Mixue Bingcheng, originating from one of China’s less affluent regions, has swiftly become the world’s largest food and beverage chain by store count, surpassing industry giants McDonald’s and Starbucks. The journey of Mixue Bingcheng began two decades ago with a budget-friendly approach that captivated its market.
Mixue Bingcheng, translating to ‘Honey Snow Ice City’, recently made a significant mark when its shares surged over 40% on the first trading day in Hong Kong. This impressive leap came after raising $444 million in a highly anticipated initial public offering (IPO), noted as the largest in Hong Kong this year, according to the Hong Kong Stock Exchange. Devi Subhakesan, from equity research firm Investory Pte, highlighted, ‘The demand from retail and institutional investors has been strong, as was expected.’
With over 45,000 outlets worldwide as of last September, Mixue has rapidly expanded its presence. Its key to success lies in a simple pricing strategy aimed at affordability. With products priced between 2 to 8 yuan (30 cents to $1.20), Mixue has successfully attracted a diverse customer base across China, leveraging its catchy theme song and distinctive snowman mascot.
The founder, Zhang Hongchao, envisioned a model where people globally could enjoy quality food and drinks at minimal cost. This has set the foundation for Mixue’s popularity, particularly amid China’s economic challenges. Zhang’s concept of providing ‘value for money’ has been a cornerstone of Mixue’s business model, proving especially effective in China’s competitive bubble tea market.
Mixue’s store count increase has been primarily driven by its franchising method, with over 99% of its stores operated as franchises. This model has proved lucrative; in the first nine months of 2024 alone, Mixue’s net profit saw a 42% rise, reaching 3.49 billion yuan ($479 million), with revenue climbing 21% to 18.7 billion yuan ($2.6 billion) compared to the previous year.
Zhang’s entrepreneurial journey began in Henan province, initially selling shaved ice in 1997. Transitioning from a farming family background, Zhang alongside his brothers ventured into the soft serve market, where a 1-yuan cone became an instant hit. This success laid the groundwork for further expansion and product diversification, including the introduction of boba tea and a coffee brand called Lucky Cup by 2017.
Despite Mixue’s overwhelming demand, as seen with its IPO being over 5,200 times oversubscribed, the company’s growth is not without challenges. Intense competition within China’s tea market, alongside shifting investor sentiments towards Chinese growth prospects, impact Mixue’s trajectory. Nevertheless, the company continues to pursue overseas expansion across Asia Pacific, setting sights on regions like Indonesia, Vietnam, and Malaysia.
Though Mixue has outnumbered giant brands like McDonald’s and Starbucks in terms of outlets, its sales still lag behind others, such as Starbucks and Dunkin’s parent company, Inspire Brands. However, with China’s tea market predicted to reach about $66.5 billion by 2027, Mixue strategizes to leverage its scale against competitors, focusing on extending its influence beyond China.
Mixue Bingcheng’s remarkable rise from a small-scale business in Henan province to a global franchise leader demonstrates its successful strategy of affordability and aggressive expansion. While challenges persist, particularly against a backdrop of stiff competition and investor scrutiny, Mixue’s compelling value-driven approach continues to captivate consumers, setting a distinguished path in the global food and beverage industry.
