This is an English adaptation of a FoodBud historical article originally published on September 14, 2021.
If Mixue Bingcheng were to pass 20,000 stores, where would incremental growth come from?
On September 14, FoodBud learned from Tianyancha that Xuewang Investment Co., Ltd. was established on September 13 with registered capital of RMB50 million. Its legal representative is Liu Yang, and its business scope includes venture investment limited to unlisted companies and investment activities using its own funds. Shareholder information shows the company is wholly owned by Mixue Bingcheng Co., Ltd.
This was Mixue Bingcheng’s fifth investment in Southwest China and Hainan since the start of 2021.
The other four entities were:
By business scope, these companies fall into two broad groups.
One group supports local-market operations, accelerating supply chain and supporting infrastructure in Southwest China and Hainan. Chongqing Xuewang Agriculture, for example, covers food and beverage production, procurement of primary agricultural products, and fruit wholesale. Hainan-based Daka International Enterprise Management focuses on local foodservice, enterprise management, and marketing planning.
The second group is tied to export-related business. Hainan Xianyida and Xuewang International Trade both list courier services, technology and goods import/export, and food operations in their business scopes.
Mixue Bingcheng’s rapid company formation suggests an increasingly strong appetite for growth.
The brand scaled nationally through a franchise model built around extremely low prices and a highly efficient single-store model. Once store expansion reaches a certain size, however, maintaining stable growth becomes the harder question.
Standing still is also difficult. Mixue Bingcheng has investors behind it, and competitors including Shuyi Grass Jelly, Chabaidao, and Guming are still pushing ahead. Without new breakthroughs, market share can be eroded.
According to Jihai Brand Monitoring, Mixue Bingcheng had 17,958 operating stores, with 1,089 cumulative closures. In the previous month, it had opened 314 new stores. At that pace, the brand could reach 19,000 stores by the end of 2021.
Other foodservice-related companies in China had already passed 10,000 stores:
Looking at Wallace, Zhengxin Chicken Steak, and other “10,000-store club” operators, Mixue Bingcheng likely approaches a ceiling once it moves beyond 20,000 stores.
Mixue has already explored multi-brand and multi-business-line growth. Its coffee brand Lucky Cup has not reached meaningful scale even with founder-level support; coffee consumption habits in lower-tier markets have not yet been cultivated, and low pricing alone does not guarantee demand.
Its higher-end tea brand M+ ended poorly. A team built around value-for-money and cost control was not naturally matched to premium tea drinks, where product development and brand culture are major challenges. A franchise-oriented organization also faces a very different operating mindset when running directly operated premium tea stores.
More recently, Mixue launched an ice cream brand, Jilato, and opened franchising for it. According to Zhaimen Canyan, Jilato had 19 stores.
FoodBud had previously published an article on the privatization of Hop Hing Group, which disclosed store data for Dairy Queen in China. As written in the source, by “June 60” of that year, DQ had 193 stores and generated RMB120 million in revenue in the first half.
Earlier media reports cited people close to Mixue Bingcheng as saying that Mixue’s 2019 revenue was around RMB6 billion, with net profit of roughly RMB800 million.
Even if the coffee and ice cream brands gradually grow, Lucky Cup had 197 stores at the time, their contribution would still be limited relative to Mixue Bingcheng’s annual revenue of more than RMB6 billion.
Investment by tea-drink brands already had precedents: Heytea invested in Seesaw, while Chayan Yuese invested in Guoyaya.
At this stage, Mixue Bingcheng setting up an investment company is not surprising.
As investment in the broader consumer market became more rational, the next area to become more disciplined was foodservice. That rational mood was already spreading. Many investors had begun to believe there were few remaining opportunities in tea drinks. Even star investments such as Heytea, when calculated carefully, may have delivered more reputation than financial return.
Before Heytea announced its investment in Seesaw, it also disclosed that it had declined to invest in Lelecha. Two members of Lelecha’s founding team had already left, and its backers wanted to exit.
Over the following period, tea-drink companies that had previously raised capital would likely find it harder to raise another round unless they had strong confidence in an IPO path. Not every project can go public, and selling at the right time can also be a good outcome.
For Mixue Bingcheng, the best timing to negotiate acquisitions could arrive as suitable targets decline in value. Through buyouts of appropriate tea-drink and adjacent projects, Mixue could apply its supply chain cost-control capabilities and franchise expansion experience, revitalize acquired assets, increase their value, and build a multi-brand, multi-category ecosystem.
That route is faster than incubating a new brand from scratch, but it puts more pressure on Mixue’s ability to choose targets and integrate them effectively.
Tea-drink companies expanding into agriculture is not new. Heytea and Nayuki have both extended into areas such as strawberry farms to strengthen upstream supply control.
Nayuki is a useful example because its IPO prospectus disclosed more detail.
According to the prospectus, Nayuki’s revenue was RMB1.087 billion in 2018, RMB2.502 billion in 2019, and RMB3.057 billion in 2020.
Nayuki’s material costs mainly included two categories: raw materials such as tea leaves, fruit, and dairy products; and packaging materials and consumables such as cups and paper bags.
From 2018 to 2020, Nayuki’s largest supplier was Dongguan Zundao Environmental Protection Packaging Industry Co., Ltd., established on October 25, 2017 and identified as a connected person of Nayuki.
The prospectus showed that Nayuki’s raw material cost as a percentage of total revenue was 28.7% in 2020, down from 29.2% in 2018.
Its packaging cost ratio, by contrast, rose from 6.1% of total revenue in 2018 to 9.2% in 2020.
In 2020, Nayuki’s packaging material cost was RMB280 million, of which RMB94 million was purchased from Zundao.
Leaving aside any discussion of related-party transactions, Nayuki’s raw material cost ratio did decline as the business scaled. Under normal commercial logic, packaging procurement costs should also benefit from stronger bargaining power as scale grows.
For Mixue Bingcheng, establishing an agriculture company could serve two purposes. First, it can strengthen control over upstream resources. In 2021, many tea-drink brands pushed lemon tea, making supply of perfume lemons a headache for many companies; the popularity of products using yougan, or Chinese emblic, also caused upstream prices for sweet yougan to surge. Second, upstream businesses can bring their revenue and profit into the company.
Large regional packaging-material companies in China generally generate annual revenue of roughly RMB500 million to RMB1 billion. If Mixue Bingcheng were to establish a packaging-material company and consolidate that business, it could become another possible route.
Note: store-count projections, IPO references, acquisition timing, and financial figures are historical as of the original September 14, 2021 article.