China’s Mixue and GoodMe push for Hong Kong IPOs amid bubble tea consumption recovery

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China’s two largest bubble tea chains Mixue and GoodMe both filed prospectuses for Hong Kong listings on Tuesday. Credit: 123RF

China’s two largest bubble tea chains Mixue and GoodMe both filed prospectuses for Hong Kong listings on Tuesday, with the aim of broadening the companies’ financing access through share sales, providing vital support for the new-style tea brands to navigate an extremely competitive industry.

Why it matters: Three China-founded beverage retailers have now lined up to apply for IPOs in Hong Kong in less than five months, incluing fruit tea chain ChaBaiDao submitted its application last August, signaling that the industry leaders are betting big on store expansion and tea consumption in China’s delayed post-Covid economic recovery.

Details: Mixue, which also sells ice cream for RMB 2 (less than $0.3) per cup, generated RMB 15.4 billion ($2.17 billion) in revenue and recorded a net profit of RMB 2.5 billion in the first nine months of last year. Mixue’s numbers are nearly triple those of rival GoodMe on both metrics.

With an eye-catching snowman logo, Mixue boasted 32,180 stores across China as of September 30, 2023, with over 55% of those stores in third-tier and below cities. GoodMe, a 13-year-old brand selling bubble tea mainly in second-tier and below cities, had opened a total of 9,001 stores by the end of 2023.

The primary revenue streams for Mixue and GoodMe are driven by the sales of raw materials and equipment to franchisees; the former has derived over 98% of its income from this strategy in the past three years.

According to GoodMe’s prospectus, revenue from directly operated stores in the first three quarters of 2023 accounted for only 0.1% of its total, while the income from selling goods to franchisees made up as much as 75%.

Context: Mixue shifted to exploring a Hong Kong IPO instead of a mainland China listing due to a lack of progress following a proposed RMB 6.5 billion Shenzhen IPO filing back in 2022. The tea chain’s decision to put its mainland listing on hold is widely seen as a sign that Chinese regulators have imposed strict rules discouraging companies that rely heavily on franchise business models from listing.

Cheyenne Dong is a tech reporter now based in Shanghai. She covers e-commerce and retail, AI, and blockchain. Connect with her via e-mail: cheyenne.dong[a]
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