Mixue Group, the bubble tea giant from China, is making headlines with its plans to raise approximately 3.45 billion Hong Kong dollars (around 1.5 billion USD) through its upcoming initial public offering (IPO) on the Hong Kong stock exchange.
Set for March 3, 2024, the IPO will see Mixue offering 17.06 million shares priced at HKD 202.50 each, with the possibility to increase the number of shares based on investor demand. This strategic move is aimed at bolstering the company’s position as it competes against other beverage operators within the rapidly growing tea market.
Analysts are optimistic about Mixue's performance compared to other brands like Nayuki and Guming, attributing this to its long-standing history and well-established supply chain. "Mixue has a superior position compared to other bubble tea operators due to its long history and large supply chain,” remarked Angela Hanley, an analyst with Bloomberg Intelligence.
The company, which currently operates over 45,000 outlets worldwide, saw its revenue soar by 21% to 18.7 billion yuan (approximately 8.67 billion USD) during the first nine months of 2024, alongside an impressive profit increase of 42%. Indeed, the affordable pricing of Mixue’s beverages, ranging from 2 to 8 yuan, distinguishes it from larger local competitors.
With projections estimating the bubble tea market in China to balloon to approximately 71 billion USD within three years—up from 9.6 billion USD just five years earlier—the stakes are high. This rapid growth does come with its challenges, particularly as competition heats up and brands engage in price wars. Nevertheless, Mixue's eye for expansion continues to position it favorably.
The funds raised by the IPO will enable Mixue to significantly scale its operations, going beyond its current footprint and enhancing the competitiveness of its stores. Notably, major institutional investors have already shown interest, having placed orders for all shares available, including significant players such as Hillhouse Investment, HongShan Capital Group (formerly Sequoia China), and Long-Z investment from Meituan.
Prominent banks including Bank of America, Goldman Sachs, and UBS are facilitating this IPO, indicating confidence in Mixue's growth strategy and the bubble tea market's potential. This IPO is particularly significant as smaller operators like Guming Holdings Ltd. and Sichuan Baicha Baidao Industrial Co. have successfully gone public, highlighting the increasing trend of companies within this sector seeking capital through public markets.
Interestingly, after the initial buzz surrounding newly listed bubble tea stocks, there have been concerns about consistently declining prices due to intense competition. Yet, Mixue stands apart with its extensive network and product affordability, likely allowing it to withstand these pressures more effectively.
Overall, the outlook for Mixue is positive as the company continuously seeks to innovate its offerings and maintain its dominant market share amid growing competition. The successful execution of its IPO could mark just the beginning of its next phase of growth, as it leverages investor capital to expand not only within China but potentially onto the global stage.
With the bubble tea market rapidly gaining momentum and appealing to consumers across generations, Mixue appears poised for significant success following this IPO launch. Its longstanding operational practices, combined with innovative strategies and competitive pricing, will undoubtedly play pivotal roles as the company navigates this competitive industry.