GoodMe has resumed its efforts to go public after its earlier IPO application expired. The tea brand updated its prospectus on December 15, as disclosed in filings with the Hong Kong Stock Exchange. The China Securities Regulatory Commission confirmed that GoodMe has completed its filing for a Hong Kong listing, intending to issue no more than 441 million ordinary shares. In tandem, Xiaocaiyuan, another tea brand, passed its listing hearing in Hong Kong. These developments hint at a potential revival of the previously stagnant IPO market.
The updated prospectus sheds light on GoodMe’s position within the tea beverage industry. Based on gross merchandise value (GMV) and store count, GoodMe ranks second among competitors. Its customer spending ranges from RMB 10–18 (USD 1.4–2.5), placing it in a highly competitive market segment. With most of its stores located in lower-tier cities, the company’s sales are evenly divided between milk tea and fruit tea, alongside a growing coffee line.
Growth metrics reveal steady progress, with GoodMe’s GMV for the first three quarters of 2024 reaching RMB 16.6 billion (USD 2.3 billion), a 20.4% year-on-year increase. Its network has expanded to 9,778 stores, just shy of its long-standing goal of 10,000. However, store expansion has notably slowed. This year, the company added a net 777 stores, averaging 86.3 new stores per month—less than half of last year’s monthly average of 194.3.
This tempered growth reflects a shift in priorities. GoodMe had initially targeted 10,000 stores in 2023 but scaled back, focusing on profitability over aggressive expansion. New openings during the first three quarters of 2024 were fewer than half of last year’s total, with the opening-to-closure ratio falling from 9.8:1 to 2.76:1.
One contributing factor to the slowdown is the decline in same-store GMV growth. Outside of its core markets in Fujian and Jiangxi, GoodMe reported a 0.7% drop in same-store GMV across key cities, a significant contrast to the 9.4% growth it achieved in 2023. While last year’s strong growth was partly driven by unique market conditions in 2022, the slowdown in 2024 remains unmistakable.
This marks the first decline in same-store GMV for GoodMe in four years, highlighting some of the drawbacks associated with rapid expansion. However, the reduced pace of expansion has brought certain benefits, particularly in terms of profitability.
For the first three quarters of 2024, GoodMe’s adjusted profit reached RMB 1.15 billion (USD 161 million), up from RMB 1.04 billion (USD 145.6 million) during the same period in 2023. Although the company’s operating profit margin fell 2.3 percentage points year-on-year to 20.9%, it remains well above the industry average of 10–15%.
Rather than striving to reach the milestone of 10,000 stores, GoodMe now appears to prioritize maintaining the profitability of its existing locations.
A collective slowdown
For new franchisees joining GoodMe in 2024, competition is expected to intensify. According to the prospectus, average GMV per order and daily order volumes both declined slightly in the first three quarters of 2024. This decline was reflected in a drop in the average daily GMV for newly opened franchise stores, which fell from RMB 5,800 (USD 812) in 2023 to RMB 5,200 (USD 728) in 2024.
Price wars in the milk tea segment escalated this year, with Chagee introducing fresh milk tea products that gained widespread popularity. In response, GoodMe and Luckin Coffee launched RMB 9.9 (USD 1.4) promotions for their own offerings. However, while Luckin retained this pricing, GoodMe reduced the price of its fresh milk tea series to this level only temporarily.
Marketing expenses surged as the competitive landscape intensified. Sales and distribution costs, as a percentage of revenue, increased from 4.3% in the first three quarters of 2023 to 5.5% in the same period of 2024. Advertising and promotion expenses rose significantly from 0.8% to 1.8% of revenue, exceeding RMB 110 million (USD 15.4 million).
The fierce price wars have shaken weaker franchisees, with GoodMe’s franchisee attrition rate rising to 11.7% in the first three quarters of 2024, compared to 8.3% in 2023 and 6.7% during the pandemic in 2022.
GoodMe is not alone in facing these challenges. The tea beverage industry as a whole is experiencing an accelerated shakeout. According to data from Canyan Data, as of November 12, 2024, there were approximately 413,000 tea beverage stores nationwide. In the past year, 142,000 new stores opened, but 160,000 closed, resulting in a net decrease of 18,000 stores.
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From fruit tea to milk tea
Amid the slower growth, GoodMe has shifted its expansion focus further downward. By 2021, 78% of its stores were located in second- and lower-tier cities, the highest proportion among the top five brands. By the first three quarters of 2024, this share had risen to 80%.
In the same period, the majority of new store openings—70%—occurred in third- and fourth-tier cities. This aligns with GoodMe’s strategy to densify its store network in core regions, particularly Zhejiang, while gradually expanding to surrounding areas. The bulk of GoodMe’s stores are located in Fujian, Jiangxi, Guangdong, Hubei, Jiangsu, Hunan, and Anhui. Unlike its competitors, GoodMe has no stores in Beijing or Shanghai.
This densification strategy is designed to maximize the efficiency of its cold chain logistics. Compared to outsourced logistics, GoodMe’s proprietary cold chain comes with distinct advantages and disadvantages. While it allows for greater control, the fixed costs are high, and efficiency improvements depend on increasing the density of its regional operations. For example, 94% of its stores in Zhejiang are within 150 kilometers of its warehouse, enabling weekly cold chain deliveries to 97% of its stores nationwide.
GoodMe’s emphasis on lower-tier markets, coupled with its cold chain infrastructure and competitive price range of RMB 10–18 (USD 1.4–2.5), reflects its strategy to upgrade tea consumption in less developed areas. However, the company’s product portfolio has also evolved in response to market trends in recent years.
In 2021, fruit tea was GoodMe’s leading product category, accounting for 44% of total sales volume, with milk tea at 39% and coffee and other beverages contributing 17%. At the time, Chagee was still considered a niche brand, and the fruit tea market was dominated by Heytea and Nayuki, both of which went public in 2021. Nayuki, however, had not embraced franchising and focused on first- and second-tier city locations, while GoodMe quietly expanded in lower-tier markets.
Over the past two years, milk tea has gained greater popularity, and GoodMe’s milk tea sales proportion has steadily increased—from 39% in 2021 to 47% in the first three quarters of 2024, with sales reaching 466.8 million cups during this period.
GoodMe has also followed the growing trends in the coffee segment. According to reports from 36Kr, the number of GoodMe stores offering coffee products expanded from 500 in September 2024 to over 2,000 by the end of the year.
In terms of scale, it remains uncertain who will reach the milestone of 10,000 stores first. Auntea Jenny is GoodMe’s closest competitor, operating 9,333 stores according to data from GeoHey, with quarterly growth outpacing GoodMe’s.
While Chagee has aggressively expanded its offerings of fresh milk tea products, Auntea Jenny has concentrated on fresh fruit teas. It has even incorporated “Fresh Fruit Tea” into its online store branding and introduced a series of fruit- and vegetable-based teas.
Tea beverages largely target a young consumer base, and flavor innovation remains a consistent theme. However, this market is inherently risky due to its trend-driven nature. The industry has long debated whether milk tea or fruit tea represents the dominant trend. Regardless, the market continues to grow increasingly crowded in both product variety and price points.
As the shakeout trend persists, the tea beverage market is likely to consolidate further among leading brands. Beyond GoodMe, Auntea Jenny, and Chagee, other key players have been repeatedly linked to potential IPO attempts. Ultimately, differentiation in valuation will hinge more heavily on profitability.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Yang Yafei for 36Kr.