New Tea Drinks has launched its IPO. At the beginning of 2024, the eldest brother Mixue Bingcheng and the second child Gu Ming chose to submit their forms on the same day to rush for the IPO. An industry insider sighed after seeing it: "The new tea drink has entered the Warring States Period and started the fighting mode of gods." In addition to the Tea Hundred Way submitted last year, among the three that have made money from franchisees, it depends on who can be launched first.
Making a fortune silently outside the Fifth Ring Road
As soon as 2024 begins, the new tea drinking circuit is very lively. On January 2, Guming and Mixue Bingcheng chose the same day to submit their listings to the Hong Kong Stock Exchange and launched a sprint towards listing. In addition to Chabaidao, which submitted a prospectus to the Hong Kong Stock Exchange in August last year, the three companies are currently rushing to be listed.
Compared with Mixue Bingcheng, which has submitted A-share forms and has been discussed for a long time, Guming is considered a new face in the capital market. After Chabaidao submitted its prospectus last year, Guming has been rumored to be listed. Now, the rumors have finally settled.
Like Mixue Bingcheng and Chabaidao, Guming's core revenue also comes from franchisees. Except for a few stores, Guming's stores are all opened by franchisees. Its source of income is to make money by selling goods, equipment and services to franchisees.
Guming's prospectus shows that in the first three quarters of 2021-2023, Guming's revenue was 4.384 billion yuan, 5.559 billion yuan, and 5.571 billion yuan respectively, with year-on-year increases of 26.8% and 33.9% respectively; net profits were 9.8 100 million yuan, 788 million yuan, and 1.045 billion yuan. Among them, the year-on-year growth rates in 2022 and the first three quarters of 2023 were -19.7% and 73.3% respectively. The revenue from franchisees accounted for 99.9% in each period.
Guming does not entirely rely on franchise fees to make money from franchisees. In the prospectus, Guming’s revenue structure is divided into three major sectors, one is the sales of goods and equipment, the other is franchise management services, and the other is direct store sales. Among them, the highest contribution is the sale of goods and equipment to franchisees, which accounted for more than 80% of the revenue in the first three quarters of 2023, accounting for 4.478 billion yuan; franchise management services accounted for less than 20%, only 1.084 billion yuan; the revenue from directly operated stores is negligible, only 9.468 million yuan.
From the perspective of store scale, as of the end of 2023, Guming has 9,001 stores across the country. Although it has not completed the goal of 10,000 stores at the beginning of the year as promised, it has become the second-largest tea brand in terms of store count after Mixue Bingcheng, occupying 8.3% of the entire ready-made tea market.
Gu Ming also likes franchisees to open more stores. As of September 30, 2023, 70% of Guming's franchisees operate two or more stores. Among franchisees that have opened stores for more than two years, the average number of stores is 3.1. According to the previous prospectus of Chabaidao, among the more than 7,000 franchise stores, less than 8% of franchisees have opened more than two stores.
Gu Ming, with a unit price of 10-18 yuan, is another king in the market outside the Fifth Ring Road.
According to disclosed data, the key node for the growth of the number of Guming stores will be in 2022. In this year, Guming added 2,331 new stores, with an average of 6 stores opening every day. Most of the new stores are located in second-tier and below cities, with a total of 1,953, accounting for 84% of the total number of newly opened stores.
In addition, among these 9,001 stores, stores from second-tier cities and below accounted for 79% of the total number of stores, with GMV reaching 14.7 billion yuan. In addition, 38% of Guming’s stores are located in towns far away from the city center. According to the CIC Consulting report, the above two ratios are the highest among the top five popular fresh tea shop brands in China.
In fourth-tier cities and below, the operating profit of Guming's franchisees per store was 386,000 yuan, exceeding the average of 376,000 yuan. From the perspective of GMV, franchisees from villages and towns even earn more than franchisees in fourth-tier cities. In 2023, Guming's single-store GMV in villages and towns will be approximately 2.4 million yuan, which is about 100,000 yuan higher than that of single-store GMV in fourth-tier and below cities.
The ability to quickly open stores in sinking markets like Mixue Bingcheng is related to its construction of cold chain warehousing and logistics infrastructure and its strategy of only regional layout. Guming said that they can provide two-day cold chain distribution services to more than 97% of stores, and are the only company among the top ten freshly made tea brands that can frequently deliver short-shelf-life fresh fruits and fresh milk to stores in lower-tier cities.
The boss is worth 15 billion
Wang Yun'an, the founder of Gu Ming, was born in Anning City, Yunnan Province in 1986. The "Yun'an" in his name commemorates his birthplace. Wang Yunan's iconic appearance is his black-rimmed glasses. He is student-like, gentle, and sincere, which are also words that people around him often use to describe him.
Wang Yunan was a typical representative of the entrepreneurial boom among college students at that time. After being admitted to Zhejiang Science and Technology University, he was not interested in the materials science major he studied, and instead embarked on an entrepreneurial path. Because the business was so successful, the teacher commented, "There is no need to go to work, just start a business."
He once resold radios, sold quilts, and helped his classmates apply for credit cards. He earned money here and there. When he was in college, he saved hundreds of thousands of yuan, which became the start-up capital for Guming's first milk tea shop.
In 2010, Gu Ming's first milk tea shop opened in Daxi Town, Wenling, Taizhou, Zhejiang Province, Wang Yunan's ancestral home. "Gu" means old, and "Ming" represents tea. Wang Yunan believes that Chinese tea culture has a long history and wants to carry it forward.
However, at the beginning, the business of the milk tea shop was not satisfactory. At its worst, the daily turnover was only 98 yuan. The other founder, Ruan Xiudi, bought a cup of milk tea out of his own pocket, and the turnover reached three digits.
The opportunity for business to improve came from his occasional observation of McDonald's business practices. At that time, he suddenly discovered, "When you treat yourself as a customer and go to a milk tea shop, you no longer only care about costs and profits, but more about your feelings, whether the store is clean, whether the milk tea tastes good, and whether the clerk is friendly."
So he and Ruan Xiudi began to study the taste. In order to understand the taste needs of consumers, they would even set up mobile stalls on tricycles and invite passers-by and neighbors to taste. In the second year, the business of the milk tea shop improved, and Gu Ming also opened the franchise model. Some people were willing to make money with him.
Since starting his business in college, Wang Yunan has believed in the egalitarianism of "50-50". This is also the reason why Gu Ming has been running fast despite its short establishment. At that time, Wang Yunan lowered the price of channel goods to only 5% profit, leaving a lot of profit space to franchisees. Some franchisees earn 700,000 yuan a year, which is equivalent to the total income of the two founders' 70 stores.
Gu Ming's supply chain also started at this time. Wang Yunan once said that the original purpose of building a self-built supply chain was to allow franchisees to make more money. "Franchisees should focus on opening stores. There is no need to pick up the goods, I will deliver them to your door." From the upstream self-built fruit plantations to the realization of "one delivery every two days" in cold chain logistics, Gu Ming's supply chain system has gradually matured, and its reputation in the industry has gradually expanded.
"In 2017, many people were talking about Heytea. In fact, there is another one called 'Gu Ming', which opened its 1,200th store this year. Unexpected, right?" In Luo Zhenyu's 2017 New Year's Eve speech, he mentioned Gu Ming, which brought this then-not-so-famous brand into the public eye.
With his college classmates, entrepreneurial partners, and more than 4,000 franchisees behind him, Wang Yunan has transformed from a young boy into a boss with a net worth of billions. The prospectus shows that Wang Yunan’s shareholding ratio is 43%. If calculated based on the 40 billion valuation of Gu Ming’s last financing in 2021, his net worth has exceeded 15 billion yuan.
Can it enter the northern market?
Different from the comprehensive layout of Mixue Bingcheng and Chabaidao, Guming's store opening strategy is relatively conservative and only focuses on the southern market. By the end of 2023, Guming had opened more than 500 stores in only eight provinces. Among them, Gu Ming has more than 2,000 stores in its home base of Zhejiang Province.
The reason for opening stores in this way is that Gu Ming tends to open a certain number of stores intensively in an area, then enter neighboring areas, and finally slowly spread to other provinces. Wang Yunan believes that having more than 500 stores in a single province means that the region has the foundation to highlight economies of scale, and calls it a key scale.
Therefore, Gu Ming has very strong regional characteristics. Zhejiang is Gu Ming’s store base, with the number of stores accounting for nearly one-fifth of the total. Fujian and Jiangxi, which are adjacent to Zhejiang, are also Guming's base areas. The total number of stores in the two provinces is nearly 2,000, and the store GMV growth rate is the highest compared to other regions.
In provinces such as Guangdong, Hubei, Jiangsu, Hunan and Anhui, Guming has also reached what it calls a critical scale. The combined GMV of the above eight provinces in 2023 has accounted for 87% of the total GMV.
Gu Ming is expanding its stores in full swing in the south, but the market in the north is silent. According to the store areas disclosed in the prospectus, Guming’s northernmost province is Shandong, and it has not even reached Shanhaiguan, which cannot be invested.
"Gu Ming has always had a low presence in the tea market in the north," an industry insider told "City Circle". "In 2023, Gu Ming focused on expanding the Shandong market, but the results were average. There were franchisees who worked as aunties in Shanghai before. After starting Gu Ming last year, the profits were not as good as before, and I once expressed regret."
So far, Gu Ming still has 0 stores in 19 provinces across the country. In the two super first-tier cities of Beijing and Shanghai, Gu Ming has not entered the game yet.
In the risk disclosure column, Guming also stated that its "large number of stores are located in a few provinces in China, and any events that have a negative impact on the fresh tea beverage industry in these regions may have a significant adverse impact on the overall business and operating results."
However, from another perspective, the GMV growth rate in Zhejiang Province, the home base, has been the slowest among all regions, and the northern market that has not yet entered the market also means that Gu Ming may have new room for growth.
In order to open up young people's awareness of Gu Ming, Gu Ming has also turned its attention to the hot tea drink co-branding in recent years. In 2023, the co-branding of Gu Ming and the film and television IPs "Tianguan Blessing" and "Lotus Tower" became popular. Due to Gu Ming's strong regional attributes, many consumers were unable to purchase Gu Ming's milk tea, and it also spawned a purchasing industry chain such as "Order in Shanghai, drink on behalf of Nantong". In popular Internet memes such as "The first cup of milk tea in autumn", Gu Ming has also created a single-day GMV of more than 130 million yuan.
But now, the battle for milk tea franchises has become very fierce. At the same time as Guming and Mixue Bingcheng submitted their reports, Heytea released the "2023 Annual Report". The report stated that Heytea's global stores have exceeded 3,200, with the overall store size increasing by 280% year-on-year, and franchise stores exceeding 70%.
Even Guming is proud of its franchisee base, and Heytea is also eyeing it. In this report, Heytea said that more than 65% of Heytea's business partners have opened two or more stores, and many partners have opened more than ten stores in their respective regions.
Relying on brands to win franchisees, relying on co-branding to win consumers, and relying on supply chains to win word-of-mouth, as several giants have started to go public, the new tea market in 2024 is destined to usher in an even more intense fight.
Author |Zhang Jikang