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[Introduction] Shanghai Auntie, Gu Ming, Mixue Ice City, Hong Kong IPO application documents have all expired

China Fund News reporter Qiu Dekun

Tea beverage brands are “rolling on the market”, but can they continue to roll?

On August 14, the IPO application documents of Shanghai Auntie on the Hong Kong Stock Exchange expired. So far, the current application documents of the three tea beverage brands that applied for IPO on the Hong Kong Stock Exchange have all expired.

At the beginning of this year, Hong Kong stock IPO ushered in a wave of tea beverage brand applications.Mixue Bingcheng, Guming, Shanghai Auntie, Chabaidao and others have successively applied for IPOBut so far, only Chabaidao has been successfully listed.

According to analysis by people in the tea beverage industry, competition in the industry has been extremely fierce in recent years. Previously, it was "roll franchising", "roll new products", "roll design", "roll co-branding", and "roll prices". At the beginning of this year, "roll listing" became the new direction of business wars.

The problem is that the capital market doesn’t seem to like “drinking tea”. From their listing to the close of August 14, the cumulative declines in the share prices of Nayuki’s Tea and Chabaidao were over 90% and 50% respectively, and poor performance is expected in the first half of 2024.

The above-mentioned tea industry insiders pointed out that domestic tea brands are currently facing two major dilemmas: first, the homogeneous competition in the tea beverage track has entered a white-hot stage; second, under the background of valuation pressure, the cost-effectiveness of listing financing has decreased, and whether to go public has become a dilemma.

The three documents of "volume listing" are invalid

Since the beginning of this year, many leading domestic tea brands have reported plans to go public. In addition to Mixue Bingcheng, Guming, Shanghai Auntie, and Chabaidao applying for Hong Kong IPOs, Bawang Chaji has also been reported to be preparing for a US listing.

At the same time, the VC shareholders of the parent company behind Cha Yan Yue Se recently withdrew collectively, and it was speculated by the outside world that this was in preparation for a subsequent overseas listing.

The tea brands mentioned above are basically at the top of the domestic tea industry.

According to the list of the top ten tea beverage brands in 2023 released by Hongcan.com, Mixue Bingcheng, Heytea, Nayuki Tea, Guming, Chabaidao, Shuyi Herbal Jelly, CoCo, Shanghai Auntie, Bawang Tea Princess, and Chayan Yuese are on the list.

However, currently only Nayuki's Tea and Chabaidao are listed on the Hong Kong stock market. The Hong Kong stock IPO application documents of Mixue Bingcheng, Guming and Shanghai Auntie have all expired.

According to the rules of the Hong Kong Stock Exchange, if a company applying for a Hong Kong IPO has not made any progress within six months of submitting its application, it means that the processing period for its listing application has expired, but it can reapply to activate the listing process by updating its information.

Unlike Shanghai Auntie, whose Hong Kong stock IPO application documents have just expired, Mixue Bingcheng and Guming's Hong Kong stock IPO application documents expired in early July. As of August 14, the two tea brands have not activated the listing procedures.

In response to this, tea brands such as Shanghai Auntie and Bawang Cha Ji successively told reporters that they "had no comment" and "had not yet received relevant information from management."

The trend of tea brands going public may slow down. Tianlala previously planned to go public on the Hong Kong stock market in 2025, but its founder Wang Wei recently said that "given the current actual situation, the listing will have to be slow."

“Volume capital” overall cold

An investment banker analyzed to the reporter that the reason why many tea beverage brands pressed the pause button on their IPOs may be related to changes in their valuations.

Take Mixue Bingcheng as an example. Its previous A-share IPO application was valued at 64.96 billion yuan based on the planned issued capital and fundraising amount. After that, the market predicted that its valuation would exceed 70 billion yuan when it applied for an IPO on the Hong Kong stock market.

However, the poor performance of listed tea brands has provided a new valuation reference for tea brands that are planning to go public.

Currently, the tea brands listed on the Hong Kong stock market are Nayuki's Tea and Chabaidao. This year, many tea brands applied for IPO on the Hong Kong stock market, but only Chabaidao was successfully listed, making it the focus of attention of other tea brands.

Chabaidao's stock price fell below the IPO price when it was listed on April 23, 2024, and its stock price had fallen by more than 50% as of August 14. The company's market value once exceeded HK$23 billion at the beginning of its listing, but shrunk to HK$9.664 billion by August 14.

Nayuki Tea also had a similar situation. From its listing on the Hong Kong stock market on June 30, 2021 to its closing on August 14, 2024, its stock price had fallen by more than 90%. The company's market value has shrunk from over HK$32 billion at the beginning of its listing to the latest HK$2.38 billion.

The attractiveness of tea brands to capital is weakening. According to the "China Catering Investment and Financing Report 2023", from January to August 2023, the financing amount of China's tea industry fell by 64.7% year-on-year. The latest financing time of leading tea brands such as Mixue Bingcheng, Guming, and Chayan Yuese all stopped in 2021.

Taking Cha Yan Yue Se as an example, it completed four rounds of financing from the beginning of 2018 to the end of 2021. The financing parties included 5Y Capital, Yuansheng Capital, Source Code Capital, Shunwei Capital, and Tiantu Capital. There has been no relevant information on financing since then.

People in the tea beverage industry pointed out that in recent years, competition in the tea beverage industry has continued to intensify, causing capital to become cautious about the industry, and the valuations of major tea beverage brands have also come under pressure.

Southwest Securities released a research report saying that the investment threshold of the ready-made tea beverage industry is low and it is easy to achieve economies of scale, but there are problems such as serious product homogeneity, low consumer conversion costs, and difficulty in establishing solid brand barriers.

“Scale-up” financing is hindered

People in the tea industry said that tea brands are "rolling up IPOs" to raise funds in order to "roll up scale". Now that many tea brands have pressed the IPO pause button, it may affect their subsequent daily operations and expansion plans.

Gu Ming mentioned in its prospectus that the company's cash and cash equivalents, expected cash flow from operating activities and expected net proceeds from the IPO can support at least 12 months of operations, but continued growth will still require additional financing.

Source: Gu Ming IPO prospectus

Many tea brands are constantly seeking financing, mainly to seize market share. At present, tea brands are collectively rolling up the scale and price, and "franchising, 10,000 stores, and low prices" have become the main theme of competition in the tea industry.

At present, many leading tea brands have proposed the "10,000-store plan". Among them, Cha Baidao's number of stores will expand from 5,070 at the end of 2021 to 7,927 in February 2024, mainly franchise stores.

In its prospectus, Cha Baidao stated that if it fails to effectively compete with other leading players or win the competition, it will have a significant adverse impact on the company's operating performance, financial condition and business prospects.

As the first tea beverage stock on the Hong Kong stock market, Nayuki's Tea has also felt the pressure of competition in recent years. It launched the "Partner Plan" to choose the franchise model, entered a new stage of "direct operation + franchising" dual-wheel drive, and quickly moved towards the sinking market.

For this, Chabaidao and Nayuki's Tea both paid a price in their short-term performance.

In the first half of 2024, Cha Baidao expects its adjusted net profit to decline by no more than 36.45% year-on-year, while Nayuki's Tea expects its adjusted net profit to be a loss of approximately 420 million to 490 million yuan.

Recently, Cha Baidao responded that in the first half of 2024, the company has increased its support policies for franchisees and preferential policies for the sale of equipment and goods, and increased overall market investment costs to cope with the impact of changes in the external environment on consumer habits.

Data released by Frost & Sullivan showed that the market size of China's new-style tea shops exceeds 200 billion yuan, but intensified industry competition will lead to a slowdown in growth. The average annual compound growth rate is expected to be 15.4% from 2024 to 2028, while the average annual compound growth rate from 2018 to 2023 will be 25.2%.

The above-mentioned tea industry insider said that some tea brands have already closed their stores. Some tea brands that do not have competitive advantages will be eliminated by the market if they cannot obtain continuous financing.

"Overseas" requires financing channels

To sum up the purpose of many tea beverage brands applying for IPO on the Hong Kong stock market, most of them explicitly mentioned that it would help them expand overseas markets.

Taking Mixue Bingcheng as an example, it plans to use part of the funds raised from its Hong Kong IPO to build an international supply chain platform to meet the needs of overseas consumers and market trends and effectively support its globalization strategy.

Source: Mixue Ice City IPO prospectus

Mixue Bingcheng said that the company's future development strategy is to consolidate its leading position in China's ready-made beverage industry and actively expand overseas markets.Among them, the company will continue to focus on deepening its presence in the Southeast Asian market and explore other markets in due course.

As of September 30, 2023, Mixue Bingcheng has opened approximately 4,000 stores in 11 countries overseas.

In the context of fierce competition in the domestic tea market, tea brands have turned their attention to overseas markets. For example, with the help of the global influence of the Paris Olympics, Bawang Chaji and Heytea have opened stores at the "gate of the stadium".

At the same time, Cha Baidao recently released its overseas results, showing that its brand has opened eight stores in four cities overseas.

However, domestic tea brands need to deal with many problems when going overseas. People in the tea industry point out that the industry has the characteristics of low investment threshold and easy to achieve scale effect, which makes it easy for overseas competitors to quickly imitate it. At present, some overseas local tea brands have emerged.

However, overseas expansion requires a lot of financial support. Mixue Bingcheng said that compared with the initial planned investment or the investment required in the Chinese market, the company may need to invest more in advertising and marketing activities to build brand awareness in overseas markets.

At present, the question that tea beverage brands such as Mixue Bingcheng need to answer is how to ensure their competitiveness in overseas market expansion in the future after pressing the pause button on Hong Kong stock IPOs.

Editor: Joey

Review: Xu Wen

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