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Is Mixue Group approaching a new inflection point?

(This article was written by TimelineTimelines and published by TMT Post with authorization)

By Timeline | Author: Lin Fei | Editor: Zhou Yi

Entering July, Mixue Group's performance in the capital markets has been nothing short of dramatic.

On July 9, amid a prolonged months-long downtrend, Mixue Group's share price continued to slide during trading, hitting an intraday low of HK$202.4 per share—breaking below its IPO price of HK$202.5. On July 10, Mixue Group’s stock remained volatile, briefly dipping to HK$201.2 before rebounding, ultimately holding above the HK$200 mark.

This marks Mixue Group’s darkest moment in the capital markets since its listing.

Since its listing over a year ago, Mixue Group’s total market capitalization has fallen from a peak of HK$234.8 billion to around HK$80 billion, a decline of more than 60%.

The good news is that after hitting a bottom on July 10, Mixue Group’s share price rebounded for three consecutive days, rising above HK$220 by midday on July 15—an increase of 10% from its previous low.

It must be emphasized that Mixue Group’s share price movements since its IPO have been heavily influenced by broader macroeconomic conditions—particularly given the global capital flows collectively pouring into AI and technology sectors in 2026, which has left the consumer staples segment broadly out of favor in capital markets. Under these circumstances, Mixue Group could hardly remain unaffected.

From a share price perspective, the fanfare, glory, and applause surrounding Mixue Group’s IPO have almost entirely faded—but one could also say it has now shed its superficial gloss and awaits a fresh valuation.

Against this backdrop, a key point worth watching is whether Mixue Group can identify a new, more compelling growth trajectory from its current business plateau—one that could capture renewed attention from capital markets.

From a business model perspective, Mixue is essentially a supply chain company that sells ingredients for milk tea. In its business model, while franchise stores are the primary channel through which the brand reaches consumers, they are more accurately described as downstream partners of the company.

Over the past three decades, Mixue’s growth logic has relied on expanding its downstream channel footprint. For every new bubble tea shop that opens in the market, it must sell at least 400 cups of tea daily just to break even. As long as these stores remain operational, Mixue can continuously supply raw materials; the more stores there are, the greater the economies of scale—and the more profitable Mixue becomes.

However, in terms of store footprint, by 2025 Mixue Bingcheng is projected to operate 44,000 stores domestically, while its overseas presence remains significantly smaller. Under these circumstances, expanding overseas has become virtually imperative for Mixue Group to seek further growth.

In fact, between 2020 and 2025, while aggressively expanding in the domestic market, Mixue also built its overseas presence from scratch, rapidly establishing operations across numerous regions.

Vietnam and Indonesia were the first two markets Mixue entered and are now the countries with the highest number of Mixue’s overseas stores. In Indonesia, Mixue Bingcheng became so popular that it turned into a fashion trend—Gibran Rakabuming Raka, then-mayor of Surakarta and eldest son of Indonesian President Joko Widodo, was even seen carrying a Mixue Bingcheng cup at city hall.

This successful start accelerated Mixue’s pace of international expansion.

In 2022 alone, Mixue Bingcheng entered six Southeast Asian countries and later expanded into Australia. Last year, it launched stores across the Pacific in New York, where locals were willing to queue for up to three hours for a lemonade priced under USD 2.

Yet this aggressive expansion has masked many underlying issues. According to its 2025 financial report, Mixue closed a net 428 overseas stores—a decline of 8.7%. This marks the first time since going global that Mixue has seen its overseas store count shrink.

In response, Yu Xin, CEO of Mixue Bingcheng’s Southeast Asia division, explained during an earnings call that early-stage stores in Indonesia and Vietnam needed ongoing improvements in areas such as site selection alignment and target customer focus. To ensure long-term profitability, the group initiated a systematic, proactive store optimization program.

In reality, the challenges faced in Indonesia and Vietnam closely mirror those in the domestic market: excessive store density leading to overlapping locations, an overly stretched franchise management radius, inconsistent quality control among some franchisees, and early-store review ratings一度 exceeding a 30% negative rate.

On the other hand, some of the emerging markets Mixue has recently entered appear significantly more challenging.

Meanwhile, in 2025, Mixue successfully entered the Americas, opening its first U.S. store in Hollywood, Los Angeles, followed by two simultaneous openings in New York. With ice cream priced at USD 1.19 and lemonade at USD 1.99, it continued its low-price strategy from the domestic market.

On the flip side, the Manhattan store in New York faces annual rent exceeding USD 340,000, with employee hourly wages ranging from USD 15 to USD 20, resulting in labor costs accounting for 35% of revenue. To comply with FDA standards, core ingredients must be sourced separately, causing logistics costs to surge by 30%. To break even, each store needs to sell an average of 800 cups per day—far higher than in China.

The U.S. market is not entirely unfamiliar with bubble tea; ** brands like Coco already have a base of loyal customers there. Mixue also has reference points for flavor profiles, yet some consumers still complain that its '200% sugar' option tastes 'as bland as water.'

These challenges are still confined to localization issues within a single market, which Mixue can address quickly by hiring local management teams and implementing region-specific operational strategies.

However, when it comes to supply chain management, operating across multiple countries simultaneously makes it difficult to achieve economies of scale in the short term. Even in relatively mature Southeast Asian markets, many raw materials are still shipped from China, let alone those destined for countries across the ocean like those in the Americas.

Regarding overseas growth in 2026, Yu Xin, CEO of the Southeast Asia region, expressed confidence in restoring net growth—but the ultimate outcome will depend on management’s speed, resolve, and capability in addressing challenges.

Beyond its flagship brand Mixue Bingcheng in the domestic market, Mixue Group is also expanding other business segments.

Mixue Group had long launched Lucky Coffee, a made-to-order coffee brand, and in 2025 acquired Fulu Home, a craft beer brand, attempting to replicate Mixue’s successful playbook in the coffee and fresh beer segments.

Like Mixue Bingcheng, both Lucky Coffee and Fulu Home follow a high-quality, affordable pricing strategy. Lucky Coffee’s price range is RMB 6–9, with 70% of its stores located in tier-three cities and below, adopting a 'rural encirclement of urban areas' approach to popularize coffee—a mildly addictive beverage—even in rural communities.

In 2020, when Mixue Bingcheng had just surpassed 10,000 stores, Zhang Hongfu set a goal: 'Build the Lucky Coffee brand and replicate another Mixue Bingcheng within five years.'

Lucky Coffee’s vision was admirable, but cultivating coffee acceptance among lower-tier city consumers requires more than slogans—it demands substantial subsidies, much like Luckin did in its early days. By the end of 2024, Lucky Coffee had only 4,600 stores nationwide, less than half of its target. In 2025, Mixue Group began mobilizing corporate resources to support franchisees, slashing franchise fees. At the time, the initial investment for a single Lucky Coffee store was approximately RMB 127,000—cheaper even than Kudi Coffee, whose stores were often leased on the ground floors of hotels.

In 2025, Lucky Coffee’s store count surged from over 4,000 to reach the 10,000-store milestone, barely meeting its target. However, just as the market anticipated Lucky Coffee’s rise, it added only 362 new stores in Q1 of this year—effectively reverting to square one overnight.

In February 2026, an open letter titled 'To Mr. Zhang: Lucky Coffee Franchisees Are Really at Breaking Point!' exposed cracks behind Lucky Coffee’s franchise model.

In the letter, franchisees bitterly complained about inadequate capabilities and poor attitudes from Lucky Coffee’s operational teams, flawed promotional and packaging strategies, severely imbalanced input-output ratios, market-detached tactics, and a lack of hit-product development from the R&D department. They even demanded that Zhang Hongfu personally step in to take over Lucky Coffee.

However, such a request was unlikely to be fulfilled, because Lucky Coffee’s biggest competitor isn’t Luckin or Cotti—it’s its own parent brand, Mixue Bingcheng.

In Zhengzhou, nearly 90% of Lucky Coffee outlets are located within the grid defined by Mixue Bingcheng stores. The most common drinks—lattes and Americanos—are also sold in Mixue Bingcheng stores, and at even lower prices than at Lucky Coffee.

In March 2026, Mixue Bingcheng began rolling out fully automated coffee machines across its national store network, backed by a dedicated investment of RMB 1 billion. The coffee beans were upgraded to freshly roasted beans with a 30-day shelf life, and milk was switched to chilled fresh dairy. An Americano now costs just RMB 5—RMB 0.9 cheaper than at Lucky Coffee.

Yet a deeper paradox remains: only consumers who genuinely want coffee will actively seek out Lucky Coffee—but those who do are likely to choose Luckin or other specialty coffee brands instead.

If the controversy surrounding Lucky Coffee stems from internal conflict, Fulu Jia franchisees are struggling to stay above the break-even line.

In October 2025, Mixue Group acquired a 53% stake in Xianpi Fulujia for RMB 297 million. At the time, Fulujia operated approximately 1,300 stores, primarily concentrated in Henan Province. Within six months, this craft beer brand had expanded to over 3,200 outlets.

Fulu Jia’s store locations are mainly in ground-floor retail spaces of established residential communities, street-front shops, and food-and-beverage districts, radiating outward from Henan to neighboring provinces.

Mixue’s expansion formula is clear: leverage Mixue’s extensive supply chain network—including five major production bases and 29 warehousing centers—to reduce production costs by 15%–20%, and cut beer transportation spoilage rates from the industry average of 8% to below 3%. Store footprints are minimized: a 15-square-meter tap station equipped with two beer dispensers and one refrigerated cabinet can open for as little as RMB 60,000. To attract franchisees, Fulujia waives all franchise fees for the initial three-year contract period.

However, in actual implementation, beer sales prove far more complex than those of milk tea or coffee.

Beer has low daily purchase frequency but experiences concentrated demand surges during major sporting events or holidays. Moreover, beer is highly seasonal, with peak demand in summer, which can strain supply chain capacity as it competes with other brands during that period.

“Right now, everyone feels that insufficient orders lead to slow inventory turnover, slow turnover leads to stale products, and stale products lead to even fewer orders,” wrote one franchisee on social media. “It’s a vicious cycle.”

At the group level, Mixue Bingcheng, Lucky Coffee, and Fulujie have formed a product matrix of 'morning coffee + evening beer + afternoon tea,' covering consumers’ beverage needs around the clock. However, while coffee and beer may appear similar to milk tea as beverages, their consumption logic is fundamentally different and cannot be directly mapped one-to-one.

To truly establish a second growth curve for Mixue Group in these two segments, the company needs a leader who deeply understands the operational context and can effectively mobilize resources—against this backdrop, Mixue Group appointed a new CEO.

In March 2026, during its earnings presentation, Mixue Group not only released its first full annual report since going public but also announced a rare leadership transition: founder Zhang Hongfu stepped down as CEO to become co-chairman, and Zhang Yuan, the former CFO aged 35, assumed the role of CEO.

This marked the first time in Mixue’s nearly 30-year history that leadership was handed over to a professional manager.

Zhang Yuan’s background is markedly different from that of the founder.

He holds a master’s degree in finance from Tsinghua University and previously worked at Bank of America Securities and Hillhouse Capital. He was instrumental in driving Mixue Bingcheng’s sole external fundraising round in 2020 while at Hillhouse. According to media reports, to secure the deal, Zhang Yuan—then under 30—personally flew to Zhengzhou at his own expense, stayed at Zhang Hongfu’s home to build trust, and championed the project internally at Hillhouse three times before it was finally approved.

Given this background, Zhang Yuan has largely transcended the conventional role of a 'professional manager.'

During the earnings call, Zhang Yuan halted the company’s multi-year push for rapid store expansion and accelerated growth, announcing instead that Mixue Group would focus on improving per-store operational efficiency going forward.

As the saying goes, a new leader makes bold moves early—and his first move targeted the supply chain.

In 2026, Mixue plans to invest RMB 1.6 billion in supply chain upgrades, including RMB 1.4 billion for deep transformation of its domestic supply chain and RMB 200 million for overseas production facility construction.

The core of the domestic supply chain upgrade involves upgrading fruit- and dairy-based ingredients—replacing ambient fruit jams and powdered milk with chilled fresh milk, fresh fruit, and coconut milk. In Q1 of this year, the flagship product 'Freshly Squeezed Orange' was already updated, swapping ambient fruit jam for frozen blended orange juice.

Whether viewed from taste or health perspectives, this supply chain upgrade is highly necessary—but some consumers have noticed price increases on certain Mixue Bingcheng products.

For example, the upgraded 'Fresh Orange Smash' quietly increased in price from RMB 6 to RMB 7. New products launched in 2025, such as Pomelo Lemon Tea and Kumquat Lemonade, directly used upgraded ingredients and were generally priced between RMB 7 and RMB 9. Some consumers noticed that delivery platform prices had already been RMB 1 higher than in-store prices; after the price hike, some fruit tea products now exceed RMB 10—approaching the price points of brands like Yi Dian Dian and Chabaidao—and even plain lemon water rose slightly from RMB 5 to RMB 5.2.

This price increase serves two purposes: on one hand, it offsets the higher costs resulting from supply chain upgrades; on the other, it boosts per-store profitability amid slowing growth, alleviating the pressure of the 'low-price, high-volume' model.

It should be emphasized that supply chain adjustments are an extremely complex process; from a commercial chain perspective, their impact on cost, product quality, and consumer perception will require more time to materialize.

The second priority lies in digitalizing store operations.

Zhang Yuan stated that last year’s food delivery price war exposed numerous weaknesses in the company, particularly in digital operations capabilities.

Mixue’s nearly 30 years of operational experience has almost entirely revolved around physical stores and in-person consumption. Its app and mini-program are only opened when users place orders, and its membership engagement initiatives have been virtually nonexistent. In contrast, Luckin Coffee, during its coffee price war with Kudi three years ago, was already capable of precisely pushing discount coupons to consumers near Kudi outlets.

One of Mixue’s core objectives for 2026 is to 'win back users' from food delivery platforms. Before the delivery price war, Mixue’s online order volume accounted for only about 10% of total sales; after subsidies, it rose to roughly 30%. Mixue plans to use its own app and mini-program as the main battlegrounds, conducting精细化 operations on its 430 million registered members through mechanisms like WeChat’s 'Shake-to-Discount' and exclusive new-product promotions to reduce reliance on third-party delivery platforms.

The third initiative involves leveraging the Xuewang IP to open large-format stores, shifting from 'selling products' to 'selling experiences.'

In January 2025, Mixue Bingcheng opened its first flagship store in its home base of Zhengzhou, covering approximately 400–500 square meters in a standalone two-story structure: the ground floor sells beverages, while the second floor houses the 'Xuewang Magic Shop,' offering IP-themed merchandise. This was not an isolated marketing stunt.

Before opening these large stores, Mixue had already produced some Xue Wang plush toys and snacks as merchandise, but they were merely placed on a separate shelf tucked away in store corners or occasionally prompted as add-ons during mini-program checkout to help customers meet minimum order thresholds.

Flagship megastores represent the culmination and elevation of Snow King merchandise. Customers don’t just browse—they also want to buy.

On one hand, a single flagship store can spark a wave of social media check-ins in its host city. If well-managed, this opening buzz can last several months to a year. For instance, the Zhengzhou headquarters flagship store attracted over 5.7 million visitors throughout 2025, generating approximately RMB 98 million in revenue, with IP merchandise accounting for more than 80% of total sales.

On the other hand, thanks to Snow King’s previously established down-to-earth brand persona, the average transaction value at flagship stores has risen from RMB 8–12 to RMB 25–35, and customer dwell time has extended from three minutes to 15–20 minutes. A single Snow King plush toy priced at several dozen yuan on the second-floor retail section yields profit margins equivalent to those of multiple cups of lemonade combined.

By the end of 2025, Mixue had rolled out flagship stores in 23 cities nationwide. In 2026, Mixue Group plans to open additional flagship locations in 12 key cities, including Shenzhen and Beijing, evolving from 'selling beverages' to 'selling experiences'—though how significantly this strategy will contribute to Mixue Group’s revenue and profitability remains to be confirmed by future financial reports.

Overall, as the group shifts its strategic emphasis from store count to per-store quality, Mixue Group now faces a critical internal tension: it must simultaneously defend its low-price market base while building a new growth engine through quality upgrades.

In short: after growing big, it must now grow strong.

This is no easy task, and it will take more time before results become visible in the financials.

Yet for Mixue Group, overcoming this hurdle is essential to enhancing corporate value—it is a required step on the path from 'growing big' to 'growing strong,' and a necessary milestone toward achieving its goal of becoming a century-old global brand.

To some extent, after several months of share price declines, whether Mixue Group under Zhang Yuan’s leadership can deliver a satisfactory performance in this strategic transition has become the central concern for capital markets—and the answer will ultimately be reflected in the company’s future stock price.

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