Bubble Tea Chain Mixue Leads Hong Kong IPO Revival

The biggest restaurant chain in the world just completed a splashy IPO — and you’ve likely never heard of it.

That’d be Mixue, a bubble tea-coffee-ice cream chain founded in Zhengzhou, China, which has more locations than any other restaurant chain on earth. On Monday, shares of the company popped as much as 43% after debuting in Hong Kong, marking Mixue as a headliner in what looks to be a major revival year for IPOs for the stock exchange.

Spill the Tea

With more than 45,000 locations — mostly across China and Southeast Asia — Mixue has a bigger footprint than both McDonald’s and Starbucks. And its rise has been meteoric: In the past five years, Mixue has added 38,000 locations, after being founded way back in 1997. (That mirrors another Chinese coffee chain, Luckin Coffee, which has also rapidly expanded its store count in recent years.) The chain has done particularly well breaking into lower-income metropolitan markets, thanks to a menu featuring many drinks priced at less than $1 (USD).

In its IPO prospectus, the company said it garnered around $2.6 billion in revenue in the first nine months of 2024, up 21%, driving net profit of $479 million, up 43%. The overall global bubble tea market could balloon to $71 billion by 2028, according to Bloomberg data. 

In all, it proved enough to catch a wave of regional excitement over new IPOs:

• After a $444 million raise, shares were last seen trading around $37, up 43% from its debut price, according to CNBC. Demand was so hot that shares of the Hong Kong offering were 5,200 times oversubscribed, while the international offering was 100 times oversubscribed.
• That gives Mixue the largest float of the year so far in Hong Kong. According to Bloomberg Intelligence, proceeds from listings on the exchange this year are expected to double to $25 billion.

Franchise Player: Mixue has mixed and matched a business model that US chains can learn from. According to its prospectus, 99% of Mixue locations are franchises (compared with around 93% for McDonalds; Starbucks doesn’t offer traditional franchises, though it does license the brand to non-traditional locations, like hotel lobbies). But while companies employing a franchise model in the US typically rely on franchise fees and revenue from real estate, Mixue has found a different formula. Such fees account for only around 2% of the company’s revenue, and instead, Mixue’s business is centered almost entirely around producing most of the ingredients and equipment found in its stores in house, and then selling them to franchisees. Meanwhile, McDonald’s may already be leaning into the drinks-heavy menu offered by chains like Mixue. Since late 2023, the Golden Arches has been experimenting with a new spin-off chain, CosMc’s, focused on cold and hot beverages and ice cream.