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Produced by Radar Finance Hongtu | Edited by Meng Shuai | Deep Sea

In its first capital market review after its listing, Cha Baidao will hand in a report card showing an expected net profit decline of no more than 63.03% in the first half of the year.

Faced with this unsatisfactory report card, the capital market responded quickly. On August 12, Chabaidao's stock price fell sharply. As of the close of the day, Chabaidao's stock price fell 12.38% from the previous trading day.

Regarding the "change of face" in its performance in the first half of the year, Cha Baidao explained that it was mainly due to the impact of changes in the external environment on consumer habits, the company's increased support for franchisees, and an increase in overall market investment costs.

As a new tea brand born in 2008, Chabaidao has been around for more than a decade. Starting from the first store opened in Chengdu, Chabaidao now has more than 8,000 stores across the country. It is worth mentioning that most of Chabaidao's stores are franchise stores.

As the founders of this brand, Wang Xiaokun and Liu Weihong have absolute control over Chabaidao. Thanks to the rapid development of Chabaidao, the two were listed on the "2023 Hurun Rich List" with a fortune of 14.5 billion yuan.However, as Cha Baidao has encountered setbacks in the capital market since its listing, the value of the corresponding shares of Cha Baidao held by Wang Xiaokun and Liu Weihong has fallen below 10 billion yuan.

In fact, the booming new tea beverage market in recent years has not only created two wealthy people, Wang Xiaokun and Liu Weihong. According to incomplete statistics from Radar Finance, the helmsmen behind Nayuki's Tea, Mixue Ice City, Heytea, and Shuyi Herbal Jelly have also been included in the Hurun Billionaires List.

However, the new tea beverage market seems to be booming, but the competition and challenges behind it cannot be ignored. The wealth accumulated by some of the wealthy people mentioned above has shrunk to varying degrees in recent years.

For example, the wealth of Heytea founder Nie Yunchen has shrunk in recent years. At the same time, as the first player in the new tea beverage track to enter the capital market, Nayuki's Tea's performance in the capital market was not satisfactory. It suffered a break on the first day of listing and its stock price continued to be sluggish, which also brought a considerable impact on the wealth of the founders Zhao Lin and Peng Xin.

Chabaidao's first report after listing, net profit dropped by more than 60%

Tianyancha data shows that the operating entity of Cha Baidao is Sichuan Baicha Baidao Industrial Co., Ltd., which was established in 2020. It is a member of Sichuan Tongchuang Gongjin and is located in Chengdu, Sichuan Province. The company's registered capital is 147.7634 million yuan, exceeding 99% of its peers in Sichuan Province. The paid-in capital is 132.9871 million yuan, and it has completed equity financing in 2024.

After ringing the bell for listing on the Hong Kong Stock Exchange in April this year, Chabaidao submitted its first performance forecast after listing on August 9. However, unlike the joy when it was just listed a few months ago, the report submitted by Chabaidao this time is difficult to satisfy the outside world.

Based on the preliminary assessment made based on the Group's unaudited consolidated management accounts for the first half of the year and the currently available information, Cha Baidao expects the Group to record a net profit of approximately RMB220 million to RMB250 million in the first half of the year, a decrease of no more than 63.03% from the net profit of approximately RMB595 million in the same period last year; and it expects to record an adjusted net profit of approximately RMB380 million to RMB410 million, a decrease of no more than 36.45% from the adjusted net profit of approximately RMB598 million in the same period last year.

Radar Finance noticed that in fact, long before its listing, the growth rate of Chabaidao's net profit had shown a gradual downward trend.From 2021 to 2023, Chabaidao recorded annual profits of 779 million yuan, 965 million yuan, and 1.151 billion yuan respectively. During this period, Chabaidao's profit growth rate dropped from 226.91% in 2021 to 23.92% in 2022, and further dropped to 19.28% last year. In the first half of this year, Chabaidao's net profit growth rate turned directly negative.

Chabaidao gave its own explanation for the decline in adjusted net profit in the first half of the year in the announcement. The company's board of directors believes that the main reasons include taking into account the impact of changes in consumer habits due to changes in the external environment, the company's increased policy support for franchisees in the first half of 2024, the preferential sales of goods and equipment to franchisees, and the increase in overall market investment costs.

In the profit warning announcement, Chabaidao also emphasized that the Group's current operating conditions remain stable and business operations are progressing in an orderly manner. Based on the preliminary assessment of the Group's unaudited consolidated management accounts for the first half of the year and currently available information, the Board of Directors believes that the Group's overall financial position and operations remain sound and is confident in the Group's long-term growth and development.

Although the board of directors expressed its optimism about the company's future in the announcement, investors did not seem to be satisfied with the answer. Perhaps affected by the performance forecast, Chabaidao's stock price subsequently suffered a sharp drop. On August 12, Chabaidao's stock price fell 12.38% from the previous trading day, closing at HK$6.3 per share.

On August 13, Chabaidao's share price hit a low of HK$5.4 per share. By the close of August 26, Chabaidao's market value was HK$9.22 billion.

It is worth noting that in June this year, Chabaidao announced that it would distribute an annual dividend of 0.28 yuan per share in 2023. However, more than a month after the shareholders' meeting passed the proposal, Chabaidao announced that, taking into account the recent changes in the external environment, the company's board of directors has reviewed and approved the cancellation of the distribution of the 2023 annual dividend, and will retain such cash resources for the company's daily business operations.

Regarding the decline in profits and the cancellation of dividends, a media outlet called Chabaidao as an investor. A person from Chabaidao said that in view of the fierce competition in the current consumer environment, the company has transferred part of its deserved profits to franchisees in the form of support, aiming to help them cope with challenges and ensure the continued stable operation of the stores.

As for the decision to cancel the dividend, the person said that the cancellation was not due to the subjective will of the company's management, but because the company was subject to multiple regulatory processes and was stuck in the process, and dividends will be resumed in the future. The aforementioned person also revealed that the company currently has sufficient cash flow and will have financing in the future.

A couple born in the 1980s started a business together and once made it onto the rich list with a wealth of 14.5 billion yuan

Cha Baidao, which now has stores all over the country, is backed by a couple born in the 1980s. The story of how Wang Xiaokun and Liu Weihong founded Cha Baidao began in 2008. At that time, Wang Xiaokun, who was in his 20s, opened a milk tea shop with an area of ​​about 20 square meters next to Wenjiang No. 2 Middle School in Chengdu. In this way, the first Cha Baidao was officially launched in Chengdu, which is known as the "Land of Abundance".

At first, the store mainly sold powdered milk tea. Although it was small in scale, it quickly won the love of students around it with its preferential prices and careful management. With the continuous changes in the market and the increasing diversification of consumer demand, Wang Xiaokun keenly realized that traditional brewed milk tea could no longer meet market demand. So he decisively transformed and shifted his focus to the field of freshly made milk tea. In 2010, he officially registered the "Cha Baidao" trademark, opening a new chapter in brand development.

In 2016, Chabaidao reached an important turning point. In that year, Wang Xiaokun and his wife decided to upgrade their stores, determined the brand positioning of "fresh fruit and Chinese tea", and began branding operations. This strategic adjustment not only made Chabaidao stand out among many tea brands, but also laid a solid foundation for its subsequent rapid development.

In the same year, Chabaidao opened its franchise business in Chengdu, and the number of stores increased rapidly in a short period of time. In 2018, Wang Xiaokun and his wife decided to promote Chabaidao's franchise business nationwide. After years of development, Chabaidao's footprint has now spread across most parts of the country.

As the founders of Chabaidao, Wang Xiaokun and Liu Weihong have absolute control over Chabaidao. According to the prospectus previously submitted by Chabaidao,Before the listing, Wang Xiaokun and Liu Weihong directly held 18.02% and 5.74% of the shares of Cha Baidao respectively.

Wang Xiaokun holds 0.48% of Chabaidao’s shares through the employee incentive platform Tongchuang Gongjin. The two directly own 84.89% of Hengsheng Herui’s shares through Chengdu Jinbaisen, and Hengsheng Herui directly holds 67.68% of Chabaidao’s shares. Wang Xiaokun, Liu Weihong, Chengdu Jinbaisen, Hengsheng Herui and Tongchuang Gongjin constitute a group of controlling shareholders. Based on this calculation, Wang Xiaokun and Liu Weihong and their spouses directly and indirectly hold 81.69% of Chabaidao’s shares.

In the "2023 Hurun Rich List" released by Hurun Research Institute last year, Wang Xiaokun and Liu Weihong made it onto the list with a fortune of 14.5 billion yuan. In the "2024 Hurun Global Rich List" released this year, the wealth of Wang Xiaokun and Liu Weihong remained at 14.5 billion yuan.

However, according to Cha Baidao's current market value of HK$9.22 billion, the value of the shares held by Wang Xiaokun and Liu Weihong is less than 10 billion.

According to the prospectus previously submitted by Cha Baidao, as of the end of 2023, the number of Cha Baidao stores reached 7,801.Specifically, the number of Cha Baidao stores in various city tiers is distributed relatively evenly.

Among them, 10.6% of Cha Baidao's stores are located in first-tier cities, 26.9% of its stores are located in new first-tier cities, 20.9% of its stores are located in second-tier cities, 19.4% of its stores are located in third-tier cities, and 22.2% of its stores are located in fourth-tier cities and below.

Judging from the distribution of business formats of the stores, as of the end of last year, the number of Cha Baidao stores in shopping malls, communities, and other business districts accounted for 37.3%, 28.6% and 34.1% of its total stores respectively.

From the perspective of store model, most of Cha Baidao's stores are supported by franchisees. As of the end of 2021, 2022 and 2023, there were 5,070, 6,352 and 7,795 franchise stores in Cha Baidao's store network, accounting for more than 99% of the total number of Cha Baidao stores in operation during the same period.

According to data from Zhaimen Canyan, as of now, Cha Baidao has a total of 8,560 stores across the country, ahead of a number of brands including Shanghai Auntie, Tianlala, Shuyi Herbal Jelly, Yihetang, Bawang Cha Ji, and Heytea. In the same market, it is second only to Mixue Bingcheng's 32,404 stores and Guming's 9,506 stores.

However, the business model that relies too much on franchise stores has also planted certain hidden worries for Cha Baidao. Cha Baidao has been involved in food safety scandals several times before. At present, consumers often file complaints to Cha Baidao on the Black Cat complaint platform due to food safety, service attitude and other issues.

Is it difficult to continue the myth of mass wealth creation in the new tea beverage sector?

In recent years, the popularity of the new tea beverage market has continued to rise, and its market size has continued to expand like a snowball, demonstrating unprecedented vitality and prosperous development.

According to the data from the "2023 New Tea Drink Research Report" jointly released by the New Tea Drink Committee of the China Chain Store Association and the Meituan New Catering Research Institute,Last year, the scale of the new tea beverage consumption market was close to the 150 billion yuan mark and was expected to reach 149.8 billion yuan.

What is even more remarkable is that by 2025, the market size is expected to reach a new high, exceeding 200 billion yuan, heralding the unlimited potential and broad prospects of the new tea beverage industry.

In terms of the number of stores, according to incomplete statistics, the total number of new tea beverage stores in operation as of August 31, 2023 was approximately 515,000, an increase of more than 36% from 378,000 at the end of 2020.

In this prosperous scene, the new tea beverage industry has also created many billionaires. In addition to the above-mentioned founders of Cha Baidao, Wang Xiaokun and Liu Weihong, the brothers Zhang Hongchao and Zhang Hongfu of Mixue Bingcheng also made it to the "2024 Hurun Global Rich List" again this year with a wealth of 28 billion yuan respectively. Their ranking is higher than that of Wang Xiaokun and Liu Weihong, and they directly entered the list at 880th place. However, compared with the previous year, their ranking dropped by 130 places.

Other tea drink tycoons who also made it onto the 2024 Hurun Global Rich List include Nie Yunchen and Wang Bin, who are the owners of new tea drink brands HEYTEA and Shuyi Herbal Jelly respectively. Nie Yunchen has been on the list for many consecutive years, while Wang Bin is on the list for the first time. The two ranked 2750th and 2895th on the overall list with a wealth of 8.5 billion yuan and 8 billion yuan respectively.

However, Radar Finance found that Nie Yunchen, who created the Heytea brand, has seen his wealth shrink in recent years. Compared with the 10 billion yuan he first made on the Hurun Global Rich List in 2022, Nie Yunchen's wealth has decreased by 1.5 billion yuan this year.

In addition, Nayuki's Tea, which took the lead in entering the capital market, sent its founders Zhao Lin and Peng Xin to the Hurun Rich List as early as 2021. Zhao Lin and Peng Xin ranked 647th on the list with a wealth of 11 billion yuan that year.

However, as the only two listed companies in the new tea beverage market that have landed on the capital market, Nayuki's Tea and Chabaidao have similar tragic fates. Both suffered the embarrassing situation of breaking the issue price on the first day of listing. Since its listing, Nayuki's Tea's stock price has fallen by 92.47%, which is even worse than the nearly 60% drop of Chabaidao since its listing.

As Nayuki's Tea was not well received in the capital market, the wealth of Zhao Lin and Peng Xin was also affected. In the 2022 Hurun Rich List, the wealth of the couple has dropped to 5.5 billion yuan, which is half of the previous year. In last year's Hurun Rich List, Zhao Lin and Peng Xin were not even on the list.

While the stock price performance is not ideal, Nayuki's Tea is also facing more severe performance pressure than Cha Baidao. From 2018 to 2022, Nayuki's Tea failed to make a profit for five consecutive years, and during this period, Nayuki's Tea's cumulative losses exceeded 5.3 billion yuan.

Last year, Nayuki's Tea briefly tasted profitability, recording an annual profit of 11 million yuan. But in the first half of this year, Nayuki's Tea is expected to record an adjusted net loss of about 420 million to 490 million yuan again, falling back into the quagmire of losses.

Some analysts believe that the shrinking wealth of many wealthy people in the new tea beverage market is the result of the combined effect of multiple factors.As the market becomes increasingly crowded, brands have to increase their investment in product development, marketing, and store expansion in order to compete for a place, which not only increases the financial burden of enterprises, but also puts their performance under increasing pressure. These performance fluctuations are directly reflected in the capital market, triggering a reassessment of brand value by the outside world, which in turn has a certain impact on the personal wealth of the helmsman.

As far as the new tea beverage market is concerned, the entry threshold of the entire industry is relatively low, and the product production process is relatively simple, which is easy to be imitated and copied by other brands, resulting in the phenomenon of product homogeneity in the market becoming more and more serious. This homogeneity weakens consumers' loyalty to brands and makes it easy for consumers to frequently switch brands driven by external factors such as price and promotion, further affecting the brand's revenue and profits.

In addition, the double-edged sword effect of the franchise model is particularly evident in the new tea beverage market. Although it has helped brands achieve rapid expansion and scale development, the franchisee management problems that follow cannot be ignored. With the surge in the number of franchise stores, the conflict of interest between the brand headquarters and franchisees has become increasingly prominent, and the risk of illegal operations and damage to the brand image has also increased. This not only tests the brand's management and control capabilities, but also poses a potential threat to the brand's long-term stable development, which in turn makes capital more cautious about new tea beverage brands.