Header photo source: Chagee.
Chinese tea chain Chagee has poached Li Tao, vice president of Starbucks China, to join its ranks in the first half of 2024, 36Kr reported. However, Chagee denied the claim when reached for confirmation.
Li previously oversaw store development and asset management for Starbucks in China. Before his tenure at Starbucks, his career spanned dining and retail, with stints at Yum China, Coach, Daphne International Holdings, and Chamate.
Chagee’s recruitment of Li comes at a pivotal moment as the company aims to challenge Starbucks. In May, Chagee’s founder Zhang Junjie declared that the company’s 2024 goal is to surpass Starbucks China in sales. Chagee’s GMV for the first quarter of 2024 exceeded RMB 5.8 billion (USD 797.3 million).
Li’s recruitment is part of Chagee’s extensive hiring spree. Multiple sources told 36Kr that Chagee has been aggressively hiring industry professionals, particularly from Starbucks and Tim Hortons. For brand marketing, they have recruited talent from Xiaohongshu and Huawei.
Since 2023, Chagee has opened over 3,500 new stores, a stark contrast to the more than five years it took to open the first 1,000. With an ambitious goal to exceed RMB 20 billion (USD 2.7 billion) in GMV this year, management has high expectations for rapid expansion. Just as McDonald’s and KFC are considered “training grounds” for Chinese restaurant chains, Starbucks is seen as the training ground for coffee and tea chains, known for its comprehensive store management and promotion systems.
Chagee is also rumored to be preparing for a US IPO this year. Beyond performance, a high-profile executive team can enhance investor confidence in their management capabilities.
Although Chagee operates on a franchise system, its management demands are significant. The company employs a franchising model that separates ownership and operational rights. Store ownership belongs to investors, while operational rights are delegated to Chagee to ensure consistent user experience and product quality, according to Zhang. This model is supported by wholly-owned local subsidiaries and offices. According to 36Kr, Chagee currently has 30 such subsidiaries and offices in China, each staffed by dozens to over a hundred employees.
From branch management to store operations, Chagee must achieve rapid expansion without losing control.
As a startup, some management shortcomings have begun to surface. In May, Chagee launched a promotion for a new product called “Wanli Mulan” with a week of free orders. However, a Chagee franchisee said that the free orders required manual verification at the store level before closing each day. Due to the variety of coupon sources and high order volumes, some franchisees couldn’t process all orders in time, resulting in them bearing part of the subsidy costs. This issue could have been resolved with an automated digital system.
Chagee has emerged as a prominent tea chain brand in China, achieving high GMV and cup sales. Its growth momentum is strong, and the positioning of its fresh milk tea products has rekindled hopes of it becoming a formidable rival to Starbucks. However, it must carefully manage its expansion to avoid operational pitfalls that could derail its overall development.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Yang Yafei for 36Kr.