Bāwáng Chá Jī, which has been established for 8 years, is now preparing to go public on the US stock market. In the early hours of March 26th, Bāwáng Chá Jī, which has been rumored to be going public in the US multiple times, finally submitted its prospectus to the US Securities and Exchange Commission. To reach this step, Gǔ Mǐng took 15 years, Chábǎidào took 17 years, and Mìxuě Bīngchéng took 28 years. Only Nèixuě de Chá, which rushed to go public amidst the bubble in the new tea beverage industry, did it faster, using only 6 years. In the world of milk tea, Bāwáng Chá Jī is a dark horse that has caught up later.

B霸王茶姬 actively practices the green development philosophy, and the PLA straws it uses are specifically flat in shape with three smaller holes, also known as the "Triple-hole Straw." Moreover, reports in November 2023 showed that many well-known bubble tea brands, including霸王茶姬, began using the "Triple-hole Straw." Among the material types of the "Triple-hole Straw," PLA is one of them.

The "Triple Sip Straw" is overall flat and uniquely features three smaller holes. This design allows for precise control of liquid flow. When consumers drink beverages from Bawang Tea, whether it's bubble tea with ingredients like pearls or coconut jelly, or pure tea drinks, they won't experience choking due to fast flow or difficulty in sipping due to slow flow, significantly enhancing the ease and comfort of the drinking process. Additionally, when consumers sip through the "Triple Sip Straw," air enters the mouth along with the beverage. This gas-liquid mixture allows the aroma of the tea to more fully disperse in the mouth. Taking the signature "Bo Ya Jue Xian" (original leaf milk tea) as an example, the blend of milk, tea, and air enhances the layers of flavor, allowing consumers to more comprehensively and intensely experience the unique taste of the tea drink.

The expansion of Ba Wang Tea姬 is astonishing! At the end of 2022, it had only 1,087 stores, but a year later, this number jumped to 3,511, and by the end of 2024, it soared to 6,440. During the two years when the tea beverage market competition was fierce and overall growth slowed down, Ba Wang Tea姬 achieved a more than sixfold increase in store numbers. According to Red Catering big data, nearly 200,000 bubble tea shops across the country had to close in 2024, but Ba Wang Tea姬's prospectus revealed that in 2025, it plans to open 1,000 to 1,500 new stores in China and globally.

Not only is its expansion rapid, but the operational efficiency of CHAGEE is equally impressive. According to the prospectus data, in 2024, CHAGEE's average monthly sales per store reached 25,099 cups, nearly tripling from 8,981 cups two years prior. Among these, the top 30% of stores in terms of sales achieved an average daily sales volume of 1,300 cups of tea, more than three times the industry average. research reports indicate that CHAGEE's store cost recovery cycle is approximately nine months, with a store operating profit margin of 20%, ranking among the highest in the industry.

This remarkable expansion speed and operational efficiency have directly driven the rapid growth of revenue and profits for Ba Wang Cha Ji. In 2024, Ba Wang Cha Ji's annual GMV reached 29.458 billion yuan, a year-on-year increase of 172.9%; annual revenue amounted to 12.406 billion yuan, up 167.4% year-on-year; and annual net profit hit 2.515 billion yuan, with a net profit margin of 20.3%. The net profit growth rate surged by an impressive 213.3%.

Reviewing the development journey of Chagee, during its initial four years, it was still in the exploratory phase. However, the remarkable achievements it has attained today are largely the result of the relentless efforts in the subsequent four years. So, what strategies did Chagee employ to break through the fierce competition in such a short span of four years? This prospectus may well hold the secrets to how Chagee managed to stand out in the highly competitive red ocean of the tea beverage market.

The cheapest among the high-end, the most high-end among the franchises.

Before Chagee rose to prominence, the landscape of the tea beverage industry was clearly defined, with distinct factions.

Some brands focus on a franchise model, deeply penetrating lower-tier markets. In the sub-¥10 low-price segment, Mixue Bingcheng dominates overwhelmingly, building a formidable market barrier with its highly aggressive pricing strategy, with stores scattered like stars across the country. The ¥10 to ¥20 price range, however, resembles a fiercely competitive red ocean, with brands like Cha Bai Dao, Gu Ming, Hu Shang Ayi, Yi Dian Dian, and CoCo locked in a chaotic battle. These brands rely on long-term regional operations or the refinement of unique capabilities to barely maintain their competitiveness, each vying to outlast the others in this protracted war.

Another part of the brands adopts a direct sales model, with Heytea and Nayuki's Tea as typical representatives, targeting the high-end market, where product prices are above 20 yuan. First- and second-tier cities have become their core battlegrounds. In the past, franchise brands primarily profited by selling raw materials to franchisees, while direct high-end brands made profits from selling high-priced tea beverages. Both sides developed in their respective ecological niches until the emergence of Ba Wang Tea Ji, which broke the original balance of market power.

From the prospectus of Ba Wang Cha Ji, it positions itself as a premium freshly made tea shop, with the key criterion for distinguishing between premium and low-priced tea beverages being whether the average price per cup is below 17 yuan. Ba Wang Cha Ji's product pricing is strategically set within the range of 15 to 20 yuan, a precise pricing strategy that effectively targets the market gap between low-cost brands like Mixue Bingcheng and premium brands such as Heytea and Naixue's Tea.

In terms of franchise strategy, since its inception, Chagee has deliberately avoided direct competition with brands like Mixue Ice Cream that are deeply rooted in lower-tier markets. Instead, it has focused on higher-tier cities, targeting high-spending customer groups. According to the prospectus, by 2024, the number of Chagee stores located in second-tier and above cities reached 3,806, accounting for approximately 60.6% of the total. Since 2022, the proportion of stores in second-tier and above cities has consistently remained above 50%.

As the first point of contact for consumers with the brand, BaWang ChaJi adheres to the "three highs" principle in store location selection: high potential, high investment, and high returns. According to the prospectus, the Chinese ready-to-drink tea market is dominated by low-price brands, which tend to choose street-side shops to control operating costs. In contrast, BaWang ChaJi primarily locates in upscale shopping malls that gather high-end lifestyle and dining brands. This distinctive location strategy not only helps the brand achieve differentiated competition but also significantly enhances its brand image.

According to Narrow Door Dining Eye data, among the store types of Ba Wang Cha Ji (a tea brand), mall stores account for the highest proportion at 26.18%, with nearly 80% of these mall stores located on the first floor—the most expensive rental level. In terms of store size, a standard Ba Wang Cha Ji outlet covers an area of 60 to 80 square meters, with indoor seating for about 20 customers. Compared to brands like Heytea and Nayuki, which focus on fresh fruit tea and bear high procurement and labor costs (e.g., purchasing grapes and manually peeling them), Ba Wang Cha Ji positions itself as a purveyor of fresh milk tea made from original tea leaves. Its production process is simpler and more standardized, enabling higher profit margins. In terms of pricing flexibility, Ba Wang Cha Ji holds an advantage over Nayuki and Heytea, having preemptively captured the price range of around 20 yuan before the latter two brands lowered their prices.

The prospectus shows that as of December 3, 2024, among high-end freshly made tea beverage brands, Bawang Chaji has the largest store scale, occupying 20.3% of the market share. Bawang Chaji has cleverly adopted a differentiation competition strategy, highlighting its high-end attributes when facing franchise brands, and emphasizing price advantages when compared to high-end brands. It has successfully carved out its own market niche, truly achieving "affordable prices among high-end tea beverages, and high-end quality among franchise tea beverages."

In a mall in Huangpu District, Shanghai, the stores of Chagee and Starbucks are located next to each other. Source: Visual China Group

Breaking the paradox of expansion and quality control

While many tea drink brands are expanding their scale and recruiting franchisees everywhere, Basibucha's situation is quite different, with numerous franchisees lining up voluntarily, eager to obtain the franchise资格权. A franchisee revealed to the media that in popular areas such as Guangdong, Jiangsu, and Zhejiang, new franchisees wanting to secure a location have to go through a lottery queue. If the drawn number is towards the end, they often have to wait for another month or so.

Typically, high-end tea drink brands rely on brand premium pricing for profitability. Due to concerns about quality control issues potentially damaging their brand image under the franchise model, most of these brands opt for direct management, which inherently limits their expansion speed. However, for tea drink brands, scale is not only a key path to profitability but also a core element in building a competitive moat. The founder of Heytea, Zhang Junjie, recognized the importance of scale early on. He clearly stated in an interview: "The primary foundation in the bubble tea market is the effect of scale. Only by reaching a certain scale can one be qualified to compete in the market."

The dilemma faced by direct-operated brands is that the larger the scale, the higher the operating costs, ultimately making it extremely easy to fall into a loss-making predicament. If one wants to expand the scale, the franchise model seems to be an unavoidable choice. However, the challenge of the franchise model lies in how to ensure the management level and profitability of franchise stores, preventing them from negatively impacting the brand. For example, Nie Yunchen of Heytea previously held a cautious attitude towards franchising, believing that only when the brand's core is strong enough and cannot be weakened by franchisees, is it suitable to open up franchising.

Bāwáng Chájī has taken a unique approach by implementing extreme standardization in operations, achieving exceptionally high operational efficiency and successfully resolving the apparent contradiction between expansion and quality control. When entering new markets, Bāwáng Chájī adopts a strategy different from traditional tea beverage brands — “first establish a branch company, then open branches.” At the same time, they first open self-operated stores to accumulate sufficient local operational experience before gradually opening up franchising businesses.

In its early development, Chagee set relatively low thresholds for franchisees. In 2021, for example, opening a Chagee franchise required an investment of only 250,000 to 300,000 yuan. In some provinces, there were 100 slots offering free franchise fees, brand usage fees, and equipment subsidies, with decoration costs at only half of what they would later become. During this phase, Chagee attracted a large number of franchisees by simplifying the application process, such as quick approval of applications and the ability to open for business shortly after signing contracts. With the advantage of "low cost and quick return on investment," it rapidly expanded its store count from 200 to over a thousand, achieving its "initial accumulation."

In the continuous expansion process, to effectively avoid quality control and management issues caused by uneven franchisee quality,霸王茶姬 (Bawangcha Ji) innovatively introduced a托管模式 (trustee model). Nationwide, in all 32 provinces, municipalities, and autonomous regions, professional local support teams have been deployed. From store location selection, store decoration, supply chain management, to backend e-commerce operations, each link is fully managed by the brand party. The franchisees only need to provide the business location and the required funds.

As brand influence continues to expand,霸王茶姬 (Bawang Cha Ji) has become increasingly stringent with its franchise requirements. By 2024, the total cost to join Bawang Cha Ji will increase to over 800,000 yuan (including costs for decoration, equipment, etc.). The required shop area will be increased from 40 square meters to 60 square meters, with locations strictly limited to prime commercial zones. Shops located in basements or on high floors are explicitly prohibited, in order to reinforce the brand’s upscale positioning. Additionally, clear requirements have been set for franchisees regarding age, work experience, idle capital, and other factors. In 2023, the approval rate for joining the franchise was only 15%.

In terms of store operations, Chagee has greatly simplified its processes by leveraging full automation and digital technologies. The stores are equipped with fully automatic tea dispensers, tea concentrate espresso machines, and carbon dioxide bottle coolers. On their first day of work, new employees do not need to undergo three months of complex training; they simply need to scan a code to operate the fully automatic tea dispenser, enabling them to efficiently produce drinks according to the standard of "8 seconds/cup, 2‰ variation rate." Nowadays, as an employee of Chagee, the work mainly involves three simplified steps: taking orders, operating the automatic tea dispenser, and cup filling and packaging.

The automatic tea dispenser also features real-time data recording, which meticulously tracks the ingredient usage for each cup and the number of products dispensed, transmitting this data to the cloud in real time. This not only facilitates data statistical analysis but also helps optimize the upstream and downstream supply chains. According to the prospectus, CHAGEE has successfully implemented the "five online" management model, encompassing "product delivery online," "people online," "inventory online," "stores online," and "payments online." Once a store achieves full-chain digital online operations, its primary focus shifts to the final product delivery and providing high-quality service to consumers. This aligns with Zhang Junjie's vision, as he believes the core function of future stores will center on last-mile product delivery and creating a center for delivering exceptional user experiences.

● Part of the core data of Ba Wang Tea姬. Source: Prospectus

When standardization is taken to the extreme, the differences between franchise and direct management are minimized, ensuring that the profitability model of each store does not deform due to management levels.

The latest data from the prospectus shows that in 2024, Chagee's average monthly cup sales per store reached 25,099 cups, nearly triple the 8,981 cups from two years ago. Among these, the top 30% of stores with the highest sales averaged 1,300 cups of tea per day, more than three times the industry average. The average monthly GMV per store increased from 177,500 yuan in 2022 to 511,700 yuan in 2024, a growth of 188.2%.

In 2023 and 2024, the closure rates for Wang Bao Tea Princess were only 0.5% and 1.5%, respectively. According to the prospectus, in the first nine months of 2024, the closure rate for Gu Ming exceeded 4.5%, and for Mixue Ice City, it exceeded 2.8%. According to a research report released by Huahuan Securities in May 2024, Wang Bao Tea Princess has an average store area of 80 square meters and an average number of employees of 15, both of which are relatively high levels among mainstream tea and coffee shops. However, the payback period for a single store is about 9 months, and the operating profit margin for the stores is 20%, ranking among the top in the industry.

Only when franchisees make money can the brand make money. Through extreme standardization management, Wangbaicha Ji achieved a aggressive expansion of six times in two years via its franchisees, also allowing them to profit and queue up to open stores, thus achieving a "mutual benefit and win-win" situation in a certain sense.

Sold 600 million cups of Boya Jue Xian in three years

Almost every tea beverage brand needs a hit product. For Mixue Ice City, it's lemon water; for Heytea, it's succulent grapes; for Ba Wang Cha Ji, it's Bo Ya Jue Xian.

From January 1, 2021, to August 13, 2024, Ba Wang Cha Ji sold more than 600 million cups of Boya Absolute Chord.

This is a milk tea launched by Ba Wang Tea Ji in 2017, featuring a jasmine snow bud tea base with a strong tea flavor and light milk taste. Although it was born almost simultaneously with the brand, Bo Ya Jue Xian truly became a hit in 2023. Ba Wang Tea Ji's menu has undergone several adjustments over the years. In its early days, Ba Wang Tea Ji not only sold milk tea and cheese foam tea but also fruit tea, taro tea, and pure tea. At one point, the number of fresh fruit teas on Ba Wang Tea Ji's menu even surpassed that of milk teas.

B霸王茶姬 began streamlining its product line in 2021, pushing for a major product strategy. It first chose milk tea, as fruit tea was considered "doing business with young people," which is unsuitable for middle-aged and elderly groups. Milk tea has undergone longer market scrutiny and requires lower supply chain demands. Secondly, it selected Bo Ya绝弦 as the main promoted product. The jasmine tea base has high acceptance and popularity, and being less milky and more tea-like, it is not easy to tire of and can be addictive.

●霸王茶姬 store出品。Image source: VCG

Unlike many tea beverage brands that seek growth through product innovation and category expansion in fierce competition,霸王茶姬 (Bawang Tea姬) launched 14, 22, and 15 new products in 2022, 2023, and 2024, respectively, appearing exceptionally restrained compared to its peers. Even industry leader蜜雪冰城 (Mixue Bingcheng) rolled out 47 and 105 new products in the first nine months of 2023 and 2024, respectively.

Original leaf tea lattes have always been a core category for Ba Wang Tea姬. According to the prospectus, in 2022, 2023, and 2024, approximately 79%, 87%, and 91% of Ba Wang Tea姬's total GMV in the Chinese market came from its signature tea latte products, with about 44%, 57%, and 61% of the GMV coming from the three best-selling tea lattes.

Currently, the core menu of Ba Wang Cha Ji consists of five product lines with 19 products, significantly fewer SKUs compared to most tea drink brands. The most essential category is the tea latte, which includes three product lines: Tea latte, Teaspresso, and Teapuccino, corresponding to coffee's latte, Americano, and cappuccino.

The strategy of focusing on big-ticket items effectively reduces SKU complexity and raw material waste, ensuring the operational efficiency of the chain from the product level.

The招股书 also mentions that this core menu of Baron Tea Queen is "inspired by the menus of modern coffee chain stores." It aims to capture user mentality, enhancing consumer recognition and loyalty. Additionally, it enables the brand to achieve more concentrated, streamlined, and efficient supply chain management, as well as highly automated tea beverage production processes, ensuring product quality, consistency, and convenience, ultimately improving operational efficiency and service quality.

Lower costs, more efficient supply chains

The minimalist SKU and focus on best-selling products also allow Ba Wang Cha Ji to concentrate more on its supply chain. Zhang Junjie mentioned in a 2021 interview: "The only supply chain Ba Wang Cha Ji will focus on is tea leaves."

In the upstream procurement stage, unlike the diverse varieties and seasonal nature of fresh fruit tea, the ingredient list for Boya Juexian only includes tea soup, milk, and syrup, requiring only the procurement of milk, tea, and packaging materials. In 2024, Bawang Chaji will procure nearly 13,000 tons of original leaf tea, collaborating with over 20 high-quality tea factories nationwide, and has 2,700 acres of self-operated tea farms in Yunnan, Anxi, and other locations. For milk, different regions have different partners; for example, in the Sichuan, Chongqing, Jiangsu, Zhejiang, and Shanghai areas, they cooperate with Wei Chuan Milk, while in Yunnan they choose New Hope Fresh Milk, and in Guangxi, they select Huangshi Fresh Milk.

By the end of 2023, Wangcha Hero and Chatibude jointly established a packaging and supply chain company, focusing on collaboration rather than heavy asset investment. An investor once told the media, "Wang Xiao Kun has introduced and connected many of the supply chain resources that Wangcha Hero possesses."

In the midstream processing环节, Bawang Chajie has established tea processing plants in Chaozhou and Jiangmen, which is also for the purpose of standardization. Zhang Junjie once said, "The intermediate processing and blending环节 of tea can be standardized, achieving at least 90% stability." The tea broth and ingredients are pre-processed, and the stores only need to complete the final assembly, compressing the single cup preparation time to within 30 seconds.

In warehousing and logistics, Chagee has built an efficient logistics system with minimal capital expenditure. Chagee operates a two-tier warehousing system consisting of central and regional warehouses across 37 locations in China, enabling cold chain transportation and next-day delivery services to its stores. In 2024, logistics costs accounted for less than 1% of the total GMV in both China and overseas markets.

In terminal物料 management, Baiwang Cha Ji learned from Ruixing and established a digital central platform to monitor global store sales data in real time, dynamically adjusting raw material production and distribution to drive efficient supply chain operations with data. According to艾瑞咨询, during the same period, Baiwang Cha Ji’s inventory turnover days were approximately 5.3 days, the lowest among all ready-to-drink tea brands in China with over 1,000 stores.

The best storytelling tea drink brand

From the early days of drawing inspiration from luxury packaging designs to the recent Olympic Games, where they signed a group of athletes for sports marketing to emphasize the "health" concept, the importance of marketing to Ba Wang Chaji is self-evident. Within Ba Wang Chaji, marketing has always been on par with product development. In 2022, Zhang Junjie directly managed the brand marketing affairs of Ba Wang Chaji.

In 2023, the sales and marketing expenses of Ba Wang Chaji were 261.6 million yuan, accounting for 5.6% of the total net income. In 2024, this investment reached 1.1089 billion yuan, accounting for 8.9% of the total net income.

Regarding the effectiveness of this investment, the prospectus mentions several sets of data: Since October 2023, Ba Wang Cha Ji has ranked first in the social influence index among all ready-made tea drink brands in China. In 2024, among fresh tea drink brands with over 1,000 stores nationwide, Ba Wang Cha Ji ranked first in the number of posts, views, and total interactions on Xiaohongshu. Its keyword search index growth rate on Douyin in 2024 was the highest, reaching 234.5%. In 2024, it appeared on Weibo hot searches more than 50 times, ranking first in China's premium fresh tea drink industry, with cumulative hot search views exceeding 4.9 billion.

All of this investment is aimed at ingraining the concept of "Eastern Tea" in people's minds. From product naming (Bo Ya's Severed Strings, Gui Fu Lan Xiang) to packaging design, it avoids direct competition with similarly high-end brands like HeTea and Nayuki that focus on "urban fashion," instead emphasizing "low sugar, whole leaf tea," which aligns with consumers' health needs.

● Chinese tennis player Zheng Qinwen endorses Chagee. Image source: Visual China

Among the tea beverage brands queuing for an IPO, Bawang Tea Princess is also the only one that has chosen to go public in the United States.

Bàwán Chájī aims to tell a story of tea culture to the entire world. From the very beginning, when Zhang Junjie founded the company, he stated that they wanted to "serve consumers in 100 countries," aiming to become a global tea beverage brand. In its prospectus, it describes its mission as "gathering friends through tea, connecting every person's everyday with a cup of tea," and its vision as "driven by technology and innovation, dedicated to advancing the modernization of tea beverages."

Tea, along with coffee and cocoa, is one of the world's three major beverages. In the coffee sector, Starbucks is already the dominant player, while the tea category still seems to have significant room for imagination. Zhang Junjie once said that Ba Wang Tea姬 aims to "pixel-level" benchmark against Starbucks, making "tea drinking" more integrated into daily life, and, like Starbucks in the U.S., keeping prices not too high while improving quality. It appears that Ba Wang Tea姬 has indeed drawn considerable inspiration from the modernization of coffee: automatic tea dispensers can be compared to automatic coffee machines, and its products also have a one-to-one correspondence with coffee offerings.

As of the end of 2024, Chagee had a total of 156 overseas stores, covering regions including Malaysia, Singapore, and Thailand. The next target is the United States. According to media reports, Chagee began building a team in the U.S. in July 2023, with over 20 members. The first North American store is set to open in Los Angeles in April.

This story is also meant for the ears of the capital market. In the fiercely competitive domestic market, even a brand like BaWang ChaJi faces risks of slowing expansion and declining management standards, with limited foreseeable growth potential. However, the idea of emulating Starbucks to sell Oriental tea to the world presents an entirely new narrative that excites investors.

The success of Bawang Chaji lies not only in its wisdom of leveraging strengths and avoiding weaknesses, carving out its own differentiated path, but also in its timely gathering of valuable practices from the coffee and tea beverage industry. In Bawang Chaji, you can see the shadows of Starbucks, Chayan Yuese, Luckin Coffee, Chabaidao, Heytea, and Mixue Ice City.

Whether this "hexagonal fighter" and the oriental tea culture it represents can pass the test of the US stock market and consumers worldwide, the answer is not far from us.