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Cha Baidao, which has been listed for three months, issued a profit warning.

From January to June, the company's net profit was 380 million to 410 million yuan, a year-on-year decline of 36.45%. The management attributed this to the impact of the external environment and concessions to suppliers.

This tea dark horse from Chengdu was founded by Wang Xiaokun and Liu Weihong. In 16 years, it has rapidly expanded from a small street milk tea shop to more than 8,000 stores.

In late April, the Wangs had their highlight moment, being the first to launch freshly brewed tea drinks on the market. Cha Baidao, which is positioned in the mass price segment, faces fierce competition.

As of August 16, the market value of Cha Baidao was approximately HK$10 billion, down more than 60% from the time of issuance. However, this did not hinder the couple's pace of expansion.

Land grabbing

The Wang couple continued to expand their territory.

Data from Zhaimen Canyan shows that the number of Cha Baidao stores has exceeded 8,500, an increase of nearly 500 stores in four months compared to the 8,016 stores when it went public in April.

Franchise stores account for the majority, with 7,921 stores as of the end of 2023, while there were only 6 directly-operated stores during the same period.

According to Sullivan, in terms of 2023 retail sales, Cha Baidao ranked third in China's freshly brewed tea drinks, with a share of 6.8%.

Among the top two, the franchise fee for Mixue Bingcheng in provincial capital cities is about 210,000 yuan, Guming is around 230,000 yuan, and Cha Baidao is as high as 300,000 yuan.

"Increase policy and financial support for franchisees." Wang Xiaokun's recruitment of allies has, to a certain extent, caused a decline in net profit.

"As rents rise, we are optimistic about the 'win-win' strategy of giving concessions to franchisees." Zhu Danpeng, a Chinese food industry analyst, told reporters.

The site selection is also important.

"The area under protection is within the range of 50-400 meters, and specific details require on-site survey by staff." The customer service team of Cha Baidao told reporters that the average gross profit is as high as 62%-65%.

But milk tea is hard to sell.

“Costs are increasing and sales are stagnant.”

A franchisee revealed to the "21CBR" reporter that his store's sales have returned to 2019 levels, rent and labor costs are still rising, and the gross profit is 52%.

It was disclosed that the average daily sales of each store dropped from 7,414.1 yuan in 2021 to 6,887.2 yuan last year, equivalent to 526.9 yuan less per day.

During the same period, the average store sales volume decreased from 163,000 cups to 143,000 cups.

Another franchisee admitted that whether or not to make money depends on the location. "The market is generally saturated, but there are still opportunities in the Northeast."

The reporter asked Cha Baidao about the latest franchise preferential policies, but no reply was received as of press time.

Qichacha shows that Wang Xiaokun and Liu Weihong hold a total of 82.73% of the shares and are the actual controllers of the company. Based on the closing stock price on August 15, the couple's net worth is about 7.75 billion yuan.

Data shows that from 2018 to 2023, the compound growth rate of China's ready-made tea beverage industry will reach 25.2%, 20 percentage points higher than soft drinks.

The wind will blow for a while longer.

Different play styles

The Wang couple made many alliances and earned 231 million yuan in royalties and franchise fees last year.

The purchase of equipment and milk tea raw materials by franchisees is Wang Xiaokun's main source of income. In 2023, "sales of goods and equipment" contributed 5.419 billion yuan.

In order to differentiate themselves, the Wang couple started with "brand image".

In April last year, they changed the English name of Cha Baidao from "chabaidao" to "ChaPanda", and the trademark was also changed from panda ears to a more intuitive giant panda image.

Earlier, the two launched the "Ding Ding Cat" panda IP to strengthen the regional characteristics of Chengdu.

"The level of commercial rent can directly affect gross profit margin by more than 30%, especially in first- and second-tier markets," said Zhu Danpeng, a Chinese food industry analyst.

Chabaidao avoids shopping malls where most of its peers are located, and takes communities as its main battlefield. Data shows that the proportion of stores located in residential areas reaches 40%.

As the number of stores increased, the difficulty of management also increased. Its franchisees were once exposed for using overnight or expired ingredients.

"(After the incident) the headquarters has increased its management of the store." A clerk told reporters.

He gave an example, the company clearly required that small ingredients cannot be left overnight, and a special video needs to be recorded when pouring out the small ingredients, "Fruits require visible freshness."

Another sales representative said that all kinds of fruits, canned materials, straws and forks are distributed by the company. Among them, fruits are basically delivered on the same day to ensure freshness.

For timeliness considerations, Wang Xiaokun formed a takeaway team in 2018, and the takeaway orders placed at franchise stores were delivered by the headquarters.

In 2023, the revenue of the takeaway channel will increase from 6.114 billion yuan in 2021 to 9.982 billion yuan, with online sales accounting for nearly 60%.

Correspondingly, the offline stores are mostly 30-100 square meters in size, and the front desk mainly provides take-out and self-pickup services.

"Reducing store investment costs can reduce store closure rates," said an industry insider.

Cultivate inner strength

Cha Baidao's development is accelerating rapidly, which is in sharp contrast to its early days.

In 2008, the Wangs opened their first store near Wenjiang No. 2 Middle School in Chengdu. In 2016, the number of stores exceeded 100, and most of them were concentrated in Chengdu.

With the emergence of new stars in the tea beverage industry, Wang Xiaokun realized the importance of brand expansion. In 2021, he reorganized the company structure, and supply chain management became a top priority.

In the same year, Boss Wang established a biodegradable packaging product factory, a tea factory and a juice factory.

By the end of last year, Chabaidao had 21 multi-temperature warehouses with a total area of ​​about 80,000 square meters.

The Wangs also worked with a third party to build a delivery fleet, opening up 41 night delivery routes in Beijing, Chengdu and other places, ensuring that 97% of stores are delivered at least twice a week, and daily delivery has been achieved in core cities.

In 2023, the company's R&D expenses were 16.4 million yuan, which was used for beverage research and development. It is said that more than 70% of Cha Baidao's beverage ingredients are self-developed.

In terms of products, there are three categories: classic, seasonal and regional.

Among them, classic tea drinks account for 40% of the total SKUs. Best-selling products include mango sago, signature taro ball milk tea, etc., with price tags ranging from 6 to 22 yuan, with an average price of 13.9 yuan.

Seasonal products feature seasonal ingredients, flavors and themes, such as "Wujimahei" and "Green Grape Jasmine"; regional products focus on local fruit characteristics, such as "Yellow Peel Lemon".

The latter two categories have slightly higher prices, ranging from 12 to 26 yuan, with an average selling price of 16.6 yuan.

Wang Xiaokun and his wife also had to deal with the price war.

In the Cha Baidao ordering app, the homepage states discounts such as "Members can get free upgrades to all drinks on Wednesdays" and "Join the community and drink milk tea for 9.9 yuan every day."

For example, the total membership price for two cups of Laoyan lemon tea and Yanyan ice cream is 16.9 yuan, an average of 8.4 yuan per cup.

In the tide of tea drinks going overseas, Boss Wang is not lagging behind.

In January, Cha Baidao’s first overseas store started trial operation in Seoul, South Korea.

"South Korea is a country with relatively high entry barriers and strict food and drug testing, which will help us enter high-entry countries in the future. There are many Southeast Asian tourists, which will be conducive to expanding the market in the future," said management.

Currently, Cha Baidao has opened 8 stores overseas, including 4 in South Korea, 2 in Thailand and 2 in Australia.

Freshly brewed tea has become a red ocean, and the Wang couple are also looking for a broader world.