Chagee marches ahead in latest overseas push

Chagee Holdings Ltd, a leading Chinese premium tea beverage brand, made its debut on the Nasdaq stock exchange on April 17, signaling the company's global expansion drive and mirroring the rising presence of Chinese tea drinks overseas.

Since its founding in 2017, the company has envisioned creating a global brand, said Zhang Junjie, founder, chairman and CEO of Chagee.

"This is just the beginning. We will continually support healthy lifestyle choices, drive industry innovation, and deliver on our mission of creating connections every day with tea," he said.

The beverage chain raised about $411 million by issuing 14.68 million shares, giving it a market capitalization of $7.66 billion as of the close of trading on its first day.

Chagee is also preparing to open its first North American teahouse in Los Angeles.

Founded in Yunnan province in Southwest China, Chagee initially developed at a measured pace before pivoting toward international markets.

Its first overseas store opened in Malaysia in 2019, a move that signaled the beginning of its "tea + culture" global strategy. The company operated 156 stores overseas by the end of 2024. It plans to open 1,000 to 1,500 new stores globally this year.

Unlike several competitors who thrived on trends like cheese tea or fruit tea, Chagee focused on original leaf fresh milk tea, building a niche with its streamlined, efficient, and quality offerings.

The company's rapid growth was supercharged by capital injections from prominent investment firms, enabling its expansion across the country and beyond.

As of the end of 2024, Chagee operated 6,440 stores worldwide — 6,217 of which were franchises — representing an 83 percent increase from the previous year.

Its 2024 GMV (Gross Merchandise Volume) surged 173 percent year-on-year to 29.5 billion yuan ($4.04 billion), with average monthly GMV per store in China hitting 5.12 million yuan.

Its annual revenue reached 12.41 billion yuan, while net profit came in at 2.52 billion yuan — translating to a net margin of 20.3 percent, significantly above the industry average.

Chagee's success has largely been driven by its "top single product "strategy.

By eliminating lower-performing categories and focusing on a core set of offerings, Chagee has been able to boost efficiency and reduce complexity. Its proprietary machines can prepare drinks in as little as eight seconds.

In 2024, 91 percent of Chagee's GMV in China was generated by its signature fresh milk tea series, with 61 percent of sales attributed to just three products.

One standout item, bo ya jue xian, or jasmine green milk tea, sold over 600 million cups as of August 2024, more than 300 million of which were sold in 2024 alone.

This product strategy also enables a highly efficient supply chain. Chagee reported logistics costs of under 1 percent of its global GMV, and inventory turnover of just 5.3 days — the fastest among major Chinese tea drink brands.

Despite its success, Chagee faces emerging challenges.

The company's prospectus revealed that same-store GMV growth slowed in the second half of 2024, declining 18.4 percent year-on-year in the fourth quarter. Analysts attribute the slowdown in part to market cannibalization from the rapid opening of new stores in the same areas.

To diversify and maintain momentum, Chagee has launched a sub-brand, "Chagee freshly brewed", which focuses on premium Chinese tea.

With three pilot stores opened in Shanghai and prices ranging from 13 to 22 yuan, the brand is testing new waters. However, similar "tea space" concepts by competitors like Heytea and Nayuki have struggled to achieve scalable success.

With China's new tea drink market growth expected to slow from 44.3 percent in 2023 to 12.4 percent in 2025, according to the 2023 new tea beverage report released by the China Chain Store and Franchise Association, leading brands are increasingly turning to overseas expansion.

Independent food and drink industry analyst Zhu Danpeng said that supply chain capabilities will be the decisive factor in the success of global expansion.

"Models, prices, and products can all be replicated, but building a global supply chain is a long game. Only companies with fully integrated supply chains will thrive," Zhu said.

Chagee's overseas strategy also hinges on cultural adaptation while retaining its core identity. In Southeast Asia, for example, it aligns with local tastes by using familiar milk-tea combinations, such as oolong or jasmine tea with premium milk. This cultural resonance has contributed to positive reception abroad, said Zhu.

The company has built a strong brand identity by fusing traditional Chinese aesthetics with modern design. Its visual branding draws on cultural symbols such as Peking Opera masks and the Ancient Tea Horse Road in Yunnan province, while store interiors balance traditional motifs with minimalist modernity, appealing to young, culturally minded consumers, he added.

Chagee enters the global stage as part of a broader wave of Chinese tea brands expanding abroad.

Heytea opened its first overseas store in Singapore in 2018 and has since moved into markets such as the United Kingdom, Australia, Canada, and the United States, opening more than 70 stores overseas.

Meanwhile, Mixue Group has established over 4,800 overseas locations and is the world's largest ready-made beverage chain by number of stores. Mixue built four local distribution centers and plans to continue to expand its logistics facilities in four countries in Southeast Asia.

Other players like ChaPanda have also entered the fray. ChaPanda has emphasized localization, rapidly opening multiple outlets overseas since last year and adjusting its menu to cater to local preferences.

The company now has 18 overseas stores and is pushing forward with its global strategy in markets including South Korea, Thailand, and Spain. The company's 2024 financial results, released in March, showed that its revenue reached 4.92 billion yuan, with the number of stores growing by 7.6 percent.