Two of China’s bubble tea giants are gearing up for IPOs

By Michelle Toh and Hassan Tayir, CNN

Hong Kong (CNN) — Two of China’s most popular bubble tea brands are preparing to go public.

Mixue Group and Guming Holdings — which are known for drawing crowds for their unique beverages, such as passionfruit pulp or grape and cheese-flavored teas — have applied for initial public offerings in Hong Kong, according to Tuesday stock exchange filings.

The size of the offerings was redacted in each company’s filing. But on Wednesday, Reuters reported that Mixue, which bills itself as China’s largest bubble tea chain, is hoping to raise $500 million to $1 billion, while Guming is aiming to raise $300 million to $500 million, citing an unidentified source.

Mixue declined to comment, while Guming did not immediately respond to a request for comment.

Even though China is grappling with high economic uncertainty and low consumer confidence, affordable treats, such as going to the movies or cheap food and beverages, are seen as bright spots.

The country’s bubble tea market is sizable. In 2023, the industry was estimated to be worth 145 billion yuan ($20.4 billion), according to a report by the China Chain Store & Franchise Association, an industry group.

Mixue, which the company says means “sweet snow like honey” in English, has more than 36,000 stores across mainland China and 11 overseas markets, such as Vietnam and Malaysia, according to its prospectus.

The company started out under another name — “Coldsnap” — in 1997, selling shaved ice at a small store in the central Chinese city of Zhengzhou. Two years later, its founder introduced the brand name Mixue.

In 2005, the company began selling soft serve ice cream for as little as 1 yuan (about 15 US cents), which quickly became a sales hit and its first signature product.

Today, the chain has extended low prices across its entire menu, selling many items for as little as $1. Its best-sellers include ice cream cones, lemonade and bubble tea, which is also called boba.

That has helped Mixue, which is associated across China with its cheerful snowman logo, become a market leader. As of the nine months ended September 2023, the company held the leading position in the country’s fresh drinks sector, with 11.2% of the market and generating 34.6 billion yuan ($4.9 billion) in sales during the period, it said in its filing.

The promise of low prices has served as a convincing sales hook. At a company outlet in the Mongkok district of Hong Kong on Thursday, several customers waiting in a long line told CNN that Mixue’s prices were too good to pass up.

Emma So, a 30-year-old administrative worker, said she had previously found its drinks a little too sweet. “But it’s so cheap,” she said while picking up a regular bubble tea with extra tapioca pearls.

Due to its relative affordability, low consumer confidence in China shouldn’t hurt Mixue, according to Prudence Lai, a senior analyst of services and payments at market research provider Euromonitor International. Rather, the company is “expected to benefit” from the current climate, as consumers are less willing to splash out on big purchases, she told CNN.

Guming bills itself as China’s second biggest bubble tea chain, with 9,000 stores across 200 cities in mainland China. The company’s name means “ancient tea” in English and was launched in 2010 in the eastern Chinese province of Zhejiang.

Guming’s strategy focuses on mostly catering to consumers outside China’s metropolises, with 79% of its stores in cities considered to be in tier two or below, according to its prospectus.

The fact that both Guming and Mixue have applied to go public at the same time could be viewed as destructive — or “cannibalizing each other in this race for capital,” noted Lai.

“[But] both chains have different positioning especially in terms of pricing, which means they are not direct competitors and no detrimental impact towards potential capital raised may be expected,” she added.

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