China’s biggest bubble tea makers Mixue and Guming apply for Hong Kong IPO

SHANGHAI/SYDNEY : China’s leading bubble tea makers including Mixue Bingcheng and Guming are rushing to apply for first-time share sales in Hong Kong as companies in the fast-growing sector expand boldly amid fierce competition.

Mixue Group and Guming Holdings, China’s largest and second-largest freshly-made bubble tea chains by store count as of 2023, filed applications for initial public offerings (IPO) in Hong Kong on Tuesday, Hong Kong Stock Exchange filings showed.

Mixue, which has roughly 36,000 stores, is looking to raise $500 million to $1 billion in its Hong Kong IPO, while Guming, with 9,000, is trying to raise $300 million to $500 million, according to a source with direct knowledge of the matter.

Guming and Mixue did not quickly reply to a request for comment.

Bubble tea is one of the few bright spots on the consumer front in China, with low-price companies doing particularly well.

According to a China Chain Store & Franchise Association study, the country’s 486,000 bubble tea stores were expecting a 40 per cent rise in yearly sales in 2023, hitting a market size of around 145 billion yuan.

But with poor product differentiation, competition has been fierce among players. Another industry giant, ChaBaiDao, also filed its Hong Kong IPO application just a few months ago.

“I think there is a big rush to IPO right now, as generally speaking these chains have been expanding aggressively but have had to be willing to lose money to do so,” said Ben Cavender, managing director at China Market Research Group.

“Whoever can IPO the fastest and get to a stable operating position may be the winner over the long term.”

Mixue applied to list on Shenzhen Stock Exchange in 2022, hoping to raise roughly 6.5 billion yuan ($909.87 million), but there have been no official announcements since on the potential listing.

Although affordable drinks are popular among young people, market opinion towards bubble tea chains isn’t optimistic. China’s post-COVID economic recovery has been disappointing generally, and youth unemployment topped 21 per cent last year.

Shares in Hong Kong-listed Nayuki, the country’s only publicly traded bubble tea chain, have dropped roughly 80 per cent since their debut in 2021, when customer confidence was higher.

Its goods tend to be more expensive than some rivals. Major products from top five freshly-made tea chains in China by store count are usually priced under 20 yuan, with Mixue focusing on products priced at roughly 6 yuan, according to CIC.

If any business is well placed to capitalise on a growing thirst for bubble tea in China and elsewhere, Mixue Bingcheng is among the top contenders, said Jason Yu, greater China managing director of market research firm Kantar Worldpanel.

“They’re very strong at cost control, but their name is also very powerful. Their snowman logo is everywhere,” he said. “They are doing really well in terms of building a business with a global scale.”

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