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For those who might assume that McDonald’s and Starbucks dominate the global food and beverage landscape by sheer number of locations, a surprising contender emerges from China. Mixue Ice Cream and Tea, the country’s leading bubble tea and beverage chain, has surpassed these well-known giants in outlet count.
Mixue recently made headlines with its successful debut on the Hong Kong Stock Exchange, where its stock price climbed over 40 percent, reflecting strong investor interest after raising $444 million US. The company operates more than 45,000 stores, not just in China but in 11 countries around the globe, including Thailand, Singapore, and Australia, as of last September.
To put this in perspective, McDonald’s has a global presence of over 43,000 locations across more than 100 countries, while Starbucks operates around 40,000 outlets worldwide.
From modest beginnings to a market leader
The journey of Mixue began in 1997, thanks to the vision of founder Zhang Hongchao, who started the enterprise as a small shaved ice shop in Zhengzhou using a homemade machine. The brand has since capitalized on the increasing popularity of bubble tea, contributing to its remarkable expansion.
“It’s the largest brand that nobody’s ever heard of,” remarked Robert Carter, a restaurant industry analyst at StratonHunter. “They’ve just exploded,” referring to the brand’s rapid rise in consumer awareness and market presence.
Mixue has captivated the Chinese market, thanks in part to its catchy jingle that translates as, “I love you, you love me, Mixue Ice Cream & Tea,” adapting the melody of the well-known American song Oh! Susanna.
The name Mixue Bingcheng translates to “sweet snow palace,” aptly reflected in its playful mascot, Snow King, adorned with a crown and a red cloak. The brand appeals to younger customers with its lineup of affordable fruit and tea drinks, coffee, and ice cream, typically priced around $1.
According to Carter, “They’ve got a really interesting pricing strategy. They keep things very low, but their product quality is high, which has enabled significant growth and attracted a younger demographic.”
In a landscape where budget-friendly options thrive, Mixue stands out as a significant player amidst a challenging consumer market in China.
A unique business model
As of September 2024, more than 99 percent of Mixue’s extensive store network is franchised, according to the company’s regulatory filings. This differentiates it from Starbucks, which directly operates around 53 percent of its locations.
However, unlike many franchise businesses that rely heavily on franchise fees, Mixue has reported that these fees account for a mere 2.4 percent of its total revenue for the first three quarters of 2024. The company’s model resembles that of a raw-material supplier more than a typical beverage retailer, selling food materials, packaging, and equipment to numerous franchisees. This approach allows Mixue to derive the majority of its income from the sale of necessary merchandise and equipment that franchisees are mandated to purchase from them.
“They’re not making money just off the franchise model,” Carter elaborated. “They also generate revenue by controlling the supply chain and profiting from the sale of products to their network.”
Future expansion and potential in North America
In its initial public offering (IPO) filing in January, Mixue indicated plans for ongoing expansion while acknowledging that its strategy might foster competition among its existing outlets and against rivals.
Carter expressed optimism about Mixue’s potential entry into the North American market, citing it as a significant opportunity. He noted, “I would expect that they will look at North America. Canada and the U.S. together represent a trillion-dollar restaurant segment.”
Experts also see promise for Mixue in North America, especially given the increasing Asian immigrant population, which could aid in brand recognition. Vince Sgabellone, a food service industry expert at Circana, remarked, “I wouldn’t rule it out… this brand could have immediate brand recognition in the right locations,” although he acknowledged that maintaining their low-price model would be a challenge.
While Mixue now boasts more locations than American fast-food powerhouses like McDonald’s, Starbucks, and Subway, its sales figures still lag behind those of industry leaders like Starbucks and Tim Hortons, as reported by the Singapore-based research company Momentum Works.
Source
www.cbc.ca