FB Pixel no scriptWith over 36,000 stores worldwide, Mixue Bingcheng is sprinting toward a Hong Kong IPO | KrASIA

With over 36,000 stores worldwide, Mixue Bingcheng is sprinting toward a Hong Kong IPO

Written by KrASIA Connection Published on   6 mins read

China’s largest made-to-order beverage company (and the second largest globally) is set to go public in Hong Kong amid an ambitious global expansion initiative.

According to IPO Zaozhidao, Mixue Bingcheng submitted its prospectus to the Hong Kong Stock Exchange on January 2, 2024, with plans to list on the main board. Bank of America, Goldman Sachs, and UBS Group will serve as joint sponsors.

As a global made-to-order beverage company, Mixue Bingcheng focuses on offering a high-quality and affordable range of made-to-order fruit drinks, teas, ice creams, and coffees, each priced at approximately RMB 6 (USD 0.8) per serving. As of September 30, 2023, the company operates over 36,000 stores in 11 countries. In the first nine months of 2023, its network of stores served approximately 5.8 billion cups.

According to a report by China Insights Consultancy (CIC), based on store numbers and beverage volume until September 30, 2023, Mixue is the top made-to-order beverage company in China and the second globally.

Mixue’s product portfolio includes long-term favorites and seasonal products that vary by region. Its top three perennial products include “ice fresh” lemon water, fresh ice cream, and pearl milk tea, selling around 913 million, 442 million, and 326 million servings, respectively, in the first three quarters of 2023. CIC’s report indicated that these three products are the top sellers in China’s made-to-order beverage industry.

Additionally, Mixue regularly introduces new products based on consumer preferences and market trends. In June last year, it launched a trio of berry-infused beverages that sold approximately 33 million cups in the first month following their introduction, quickly joining Mixue’s list of best-selling products.

Financially, Mixue’s revenue increased by 31.2% to RMB 13.576 billion (USD 1.9 billion) in 2022 and further grew by 46% to RMB 15.393 billion (USD 2.16 billion) in the first three quarters of 2023. During the same period, net profit reached RMB 2.453 billion (USD 344.6 million), a 51.1% year-on-year increase.

Since its establishment, Mixue has secured investments from well-known institutions such as Hillhouse Capital, Longzhu Capital (the investment arm of Meituan), and CPE. Before the IPO, Hillhouse and Longzhu each held 4% of Mixue’s shares, while CPE held 2%.

In the prospectus, Mixue stated that the net proceeds from the IPO will mainly be used to enhance the breadth and depth of its end-to-end supply chain, build and promote the brand and IP, enhance its digitalization and intelligence capabilities across all business segments, and serve as working capital for general corporate purposes.

Owning a comprehensive supply chain system

As the only company in China’s made-to-order beverage industry with a network of 30,000 stores (as of September 30, 2023), Mixue Bingcheng’s made-to-order tea brand has store numbers nearly equal to the sum of the second to fifth positions in the industry. Additionally, Mixue has around 4,000 stores overseas, rapidly becoming the leading made-to-order tea brand in the Southeast Asian market. In 2022 and the first three quarters of 2023, Mixue Bingcheng’s store network achieved retail sales of approximately RMB 30 billion (USD 4.2 billion) and RMB 37 billion (USD 5.2 billion), respectively.

The foundation for Mixue’s success lies in its emphasis on the supply chain, which has been a cornerstone of its “high-quality and affordable” value proposition.

According to CIC’s report, Mixue Bingcheng, as the first company in China’s made-to-order beverage industry to establish a central factory, currently possesses the industry’s largest and most comprehensive supply chain system, covering core aspects such as procurement, production, logistics, R&D, and quality control:

  • In procurement, Mixue Bingcheng’s network covers six continents and 35 countries, ensuring a stable supply of genuine and fresh materials from quality sources globally. The scale of procurement also enhances its bargaining power. For instance, in 2022 alone, Mixue procured 50,000 tons of lemons, 9,000 tons of tea leaves, and 5,000 tons of coffee beans, leading the industry in scale. According to CIC, Mixue’s procurement costs for milk powder and lemons in 2022 were approximately 10% and over 20% lower, respectively, than the industry average.
  • In production, Mixue Bingcheng has ostensibly become the industry’s largest and most diversified enterprise, achieving highly digitized and intelligent production. Through in-house R&D, Mixue has managed to offer a comprehensive range of beverage ingredients, including sugar, milk, tea, coffee, fruits, grains, and more, with five major production bases in Henan, Hainan, Guangxi, Chongqing, and Anhui, covering a total area of 670,000 square meters, and an annual comprehensive capacity of approximately 1.43 million tons. This tech-enabled production process not only improves standardization, eliminating food safety risks from the source, but also enhances franchisee satisfaction and consumer experience.
  • To further improve operational efficiency, Mixue Bingcheng has established a warehousing system consisting of 26 warehouses with a total area exceeding 300,000 square meters. As of September 30, 2023, Mixue has achieved 12-hour reach in over 90% of county-level administrative divisions nationwide.
  • Moreover, Mixue Bingcheng is one of the very few brands in China’s made-to-order beverage industry that sources 100% of beverage ingredients, packaging materials, and equipment from the brand for franchisees. Approximately 60% of the beverage ingredients provided to franchisees are self-produced, the highest among China’s made-to-order beverage industry, with core ingredients being 100% self-produced, according to CIC’s report.

Building a win-win relationship with franchisees

From another perspective, trust in the franchise model is a fundamental factor for a beverage company to achieve a scale with thousands of stores or more. As of September 30, 2023, Mixue Bingcheng has over 36,000 stores, with over 16,000 franchisee partners.

As disclosed in the prospectus, the initial investment and franchise fee for Mixue’s stores are below the average level in China’s made-to-order beverage industry. In terms of revenue, Mixue does not rely heavily on franchise fees and related service fees. During the performance recording period, only 2% of Mixue’s revenue came from franchise fees and related service fees.

Furthermore, Mixue Bingcheng is the only company in China’s made-to-order beverage industry with policies that offer franchisees waives costs associated with logistics, store design, and promotional materials. Mixue has been known to weather difficulties together with its franchisees. In early 2022, Mixue Bingcheng waived franchise fees for all domestic franchisees for one year, until the end of 2021, and subsequently reduced the prices of 69 store materials and equipment, with an average reduction of approximately 15%. This not only promoted a mutually beneficial relationship between franchisees and the company but also aligned with Mixue’s mission to “make partners wealthier.”

To provide continuous support and empowerment to franchisees and help them operate stores more effectively, Mixue has also implemented digital standardized management in site selection, store types, operations, and marketing. Critical training sessions are conducted offline before store openings. Additionally, Mixue offers a “smart store solution” aimed at empowering franchisees and enhancing their operational efficiency.

Benefiting from the aforementioned supply chain system and the enhanced franchise model, CIC’s research indicated that approximately 98% of surveyed franchisees acknowledged Mixue’s commitment to developing collaborations that are mutually beneficial by taking into consideration the franchisees’ perspective. Over 92% of surveyed franchisees are willing to recommend friends and family to become Mixue’s franchisees. During the performance recording period, Mixue received over 2.9 million franchise inquiries.

It is therefore not difficult to comprehend how, in the past few years, Mixue Bingcheng has managed to stretch its operating area from China to overseas markets, expanded its product categories from freshly made ice cream and tea to freshly ground coffee, and achieved cross-regional and cross-category sales at scale.

While Mixue Bingcheng has strived to maintain a mutually beneficial relationship with its franchisees, managing franchise stores at the kind of scale it operates is a perennial struggle. A report by Leida Finance discussed the challenges involved. Photo source: Leida Finance.

Moreover, in the medium and long term, the global made-to-order beverage market is vast and is expected to experience accelerated growth in the future. The scale of China’s made-to-order beverage market is estimated to increase to about RMB 1.2 trillion (USD 168.6 billion) by 2028, with a compound annual growth rate (CAGR) of 18.7% from 2022. Among the different price segments of made-to-order beverages, the affordable made-to-order beverages have the highest growth rate in the segmented market, with an expected CAGR of 24% from 2022 to 2028.

In fact, compared to higher-priced made-to-order beverages, affordable offerings are more likely to test the breadth and depth of a company’s supply chain and brand reputation. This means that leading affordable made-to-order beverage companies not only have sustainable competitive advantages but also establish higher entry barriers.

Looking globally, the size of the global made-to-order beverage market is expected to reach about USD 1.1 trillion by 2028. The Southeast Asian made-to-order beverage market is estimated to reach about USD 49 billion, with a CAGR of approximately 20.3% from 2022 to 2028, the highest growth rate among major markets worldwide.

With over 20 years of building an exceptionally efficient supply chain infrastructure, creating a nationwide brand, and gaining experience in managing a large franchise store network, Mixue Bingcheng may continue to capitalize on its success, achieve sustained and scalable growth, and build a more global century-old brand.

This article was adapted based on a feature originally written by and published on IPO Zaozhidao (WeChat ID: ipozaozhidao). KrASIA is authorized to translate, adapt, and publish its contents.


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