Juewei-Led Funds Invest Over RMB600 Million in Shuyi Shaoxiancao

This is an English adaptation of a FoodBud historical article originally published on February 2, 2022.

FoodBud reported on February 2, 2022, that a Juewei-led fund, Chengdu Xinjin Siyiwu, had completed an investment in Shuyi Shaoxiancao. The fund was set up with participants including Qiaqia Foods, Tencent and Kemen Foods, and had just invested in Pengjifang in January 2022.

Deal Structure

Another Juewei-directed fund, Hunan Shudaicao, also joined the round. Its disclosed capital commitments included:

• RMB70 million from Shanghai Chuangwei, a Qiaqia affiliate
• RMB52.63 million from Everbright Holdings
• RMB5.3 million from Juewei's Wu Huiling
• RMB4 million from Juewei's Wang Pu
• Total fund size: RMB200 million

A separate fund, Qingdao Nuowei, also participated. It was formed by Trout, Jingpai, the parent company of Jinjiu, K-Boxing, and others.

After the financing, the ownership stakes in Shuyi Shaoxiancao were reported as:

• Hunan Shudaicao: 2%
• Chengdu Xinjin Siyiwu: 1.6%
• Qingdao Nuowei: 2.06%
• HK YST: 0.5%

In total, Shuyi Shaoxiancao sold 6.19% of its equity in the round. Based on Hunan Shudaicao's RMB200 million fund size and 2% stake, FoodBud estimated Shuyi Shaoxiancao's valuation at around RMB10 billion. On that basis, the financing size would exceed RMB600 million.

Scale And Positioning

Among domestic tea-drink chains, the only brand with a larger store base than Shuyi Shaoxiancao was Mixue Bingcheng, which originated in Henan, had around 20,000 stores, had expanded overseas, and was testing new brands including Lucky Coffee and Jilato. Mixue had also invested in Huicha as part of an effort to expand in southern China.

Shuyi Shaoxiancao had more than 7,000 stores, making it the second-largest tea-drink brand by store count. Within the grass jelly tea category, Shuyi Shaoxiancao and Jidong Shaoxiancao were the larger players leading category development.

According to Narrow Door Canyan, Jidong Shaoxiancao had 2,385 operating stores, still far behind Shuyi Shaoxiancao.

Jihai Brand Monitoring data showed Shuyi Shaoxiancao had 7,215 stores nationwide, with 201 openings and 71 closures in the previous 90 days.

Store Footprint

By provincial distribution, Hunan, Sichuan and Guangdong were Shuyi Shaoxiancao's three largest markets, with Hunan ranking first. FoodBud attributed this partly to Hunan's market size and partly to founder Wang Bin's Hunan background. Although the brand started in Sichuan, using Hunan as a base outside Sichuan helped it avoid direct regional overlap with chains such as Mixue Bingcheng and Tianlala.

Store locations were mainly community stores, followed by mall stores, with additional units around schools and office areas.

Why Take Strategic Capital?

FoodBud noted that franchise-heavy milk tea brands generally have ample cash flow. It suggested Shuyi Shaoxiancao may have taken Juewei-linked capital for two reasons.

First, supply chain and store control. Juewei was one of China's chain brands with more than 10,000 stores and had built mature systems for chain management and supply-chain enablement. FoodBud argued this could help Shuyi Shaoxiancao address bottlenecks in operating control as it scaled.

Second, continued expansion and a possible IPO path. In the second half of 2021, Shuyi Shaoxiancao signed Jordan Chan as its chief store-inspection officer and ran a large-scale brand campaign to expand brand influence. The company had also begun opening stores overseas. Given Shuyi Shaoxiancao's scale, FoodBud viewed listing as the likely next step.

Note: Financing, valuation, expansion and IPO comments are historical references from February 2, 2022.