This is an English adaptation of a FoodBud historical article originally published on July 15, 2022.
According to 90du Perspective, Chagee, founded in Kunming in 2017, was expanding quickly in 2022 despite a more crowded and less forgiving new-style tea market. The outlet framed the brand’s momentum around three operating choices: a culture-led positioning, a focused hero-product strategy, and a two-track domestic and overseas expansion model.
China’s new-style tea market had grown rapidly on the back of younger consumers seeking drinks that were fresh, convenient, flavorful, and social.
Figures cited from iiMedia Research’s 2021 China new-style tea industry report put the market at RMB184.03 billion in 2020, with an estimate of RMB279.59 billion for 2021 and a projection of more than RMB300 billion in 2022.
At the same time, the category was described as one of the highest-failure tracks in foodservice. A report from Canbaodian said tea shops accounted for 21.7% of publicly listed restaurant-transfer listings, and that tea shops had the shortest average lifespan among restaurant formats, at 13.63 months.
Against that backdrop, Chagee had grown from a leading Yunnan tea brand into a national player and one of the few Chinese tea chains positioning itself around tea culture overseas. The article said the brand had passed 550 stores globally.
In China, Chagee reported several operating records: a single-store, single-day sales high of more than RMB200,000, and a Shenzhen flagship opened in June 2022 that sold more than 6,500 cups in one day, compared with a previous record of more than 3,600 cups. Overseas, the article said all stores were profitable at the time.
Chagee entered a market that was already highly competitive. Heytea and Nayuki had risen as newer forces, while CoCo and A Little Tea had already built strong positions, especially through franchising.
The brand identified an opportunity in what it called a category-B segment: drinks priced at RMB15-25, stores averaging 60-80 square meters, a certain level of in-store experience, and locations mainly in shopping malls. Its differentiation was a “new Chinese-style” tea format rather than a modern or generic beverage identity.
Chagee’s view was that the endgame for tea drinks would return to two dimensions: competition around tea itself, and competition around brand value. From launch, it anchored itself in Eastern tea culture.
Based in Yunnan, described in the article as a world tea origin and the starting point of the Tea Horse Road, Chagee defined its positioning as “fresh milk tea made with original tea leaves” and an “Eastern new tea house.” The brand framed this as a higher-quality, healthier, freshly made upgrade from conventional milk tea ingredients.
The article repeatedly compares the ambition to Starbucks: just as Starbucks took Western coffee culture global from 1971 onward, Chagee believed Chinese tea could also travel globally as a carrier of Eastern culture.
This showed up in brand naming, store design, and packaging. The name Chagee references the classic Chinese opera “Farewell My Concubine.” Stores incorporated elements such as opera costumes, wood textures, hand embroidery, and mortise-and-tenon architectural craft. The brand also used product and gift-box concepts, including the “Peony Pavilion”-inspired tea-bag gift box “A Dream in the Garden,” to communicate Chinese-style aesthetics and tea culture to younger consumers.
The article argues that new-style tea had moved from single-product launches in the early 1990s, to category formation in the 2000s, to category upgrades around 2015, and then to segmentation and brand competition. In that environment, product similarity had become a growing problem.
Chagee’s chosen response was a hero-product strategy. The brand drew inspiration from chains such as McDonald’s, Starbucks, and KFC, where classic products can remain bestsellers for decades. Its internal analogy was that a latte can be sold for years while flavor variation comes from coffee beans, origins, and processing; in tea, the equivalent is changing the tea leaf and blend rather than endlessly stacking ingredients.
Within Chagee’s “original leaf fresh milk tea” series, three hit products reportedly accounted for around 70% of sales. Its signature product, “Boya Juexian,” accounted for more than 30% of sales.
The brand’s logic was to make core products well, deepen brand value, and turn classic drinks into repeatable “daily companion” products. It described its ambition as building an Eastern “tea latte” equivalent to Starbucks’ latte.
Chagee did not present the hero-product strategy as a refusal to innovate. It said “big” referred to long-term repeat-purchase strength in sales data, not selling only one product. The brand expected innovation to stay tea-centered, including combinations of herbal and woody ingredients and blends of tea and flowers.
The outlet contrasted this with frequent new-product promotions and buy-one-get-one campaigns, arguing that sales often fall after promotions stop and that excessive launch frequency can weaken profitability. In a category with low barriers and easy copycatting, Chagee said brands needed to find suitable hero products and use innovation to strengthen product barriers.
The article notes an unusual pattern: during Chagee’s first three years, while the broader new-style tea market was expanding aggressively, Chagee grew more steadily; in the following two years, as the industry cooled, Chagee accelerated.
For 2022, the brand planned to enter more than nine provinces and municipalities. By the time of publication, it said it had already met corresponding city-expansion goals, with first stores or flagships opened in Anhui, Chongqing, Jiangxi, Henan, Shaanxi, Shandong, Zhejiang, Jiangsu, and Guangdong. It also reported opening 20 stores during the May Day holiday and 11 stores during the Dragon Boat Festival holiday.
Chagee described its domestic path as: first establish itself in Kunming, then build a strong base in Yunnan, and then expand nationwide. Its first store opened on Wuyi Road in Kunming, Yunnan, in November 2017. Over the following three-plus years, it focused on Yunnan, refining its differentiated model and product moat before becoming a leading Chinese-style tea brand in Southwest China.
While building its domestic base, Chagee also moved overseas. It opened its first offline store in Malaysia in August 2019. By the time of the article, it had nearly 50 stores across overseas markets including Malaysia, Singapore, and Thailand.
The article said Chagee was also looking at North America and Europe. The brand’s response was that Europe and North America were markets it would inspect and discuss, because new-style tea momentum had begun to appear there and consumer habits were gradually forming.
Some overseas social-platform users also said Chagee was preparing first stores in East Malaysian cities such as Sabah and Kuching, with the goal of moving beyond Southeast Asia’s previously Chinese-consumer-heavy milk tea market and tapping non-Chinese consumer demand.
Chagee described its two-market logic as “build high walls regionally, replicate quickly globally.” In practice, that meant using product, supply-chain, and brand capabilities proven in China to support overseas markets, while relying on localized overseas teams to operate and strengthen the brand.
Its market-positioning logic was “build the brand overseas, build scale domestically.” Chagee saw overseas markets as important for consumer mindshare and future global brand building, while China’s deep tea culture and broad consumer base made it the best platform for scale and store density.
In the first half of 2021, Chagee completed Series A and Series B financing, raising more than RMB300 million in total. Investors named in the article included XVC, Fosun, and Congbi Qiushi.
The article closes by arguing that China’s new-style tea market had moved past the era of blind rapid expansion. Chagee’s stated view was that future competition would be global category competition, quality competition, and brand competition, testing whether companies had memorable, well-regarded products and services, efficient supply-chain systems, and differentiated brand positioning.
Chagee said product capability, digital capability, and brand capability were prerequisites for new-style tea brands going global, and that it would continue expanding overseas under its mission of “meeting the world with Eastern tea.”
Note: Market forecasts, expansion plans, financing amounts, and IPO/forward-looking figures in this article are historical as of July 15, 2022.