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Bawang Cha Ji has set a goal to surpass Starbucks China in overall sales in China this year.

Text/Daily Financial Report Lv Mingxia

While "challenging" Starbucks, and stabbing workers in the back, "Oriental Starbucks" Bawang Tea Princess is embroiled in controversy again.

Recently, the topic "Woman claims that her ID number was posted on the screen after she resigned from Bawang Cha Ji" has become a hot search topic. It is reported that a woman posted on a social platform that after she resigned from Bawang Cha Ji, the store posted her ID number on the screen, which attracted the attention of netizens.

Subsequently, Bawang Cha Ji’s official Weibo account urgently posted an apology, stating that the company had asked the store to immediately “withdraw the public notice” and work with the company to contact the partner to apologize and offer condolences.

In fact, workers' comments on Bawangchaji and other similar posts are all over major social platforms. The contents of the complaints are similar, such as fines, unpaid overtime, high work intensity, etc.

Along with the "resigned employees being posted on the notice", the media revealed that Bawang Cha Ji is "recruiting a large number of people". It is understood that Bawang Cha Ji is recruiting a large number of people in the industry, "from the headquarters to various branches", mostly Starbucks and Tims.

In terms of brand marketing, it poached people from Xiaohongshu, Huawei and other companies. This poaching action by Bawang Chaji took place at a critical time when it claimed to be the "Eastern Starbucks".

While making rapid progress, how to manage the company well, especially the franchise store management, to avoid the collapse of word-of-mouth and user loss has become a key battle for the market to examine Zhang Junjie, the founder of Bawang Cha Ji.

Capital supports Overlord Tea Princess to step on the accelerator

Compared with "old-fashioned" companies such as Heytea Nayuki and Mixue Bingcheng, Bawang Chaji was established later but achieved rapid store expansion and growth.

In 2017, Bawang Chaji opened its first store in Kunming, Yunnan. At that time, the fruit tea market was booming, and Heytea and Nayuki's Tea were very popular. The only well-known original leaf tea brand was Cha Yan Yue Se, but Cha Yan Yue Se had not yet left Changsha.

When Bawang Cha Ji was founded, there were already many competitors in the new tea beverage market. Differentiated competition was the key to Bawang Cha Ji's success. Founder Zhang Junjie considered the issue from two aspects: brand positioning and product positioning.

In terms of brand positioning, Bawang Cha Ji chose to create a new Chinese style brand, tapping into the trend of the rise of national trends. In terms of product positioning, it positioned itself as original leaf fresh milk tea, taking "original tea + fresh milk" as the basic foothold, and placing tea in the protagonist position.

While Heytea, Guming, Mixue Bingcheng and others are busy building their own supply chains, central factories and logistics cold chains, Bawang Chaji insists on the simple three-piece set of "tea + fresh milk + packaging materials".

Fruit tea may be a hot potato for new brands with unstable supply chains and weak foundations. Fresh fruit is the enemy of the supply chain. It is difficult to store, transport, and even to make. Every piece of fruit represents an increasing cost.

Therefore, whether forced or voluntarily, Bawang Cha Ji usually cooperates with local fresh milk brands to reduce costs.

In terms of store layout, Bawang Cha Ji started in the southwest region where milk tea culture is not popular, and gradually opened stores eastward. After establishing itself in Yunnan, it radiated to Guangxi, Guizhou and other places. In June 2021, Bawang Cha Ji moved its headquarters from Kunming, Yunnan to Chengdu, Sichuan. This was interpreted by the outside world as the beginning of Bawang Cha Ji's nationalization strategy.

Capital also cast its favored eyes at this time. In 2021, Bawang Chaji completed two rounds of financing, and in 2023 it received investment from Coatue, with a valuation of approximately RMB 3 billion.

The optimism of capital also gave Bawang Chaji the chips to accelerate its expansion. According to public data, as of April 2022, Bawang Chaji had only 500 stores, but by the end of 2022, the number of Bawang Chaji stores had doubled to 1,000. In 2023, the growth rate of Bawang Chaji's new stores reached 233%, from about 1,000 stores at the end of 2022 to 3,511 stores at the end of 2023.

Compared with a number of "old veterans" that have already gone public or are waiting to be listed, Bawang Cha Ji's development in the past one or two years has undoubtedly been rapid, and its stores are expanding rapidly. However, while the scale of Bawang Cha Ji's stores is growing by leaps and bounds, store quality control and service quality issues have also become issues that Zhang Junjie has to face.

The journey to the United States may not be smooth

According to market news, Bawang Cha Ji will be listed in the United States as early as the middle of this year, and is expected to raise US$200-300 million (approximately RMB 1.45-2.17 billion). Citibank and Morgan Stanley will be responsible for the listing.

In response to this, Bawang Cha Ji did not respond publicly. It is worth mentioning that this is the second time that Bawang Cha Ji has been reported to be planning to go public. As early as July 2023, Bloomberg reported that Bawang Cha Ji was seeking to go public in the United States, but the media responded at the time that "there is no clear IPO plan at present."

Since the beginning of this year, six tea chain brands, including Bawang Chaji, have been "queuing up" for overseas IPOs, including Chabaidao, which has already been listed on the Hong Kong stock market, Mixue Bingcheng, Guming and Shanghai Auntie, which have submitted prospectuses to the Hong Kong Stock Exchange, and Chayan Yuese, which has repeatedly been rumored to go public in Hong Kong. But this road may not be smooth. Nayuki's Tea's market value evaporated by 90% in two years after its listing, and Chabaidao's stock price plummeted by 30% in three days after its listing.

Industry insiders said that the acceleration of IPOs is related to excessive competition in the industry in the past two years: the tea beverage track has shifted from a high-growth period to a mature period. No matter how it is modified, it cannot conceal the low threshold of the tea beverage market. Many players can only increase the price and scale of the land to achieve further growth.

Moreover, in the world of freshly brewed milk tea, the trend is always changing. Before 2016, mainstream brands in the tea industry often favored "adding ingredients". After 2016, they began to add fresh fruits to tea, and "adding ingredients" quickly became "fruit tea".

After 2018, tea brands have begun to find a new outlet - health. In 2022, the outlet is blowing towards the use of "milk". In the field of freshly brewed tea, the outlet seems to really have "logic". Maybe the consumption logic is to like the new and dislike the old. Whoever flips over a brand today often has a "flash of inspiration".

Consumer loyalty is limited, excessive competition creates excessive bubbles, and "de-bubble" has begun. The leading brands that have completed the original accumulation of capital will be able to stay, and brands that have not yet established a firm foothold will be kicked out.

Therefore, as the new tea beverage industry enters a period of de-bubble, Bawang Cha Ji must make more money in the shortest time to be qualified to stay in the game.

Let’s compare Starbucks

Although the store scale of Bawang Cha Ji is currently only about 1/7 of that of Mixue Bingcheng, Bawang Cha Ji’s founder Zhang Junjie is still full of confidence.

On May 21, Zhang Junjie, founder of Bawang Cha Ji, announced a "small goal" to surpass Starbucks in Shanghai. "Six years ago, we said we would benchmark Starbucks in all aspects. This year, we have also set a small goal to surpass Starbucks China in terms of overall sales in China."

A tea beverage brand that has only been established for 7 years has to go head-to-head with Starbucks, which has been in China for 25 years, but the gap between it and Starbucks also objectively exists.

In terms of the number of stores, Bawang Chaji currently has only about 60% of Starbucks. In terms of public sales, the financial report shows that Starbucks' revenue in China in fiscal year 2023 will reach US$3 billion, or about RMB 21.953 billion. Bawang Chaji is also only about half of Starbucks China.

More importantly, as a newcomer in the industry, Bawang Cha Ji has a large gap with Starbucks in terms of brand accumulation, supply chain integrity, service system, customer stickiness, etc. Why does a brand that focuses on "high efficiency" have to compete with Starbucks?

To stand out in the crowded tea beverage market, Bawang Chaji did a lot of things right, but compared to challenging Starbucks, what it needs more is probably to become a better version of itself.

New tea beverage brands are lining up for listing, but the imagination space of this track is no longer as glorious as it used to be. The capital market is also becoming more cautious in accepting new consumer brands. The number of stores is not the only factor that investment institutions and investors vote with their feet. The importance of comprehensive strength and risk resistance is increasing day by day.

Luckin Coffee, the last competitor to Starbucks, made a successful bet; will Bawangchaji succeed? We will have to wait and see.

Daily Financial Report

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