How a Bubble Tea Chain Became China's Largest Restaurant Brand

In 1997, a college student in Zhengzhou, China, named Zhang Hongchao opened a small shop selling shaved ice and homemade lemonade. He named it Mixue Bingcheng, which translates roughly as "Honey Snow Ice City." Today, Mixue operates more than 45,000 stores across China and twelve other countries, making it the largest restaurant chain in China by location count and one of the largest in the world. Its 2024 IPO valued the company at approximately 12 billion dollars. McDonald's, by comparison, has roughly 41,000 locations globally.

The product is bubble tea, ice cream, and fruit drinks. The flagship item — a vanilla soft-serve cone — sells for 4 yuan, or roughly 55 cents. The chain has built one of the largest consumer empires in the world by selling things that cost less than a dollar.

The Math of Cheap. Mixue's economics are aggressive. The company manufactures most of its raw materials in-house: tea leaves, syrups, milk powder, fruit purees, packaging. Stores buy from a central supply chain that operates with the kind of vertical integration that Western coffee chains spent 50 years failing to achieve. Per-unit margins on individual drinks are slim — sometimes just 5-10 percent — but volume is staggering. A typical Mixue store moves several hundred drinks per day, and at scale, those margins compound into a profitable operating model.

The franchisee model is the engine. Mixue runs about 99 percent of its locations as franchised stores. Franchisees pay an upfront fee, equipment costs, and ongoing supply purchases — and that supply chain is where Mixue actually makes its money. The drinks are the customer-facing product. The B2B raw-materials supply is the actual business.

The Geographic Bet. Mixue's growth has come from tier-3 and tier-4 Chinese cities that more upscale chains like HEYTEA and Nayuki have largely ignored. Where HEYTEA's average drink runs 30-40 yuan, Mixue's runs 4-12 yuan. The customer is different — younger, working-class, often on a tight student or office budget — and the locations reflect this. Mixue stores cluster around schools, transit stations, and dense neighborhood streets, not in luxury malls.

The international expansion has followed a similar pattern. Mixue has aggressively entered Vietnam, Indonesia, Thailand, the Philippines, and Malaysia. In each of these markets, the chain serves a young, price-sensitive consumer in cities outside the capital. The Vietnamese consumer paying 25,000 dong (roughly one US dollar) for a Mixue lemonade is essentially the Indian DMart customer or the early-2000s Walmart shopper, just expressed in beverages.

Why Western Equivalents Don't Exist. Starbucks has roughly 8,000 stores in China and operates at a price point that excludes the Mixue customer base entirely. Tim Hortons has tried. Luckin Coffee, the closest scale equivalent, operates with 21,000 stores but in a different category (coffee, not tea/ice cream). The Western chains that have succeeded in China have done so by serving the urban middle class. Mixue serves the much larger working-class market that Western chains have not figured out how to access.

This is a recurring story in Chinese consumer business: the bigger market is not the urban elite. It is the 700-million-person tier-3-and-below population that has gradually risen into discretionary spending over the past 20 years. Mixue has captured a slice of that consumer in beverages. JD.com captured part of it in e-commerce. Pinduoduo captured the bottom of it. Each of these companies built valuations measured in tens of billions of dollars by serving customers that Western incumbents largely ignored.

The IPO Story. Mixue listed on the Hong Kong Stock Exchange in March 2024, with shares pricing at 202.5 HKD and rising 43 percent on debut. The company's valuation reflects an unusual structure: high revenue, modest store-level margins, and a deeply integrated supply chain. Investors who underwrote the offering were betting less on the bubble tea trend (which has had several boom-bust cycles in China) and more on the supply chain itself. If Mixue survives a category downturn, its raw-materials business survives. If a competitor wins the tea wars, Mixue can pivot the same supply network to whatever the next category is.

What's Next. The growth question is whether Mixue can continue compounding store count at the rate it has shown — roughly 30 percent CAGR in recent years. There is a saturation point in China itself; some analysts believe the addressable market is somewhere around 60,000 stores. International expansion is the next leg, and it requires Mixue to rebuild the supply chain in each new country, which is more capital-intensive than its domestic playbook.

The longer-term lesson is that Chinese consumer scale produces commercial outcomes that Western analysts repeatedly underestimate. There is a 12-billion-dollar bubble tea company. There is no equivalent in any other country. The reason is not the product. The reason is the consumer base.

Now go enjoy your Saturday. Perhaps with a 55-cent ice cream cone.

Sources: - Mixue Bingcheng IPO prospectus (Hong Kong Stock Exchange, 2024) - Industry coverage: South China Morning Post, Caixin, Bloomberg China - Mixue Group investor relations