Week in China

Since its founding in 1997, the tea brand Mixue Bingcheng has launched a range of products including milk teas, fruit teas, ice cream and other categories. “Low price and affordable” is its tagline and its milk teas are less than a third of the price of premium-priced rivals like Heytea and Nayuki Tea.

Mixue Bingcheng’s positioning is to compete more on the size of its market. It started out by targeting lower-tier markets from third or fourth-tier cities and in June 2020 it claimed it was the first tea brand in China with more than 10,000 stores. The company runs its business on the economies of scale that this network provides. Stores are opened on a franchise model, with income from annual licensing fees, equipment contracts and supply agreements for ingredients. Income reached Rmb6 billion in 2019.

However the franchise model has also created problems for the brand, including a series of stories in the media about food safety issues at some stores. Mixue Bingcheng was reported to have paid a fine to the government, reaffirming criticism from some of its customers that product quality at the chain was coming under pressure because of the low prices.

In January 2021 Mixue Bingcheng completed a first round of financing of Rmb2 billion, jointly led by Hillhouse and Meituan’s Longzhu Capital. The company was reported to be valued at about Rmb20 billion, or $3 billion.