Bawang Chaji, China’s rapidly expanding tea chain that recently went public in the U.S., has reported impressive yet concerning first-quarter results that highlight both its operational strengths and emerging challenges in the competitive bubble tea market.
Financial Highlights Show Mixed Picture
The tea chain posted:
- Q1 2025 GMV of ¥8.227 billion, up 38% YoY
- Revenue of ¥3.39 billion, growing 35.4% YoY
- 20% net profit margin, above industry average of 16%
However, beneath the surface growth:
- Net profit margin declined from 23.7% to 20% YoY
- Same-store GMV growth turned negative for two consecutive quarters
- Average monthly GMV per store dropped from ¥549,000 in Q1 2024 to ¥456,000 in Q4 2024
Operational Excellence Meets Market Saturation
Bawang Chaji’s success stems from three strategic pillars:
1. Product Standardization
Unlike competitors loading drinks with toppings, Bawang focuses on pure tea-milk blends. Its signature “Boyajuexian” accounted for 45% of 2024 sales (over ¥10 billion).
2. Unmatched Efficiency
The chain achieves industry-leading metrics:
- Logistics costs below 1% of GMV
- Inventory turnover of just 5.3 days
- 1.5% store closure rate (lowest in industry)
3. Digital Engagement
Mini-program members grew 109.6% YoY to 192.4 million, with 15 million new Q1 registrations.
The Starbucks of Tea Ambition Faces Reality Check
While spending heavily on marketing (8.8% of revenue), Bawang Chaji faces:
- Intensifying competition from Luckin Coffee entering milk tea space
- Consumer fatigue with bubble tea brands’ lifecycle (previously seen with Heytea, Naixue)
- Need for continuous innovation to maintain premium positioning
The company has implemented:
- Singapore-style nutrition labeling (A-D grades)
- “Light Caffeine” options addressing insomnia concerns
- Celebrity partnerships and limited-edition packaging
Global Expansion Proves Challenging
CFO Huang Hongfei emphasizes quality over speed in global growth, acknowledging supply chain complexities and cultural adaptation requirements that make “copy-paste” expansion impossible.
Long-Term Questions Remain
While currently leading in operational metrics and brand appeal, Bawang Chaji must address:
- Reversing same-store sales decline
- Maintaining premium positioning amid price wars
- Building sustainable global supply chains
- Differentiating from competitors copying its model
The tea chain’s journey reflects both the potential and perils of China’s new consumer brands going global – demonstrating impressive execution but facing the immutable laws of retail physics in maintaining growth momentum.
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