, the development of Mixue Bingcheng will also be limited.
03. Looking for the second growth point, who will be the "second share of new tea drinks"?
In addition, it is worth noting that the competition in the tea industry in the sinking market is also becoming increasingly fierce, and the pressure on Mixue Bingcheng has doubled.
The main "high-end" Hey Tea and Nai Xue's tea have been reduced in price, and their brand stores have already begun to test the sinking market; and Gu Ming, Shu Yi Yao Xian Cao, Tea Baidao, Shanghai Auntie, etc. have long been in the second and third tier and even the county market; it is worth mentioning that from the point of view of the distribution area of the store, Gu Ming is even more sinking than Mixue Bingcheng.
Michelle Bingcheng also has an opponent that cannot be ignored, and that is Tianlala. The same is the main sinking market, sweet lala also has a loyal fan base, the price is cheap, now has opened more than 6,000 stores in China, but also in the sea business; recently, sweet lala overseas market head Gao Ce said that this year sweet lala plans to open a total of 300 stores in Indonesia, while continuing to expand overseas markets, focusing on the development of the Southeast Asian market.
Image source: Screenshot of Xiaohongshu
Nowadays, in the face of a new competitive situation, Mixue Bingcheng has also begun to expand across regions and categories in recent years, looking for its own second growth point.
In terms of going overseas, in 2018, the first overseas store of Mixue Bingcheng opened in Hanoi, Vietnam, and as of September 30, 2023, it has opened about 4,000 stores in 11 overseas countries. With the advantage of cost performance, Mixue Bingcheng has swept Southeast Asian countries such as Indonesia and Vietnam, and has since entered the markets of developed countries such as Singapore, Australia and South Korea.
However, overseas markets seem to have become a "must fight" for new tea brands. In Southeast Asia, the dominant market of Mixue Bingcheng, brands such as Bawang Tea Ji and Tianlala have also poured in and performed well, and at the same time, local tea brands in Southeast Asia are also rising. It remains to be seen how the Southeast Asian market will develop in the future.
Image source: Screenshot of Xiaohongshu
In terms of cross-categories, in 2017, Mixue Bingcheng launched the coffee brand "Lucky Coffee". As of September 30, 2023, Lucky Coffee had about 2,900 stores, and according to the CIC report, it is the fourth largest freshly ground coffee brand in China in terms of number of stores.
Another brand after "Lucky Coffee", "Jilatu", focuses on the mid-to-high-end ice cream market, because it is Italian artisanal ice cream, its price is several times more expensive than ordinary ice cream; On December 25, 2023, the enterprise investigation showed that Henan Audemars Piguet Catering Management Co., Ltd., an affiliated company of Jilatu Ice Cream, underwent industrial and commercial changes, and Mixue Bingcheng Co., Ltd. withdrew from the ranks of shareholders, with a shareholding ratio of about 85.71% before the withdrawal, and the company is currently wholly owned by Li Zenghui, the founder of Jilatu.
Image source: Screenshot of Qichacha
Michelle Bingcheng's cross-border attempts don't stop there. In 2022, Henan Mixue Bingcheng Beverage Co., Ltd. underwent industrial and commercial changes, and it was rumored that Mixue Bingcheng cross-border craft brewing, and last year, Mixue Bingcheng launched fried skewers and chicken steak products in some stores in Zhengzhou and Beijing, but none of them have caused much splash so far.
It is undeniable that based on a strong supply chain system and operational capabilities, there is still a lot more that Mixue Bingcheng can do. It is not easy to develop new business, but the current Mixue Bingcheng urgently needs to use a "killer weapon" in the "white-hot" competition in the tea industry to win the "second share of new tea drinks".