Congratulations to the milk tea consumers for once again drinking a cup of milk tea into the IPO.
On April 23, 2024, Chabaidao was successfully listed on the Hong Kong Stock Exchange. The issue price of Chabaidao is HK$17.5 per share, and a total of 148 million shares are issued, raising a total of HK$2.586 billion, which is the largest IPO in Hong Kong so far this year. As of press time, the stock price was HK$12.5 per share, with a market value of HK$18.47 billion.
In the past year, many tea brands have announced plans to IPO, and in 2024 alone, Shanghai Auntie, Gu Ming, and Mixue Bingcheng have all submitted prospectuses to the Hong Kong Stock Exchange, and the new tea beverage track has ushered in a wave of listings. However, the submission of the prospectus can only be regarded as knocking on the door of the secondary market, and there is still a distance from truly entering the capital market, but this time Chabaidao has finally officially opened this door.
The post-80s couple started a business, and the number of stores approached 8,000
Friends who love milk tea should be familiar with the name of Tea Baidao, which can sell 1 billion cups a year, and many stores are even open 24 hours a day.
The development history of Chabaidao is also a very romantic entrepreneurial story. The founder Wang Xiaokun is said to have been born in a family of tea merchants in Chengdu, and became a tea artist after graduating from university, and his wife Liu Weihong also has a lot of research on tea, and the two post-80s saw the business opportunity of freshly made tea, so in 2008 they opened the first store of tea Baidao near Wenjiang No. 2 Middle School in Chengdu, with students as the main consumer group.
At that time, Tea Baidao was undoubtedly a veritable "mom-and-pop shop", and now Tea Baidao is open all over the country, and it is not far from the number of "10,000 stores". In addition, after the completion of the IPO today, following Nai Xue's tea, the "first share of new tea drinks", it still won the title of "second share of new tea drinks" under the fierce competition of many peers.
In the new tea drink track, milk tea brands are emerging in an endless stream, even if the predecessors have already made their own popularity, there are still new players who are not afraid of cruelty pouring into this track. However, there are many brands, and Tea Baidao is still a veritable third in the industry.
The third in the industry will sell 1.016 billion cups of milk tea in 2023, with a total retail sales of 16.9 billion yuan. According to Frost & Sullivan's report, in terms of retail sales in 2023, Chabaidao ranks third in China's freshly made tea shop market, with a market share of 6.8%.
The second place Gu Ming has a market share of 7.8%, the industry leader Mixue Bingcheng accounts for 17.8% of the market share, and the five major market players (Mixue Bingcheng, Gu Ming, Chabaidao, Shanghai Auntie 4.2%, and Shuyi Yao Xiancao 3.4%) have a total market share of 40.0%. As an aside, at this point, the new tea drink track is rolled up, and the remaining 60% market share is enough to attract new players.
Tea Baidao was able to win the position of the third in the industry, thanks to its strong ability to open stores. According to the prospectus, as of February 18, 2024, Chabaidao has a total of 7,927 stores in China, approaching 8,000. Among them, 99% are franchised stores, and there are only 6 directly operated stores. Therefore, it also obtains income from franchising, which is also the main source of income for Tea Baidao.
In 2019, there were almost 600 tea Baidao franchise stores, which exceeded 2,200 in 2020 and 2,835 in 2021, an increase of more than 70 times from 100 in 2016. According to the prospectus, Chabaidao took up to 95% of the total revenue from the franchisee, as well as 4.1% of the royalties and franchise fees.
In terms of operating segments, the revenue of each segment of Chabaidao is growing, but the revenue from the sales of goods and equipment business has increased most significantly, accounting for 90.5% in 2023, from 83.6% in 2021.
From the perspective of the cities where the stores are distributed, the number of tea Baidao still accounts for the largest proportion in the new first-tier cities, accounting for 26.9%. The proportion of fourth-tier cities and below has increased significantly, from 19.7% at the end of 2022 to 22.2%.
In the major tracks, it is common for the more franchised stores and the greater the number of closed stores, and Chabaidao is an exception, although it is constantly expanding its stores, its store closure rate is not high. According to the Frost & Sullivan report, from 2021 to 2023, the store closure rates of Chabaidao will be 0.2%, 1.1% and 2.3% respectively, far lower than the industry average.
This shows that Tea Baidao has formed its own moat and stabilized consumers' minds in the consumer experience, which is not easy in the new tea drink track that rolls out of the sky.
The growth of stores has led to an increase in revenue. According to the prospectus, from 2021 to 2023, Chabaidao will achieve revenue of 3.645 billion yuan, 4.233 billion yuan and 5.706 billion yuan respectively, net profit of 756 million yuan, 954 million yuan and 1.139 billion yuan in the same period, and gross profit margin of 35.7%, 34.4% and 34.4% respectively in the same period.
In terms of revenue ratio, from 2021 to 2023, the retail sales of tea Baidao takeaway orders increased from 6.114 billion yuan to 9.9815 billion yuan, online sales accounted for 59.03%, nearly 60% of the revenue came from takeaway, and the "Tea Baidao Membership Program" accumulated more than 66 million registered members.
The store closure rate of Chabaidao is lower than the industry average, and its net profit margin is also at the top level of the industry, which is above 20% in the past three years, with 780 million yuan, 960 million yuan and 1.15 billion yuan respectively in the same period, with a compound annual growth rate of 21.6%.
The first round of public financing was 970 million yuan, with a valuation of nearly 18 billion yuan
The title of "10 billion unicorn" of Chabaidao actually came quite unexpectedly, because it did not open its first round of financing until June 2023, which was also its Pre-IPO financing, and 2 months later, Chabaidao submitted a prospectus to the Hong Kong Stock Exchange.
However, Chabaidao has always been a sweet spot in the circle, and it is said that in 2021, it was also rumored that investors were crazy to grab shares in the new round of financing.
In May 2023, Orchid Asia, Zhengxin Valley Capital, Grassroots Zhiben and Tomato Capital contributed a total of 950 million yuan to become shareholders of Chabaidao. The following month, the company received a financing of 20 million yuan from CICC Capital, a subsidiary of CICC, the sole sponsor. At this time, the valuation of Chabaidao was about 17.6 billion yuan.
This is the first public financing in the 15-year history of Tea Baidao, and it is also the first large-scale financing in the tea industry in 2023.
There are clues in the prospectus about the motivation for this round of financing. As of the end of March 2023, Chabaidao's cash and cash equivalents were only 32 million yuan, cash was tight, and financing was imminent. Thanks to this round of funding, Chabaidao's bank balances and cash have risen rapidly, reaching RMB1.17 billion as of January 31, 2024, and its net current assets have also increased from RMB320 million in 2021 to RMB1.68 billion as of January 31, 2024.
In the prospectus, Cha Baidao said that they have sufficient funds to meet the demand in the next 12 months.
Before the listing, Wang Xiaokun and Liu Weihong held a total of about 81.21% of the shares, Orchid Asia held about 4.56% of the shares, Zhengxin Valley Capital held about 0.4% of the shares, Grassroots Zhiben held about 0.28% of the shares, Tomato Capital held about 0.17% of the shares, and CICC Capital held about 0.11% of the shares.
Based on the pre-listing valuation of 17.6 billion yuan, Wang Xiaokun and his wife have a net worth of more than 14 billion yuan, and they can already be seen on the list of billionaires.
New tea drinks are on the market
There are many rolls of new tea drinks, which everyone can see. Brands that once took the high-end price point have stepped down from the altar and lowered the price to enter the market of 20 yuan and below, and everyone is "volume price" to illustrate one point: it is not easy to live.
In addition, everyone is still rolling up to go public.
For example, as early as July 2023, it was reported that new tea beverage companies such as Mixue Bingcheng, Tea Baidao, Shanghai Auntie, Bawang Tea Ji, Xinshi Brewing, and Gu Ming were ready to go public;
However, only Nai Xue's tea was successfully listed in 2021. Mixue Bingcheng applied for an A-share listing in 2022, but there has been no new progress nearly a year later, so there are reports that the plan has been "shelved".
There are many high-profile statements that they want to be listed, but there are very few that can really be listed. There have been investors who are in a state of misery in private, and they are desperate to see the new tea companies invested under the fund go public as soon as possible, and LPs are urging them to exit, and this investor is investing in the brand with a very high valuation.
There are also many investors who no longer expect to get high returns from the new tea companies they have invested in, but only want to exit through listing, "a little back is a little bit," said the above-mentioned investors.
But anyway, it's good news that a new tea drink is finally on the market. The second share of new tea drinks is coming, and the third and fourth shares may not be far away.