Forbes estimates that Mixue Bingcheng, which has about 36,000 stores and is China’s largest carbonated tea maker, is worth $2.9 billion
When he was just 21, Zhang Hongchao borrowed money from his grandmother to open a small stall selling shaved ice treats in the central Chinese city of Zhengzhou. The first store didn’t work out, but two years later he tried again with a second shaved ice shaved ice stand, this time called Mixue Bingcheng, which means «sweet snow palace.» Over time, the business took off. He started selling ice cream, then tea, lemonade and coffee at very low prices.
Now, Mixue Bingcheng, which has around 36,000 stores and is China’s largest carbonated tea maker, is about to go public. Zhang, now 47, and his younger brother Hongfu, 39, are billionaires.
Mixue filed for an IPO in Hong Kong last Tuesday (2), revealing the company’s shareholding details. Each brother currently holds a 42.8% stake in the business. Forbes conservatively estimates Mixue to be worth $2.9 billion . Revenue and net profits increased 46% and 48% in the first nine months of 2023.
That puts the Zhangs’ net worth at about $1.2 billion each. The iced tea maker last raised money in January 2021, raising $329 million.
Mixue filed for a $915 million IPO in 2022, but it never materialized. There is always the chance that this new IPO will also fail. Hong Kong’s Hang Seng index fell around 25% last year and local shares had their worst start to the year in almost two decades.
Secret of success
Mixue has 32 thousand stores, almost all franchised in China and another 4 thousand in 11 other countries, mainly Asian. Its stores sold about 5.8 billion drinks (in glasses) worldwide during the first nine months of 2023, making it the second-largest global seller of drinks in glasses, according to China Insights Industry Consultancy. The number one seller is Starbucks.
The company stands out in the competitive carbonated iced tea market due to its low prices. Freshly made lemonade, soft ice cream, fruit tea and coffee cost between US$0.03 (about the price of a can of Coca-Cola in China) and US$1.
Mixue disclosed that it achieves such low prices due to its supply chain, which covers everything from ingredient procurement and production to logistics and quality control. Meanwhile, almost all of its revenue and profits come from selling supplies such as appliances and ingredients to franchisees.
Entrepreneurial journey
Hongchao was a student at Henan Economics and Finance College (now known as Henan University of Economics and Law) in 1997 when he got a job at a beverage kiosk. While working there, he came up with the idea of building his own ice machine and opening a store that sold shaved ice treats, something that was popular in nearby Shangqiu but had not reached Zhengzhou. According to local Chinese media reports, he borrowed 3,000 yuan ($422) from his grandmother to open Coldsnap Shaved Ice, Mixue’s predecessor.
The student learned quickly when he had trouble selling the frozen treats during the winter. He closed the business but tried again in 1999 with new products such as sugary drinks and, later, ice cream.
His younger brother, Hongfu, who now serves as CEO of Mixue, (Hongchao is the president) joined the company in 2007 to standardize operations and launched the franchise model that became a success. Today, 99.8% of its 36,000 stores are operated by 16,000 franchisees, making it one of the largest franchise operators in the world (it has more than double the number of Dunkin’ stores and almost double the total number of Burger King.)
The two brothers continued to innovate. They opened their first Lucky Cup coffee shop in 2017 and now have 2,900 stores, now also in countries including Canada, Indonesia, Japan and South Korea. The Zhangs are the latest to make their fortune from carbonated tea, which is popular among millennials and Gen Z in Asia and the US.
