Mixue's rags-to-riches tale inspirational for peer firms

Can you get milk tea for under 7 yuan ($1), or an ice cream cone for 2 yuan? One company based in Zhengzhou, Central China's Henan province, is winning the hearts of quality and price conscious consumers with good products at such low prices.

Mixue Group started from a small ice shop in Zhengzhou to now become a fresh-made beverage and snacks giant offering ice cream, milk tea, lemon tea, milkshakes and other refreshments to consumers not only in China, but also around the world.

According to China Insights Consultancy, in terms of the number of outlets and cup delivery, Mixue now ranks first among fresh beverage makers in China and second globally in the product category.

On Jan 2, the company applied for an initial public offering in Hong Kong, as it accelerates efforts to enhance consumer awareness and build a brand with an enhanced global cachet.

The company currently has two major brands — fresh-made tea drink brand Mixue and fresh-brewed coffee brand Lucky Cup. By September 2023, the number of Mixue's outlets at home and abroad surpassed 36,000. Mixue had sold around 5.8 billion cups of beverages in outlets in China and 11 other countries and regions around the world, said its IPO prospectus.

From a small shop to networks across the world, Mixue's story may vividly demonstrate how China's consumer goods brands go from rags to riches.

In 1997, Zhang Hongchao, founder and chairman of Mixue, opened a little ice shop in his hometown in Henan province. The store sold freshly made shaved ice. At that time, few beverage stores in China offered freshly made beverages.

After nine years of market exploration, Zhang successfully developed an ice cream cone made of milk, eggs, corn flour and sugar. Boasting a good taste, the ice cream cones — priced at 1 yuan at that time — enjoyed great popularity among consumers. At that time, ice cream cones were usually priced between 4 and 5 yuan. Now, Mixue's ice cream cones have become one of its bestsellers. According to CIC's report, in the first nine months of 2023, the company sold around 442 million ice cream cones in China.

In 2007, Zhang Hongfu, CEO of Mixue, joined the company. With rich experience in store operations, Zhang established a standardized operational management system and a franchise model for the company. During the promotion and development of Mixue's franchise model, Zhang has continuously optimized and upgraded a series of core capabilities for the company, including brand building, store operations, marketing and product management. As demonstrated in its IPO prospectus, by September 2023, Mixue had over 16,000 franchised stores around the world.

With rapid growth in business scale, in order to ensure product quality and stable supply of beverages and ingredients while optimizing costs and improving efficiency, the company decided to extend its business to the upstream manufacturing segment.

In 2012, Mixue pioneered a centralized factory system. A decade later, it had built five production bases with a total area of 670,000 square meters, covering a full range of raw materials including sugar, milk, tea, coffee, fruits and grains.

As of Sept 30, Mixue's annual comprehensive production capacity had reached approximately 1.43 million metric tons. It held 84 patents. Up to 60 percent of the ingredients supplied to its franchises were self-produced and self-sourced by Mixue, while ingredients for its core products were 100 percent self-produced, according to CIC.

In order to meet the surging needs of franchisees to open stores nationwide and address concerns about long-distance logistics costs, in 2014, Mixue established its own logistics system and implemented a nationwide policy of free logistics fees for franchisees. This also blazed a trail in the freshly made beverage sector.

After nearly 10 years of efforts, Mixue's independently operated warehousing system and exclusive distribution network were able to support its wide store layout. By Sept 30, Mixue's logistics network covered 31 provinces, autonomous regions and municipalities directly under the central government, 300 prefecture-level cities, 1,700 counties and 3,100 townships. Meanwhile, it had achieved 12-hour deliveries in over 90 percent of county-level administrative regions in China.

"Through a series of measures such as building a global procurement network, production bases and logistics system, we have created the largest and most complete end-to-end supply chain system in China's freshly made beverage sector, covering procurement, production, logistics, research and development and quality control. Our large-scale and highly efficient supply chain system is the key to maintaining high-quality and affordable products, as well as a strong guarantee for our cross-regional and cross-category expansion," said the IPO prospectus of Mixue.

Zhan Junhao, founder of Fujian Huace Brand Positioning Consulting, said: "The supply chain is the key to ensuring product quality and stability. The taste, quality, and safety of snack and beverage products are closely related to the quality of the raw materials. By building a complete supply chain, enterprises can ensure the quality of raw materials is controlled from the source, providing consumers with products with consistent taste and stable quality. Meanwhile, a sound supply chain can also reduce the risks caused by fluctuations in raw material quality and ensure product safety."

Hong Yong, a research fellow at the Chinese Academy of International Trade and Economic Cooperation's e-commerce research institute, said, "The optimization of supply chains and distribution channels is core to raising product quality and lowering costs."

In 2018, Mixue's first overseas outlet was opened in Hanoi, capital of Vietnam. Currently, it has opened around 4,000 outlets in 11 countries. According to CIC, its market share in Southeast Asia ranked the top.

In the same year, the company created "Snow King" — a cartoon-themed snowman — as its super IP and lifetime spokesperson. Snow King has now accumulated countless loyal fans from different countries, regions and cultural backgrounds around the world. By Sept 30, the accumulated exposure of topics related to Snow King and the theme song of Mixue on major social media platforms in China exceeded 8.7 billion and 8.4 billion times, respectively. In 2022, sales revenue stood at 30 billion yuan, while in the first nine months of 2023, it had already reached 37 billion yuan, said the IPO prospectus of the company.

During this year's two sessions, Zhao Hongguo, a deputy to the 14th National People's Congress, and also general manager of Daka International, suggested revising dairy industry policy and industry access standards to promote the healthy development of the freshly made beverage industry. Daka International is a tea beverage supply chain enterprise and a wholly owned subsidiary of Mixue Group.