Mixue: A new age of frugality?

Thirty-year-old Liu Bo opens a food delivery app and scrolls through more than 50 milk tea shops within a five-kilometer radius that deliver to his dorm. A doctoral candidate, Liu is one of tens of thousands of university students in Shanghai who satisfy their cravings through milk tea, and among their favorites is the budget chain Mixue Bingcheng.

Even without discounts, a Mixue drink can cost as little as ¥5 ($0.7), and Liu wonders how the company manages to stay afloat on such slim margins, especially when the dense networks of milk tea stores seem self-cannibalizing. The no-frills brand marks a notable shift from the premium Western consumer beverage labels that many of Liu’s age group grew up with.

What’s more, Mixue’s rapid expansion mirrors China’s new economic reality: as competition grows fiercer and margins become thinner, pragmatism is steadily trumping prestige in everyday consumer decisions.

“Mixue’s popularity is driven by its low prices, which resonate with Chinese consumers’ current focus on value for money amid economic uncertainty and cautious spending,” says Roolee Lu, Director of Food & Drink and Food Services at Mintel China.

The cold start

The milk tea and ice cream chain was founded in 1997 by Zhang Hongchao, a college freshman. Working out of a makeshift stall, he spent his summer break in Zhengzhou, the capital of Henan province, selling homemade shaved ice. The chain now operates more than 53,000 stores worldwide—roughly 48,000 of which are in China. Mixue overtook Starbucks in store count at the end of 2024 and surpassed McDonald’s in early 2025, becoming the world’s largest F&B chain.

A growing contrast exists between Chinese and US approaches to business success, with US food & beverage companies often selling aspiration, status and the promise of upward mobility, whereas Mixue thrives on exactly the opposite: constraint, affordability and practicality.

Mixue’s offerings include its signature bubble tea, lemon water and ice cream. Most products are priced between ¥4 and 10 ($0.6 and 1.4). “The main customer base is made up of what we call ‘small-town youths’ under the age of 35,” says Jason Yu, general manager at CTR Market Research. “Even in first-tier cities, many of these consumers live in suburban areas and seek affordable indulgences, and this makes Mixue’s value-for-money proposition appealing.”

“This 18-24 age group is highly attracted to Mixue due to its low prices, with 39% of those we surveyed preferring low-price tea drinks—a significantly higher proportion than other age groups,” says Lu.

Mixue has intentionally streamlined its list of offerings to around 30 stock-keeping units (SKUs), far less than its rivals such as Heytea or Chagee.

“With fewer products to manage, Mixue can ensure a uniform standard of taste and quality across its vast and growing store network,” says Lu.

Mixue crossed a major milestone in March 2025 by listing on the Hong Kong Stock Exchange. In November, its shares were trading at nearly double the initial offering price of HK$202.5 ($26), valuing the company at HK$150 billion ($19 billion). In the first half of 2025, Mixue reported a net profit of ¥2.72 billion ($381 million), up 44.1% year-over-year, on revenue of ¥14.87 billion ($2 billion), an increase of 39.3% from the previous year.

There are no known public records indicating Zhang, the founder, has cut his stake since, a sign of his confidence in its long-term prospects.

Cheap thrills

China’s immense tea and drink market took off in the mid-2010s, when a legion of brands sought to reinvent the decades-old bubble tea business by introducing new technologies, innovative recipes and exotic flavors. But as the economy slowed after 2018, the sector began to consolidate, with only a dozen or so major chains left, including Mixue as a forerunner.

While the brand’s emphasis on accessibility has allowed it to capture market share from rivals in retreat, not all consumers are convinced.

“I gave up on becoming a repeat customer, not only because the drinks lack refinement, but because they don’t provide any emotional value,” says Diana Ye, a Shanghai-based office worker in her early 40s. For her, Mixue’s ultra-utilitarian philosophy, where products are stripped down to the bare essentials, holds little appeal.

But it is exactly this ruthless pursuit of scale that has brought about Mixue’s success. “Rather than a tea and ice cream brand, Mixue is essentially a supply-chain machine,” says Ray Hsu, managing partner at Shenzhen-based venture fund RF Capital. “The low prices don’t reflect low quality, but extreme efficiency.”

Mixue operates a franchise model, with most of its revenues coming from supplying raw ingredients and equipment to franchisees. This structure helps to spread operational costs across a vast store network. The company has invested heavily in supply chain resilience to ensure access to raw materials like tea leaves and lemons. After its initial plan to grow lemons hit a snag, it chose to source in bulk from fruit farmers in southwestern China, slashing procurement costs.

Mixue outlets, typically located far away from prime city spots, offer no seats and only minimal decor. The message is clear: it is a grab-and-go model designed to maximize foot traffic. But this does not mean that it lacks identity or brand recognition. The company’s snowman icon and theme song—adapted from the American folk song “Oh! Susanna”—has proven immensely popular on social media, with user-generated content and memes effectively saving the firm millions in advertising costs.

The Mixue model’s success has also given competitors pause for thought. For example, Heytea’s positioning as a higher-end lifestyle drinks brand has weakened as consumers opt to trade down. It responded by cutting prices across its menu—from around ¥30 ($4.2) per cup in 2018 to now closer to the ¥15-20 ($2-2.8) range. Chagee, another arch rival, has fared better, pricing its products mainly in the ¥10-18 ($1.4-2.5) bracket and due to relatively high unit prices, its margins have remained healthy.

While the model has proven worthwhile for now, some observers are concerned about the potential impact of a race to the bottom. “Since Mixue relies on low margins, every element in its formula has to be right. One misstep could lead to a meltdown,” says Hsu.

When the ice gets thin

Mixue’s recent fortunes reflect shifting market sentiments in China: cost-conscious, younger generations are moving away from status-driven, conspicuous consumption in favor of pragmatic and affordable indulgences. As this mindset takes hold, Mixue could face threats to the viability of its lean business model. To begin with, it may struggle to control supply expenses amid rising labor and raw material costs.

“In China, there’s never the lowest price, because there’s always someone who tries to lower prices to compete with you. So it’s the overall supply chain efficiency that matters,” says Yu.

With Mixue steadily expanding on a global scale, many ingredients like coffee and cocoa beans will be subject to global supply chain disruptions. Aside from building a more robust supply chain and employing AI to better predict demand and reduce inventory, Mixue has set its sights on diversification to offset risks and maintain growth.

It set up Lucky Cup, a budget coffee unit, in 2017. In a separate move in October 2025, Mixue bought a 53% stake in Fulujia, a craft beer pub chain, for ¥297 million ($41 million).

These diversification attempts do not necessarily undercut Mixue’s core strategy; they could complement it. “Because of heavy interaction between coffee and tea, this Lucky Cup move is more about enriching your offerings so that you can attract more demand,” says Yu, adding that branching out into beer could be a ploy to broaden Mixue’s investment portfolio.

In lower-tier cities, it’s easy to find multiple Mixue stores on the same pedestrian street, as part of a saturation strategy to corner the competition. As a result of this almost over-expansion, managing franchisee relations has become increasingly complex, since Mixue’s light-asset model shifts risks to store owners. “If I’m a franchisee’s owner, 90%, if not all, of the risk is on me, and we are seeing a relatively high turnover of those restaurants,” says Yu.

In the years to come, the brand will likely cling to its low-price strategy, and head-on competition with premium players like Heytea seems out of the question. That said, it will have to do more to woo fickle customers. The biggest risk to Mixue could stem from the perception that it is no longer a popular choice or at the cutting edge. To stave off this scenario, it has rolled out a series of campaigns to engage with young customers.

According to Mintel’s Lu, the brand has expanded its emotional and cultural resonance through music festivals, co-branded products and offline events, positioning itself as more than just an affordable drink shop.

Exactly how effective these moves are remains to be seen. What is clear is that the stakes are higher in China’s milk tea war, and the intense turf war bodes ill for the industry’s long-term health.

“Some brands compete on emotional value, service or product experience. But in the race for extreme cost-effectiveness, or ‘involution,’ focusing only on price sacrifices differentiation, service and product quality,” says Hsu.

There is also mounting scrutiny over Mixue’s corporate governance and transparency, especially in global markets where regulatory standards are stricter and public trust is harder to earn.

Snow King goes global.

Mixue began its overseas push in 2018, when it opened its first store in Vietnam. Within just five years, the Snow King mascot had been plastered on signage and storefronts across Southeast Asia, from Indonesia to Thailand. Mixue used this region as a springboard into more mature markets, including South Korea and Japan, and from there its footprint expanded to Australia, Canada and the UK, operating a total of 5,000 stores in 12 markets outside China as of June 30, 2025.

In terms of store breakdown, Indonesia tops the chart with more than 2,600 outlets as of February 2025. Vietnam has grown to 1,300 stores, helped in part by a zero-franchise-fee policy. Malaysia is now home to more than 330 branches.

To venture capitalist Hsu, when one looks to scale in Southeast Asia, it’s best to consider the “development cycle.” “The Southeast Asian consumer market is similar to China’s 15 years ago,” he says. “So, the game will not belong to high-end brands; companies with supply chain capabilities like Mixue will win.”

To cater to Southeast Asian consumers, the company has adapted its menu with local flavors—coconut drinks in Thailand and mango milk tea in the Philippines—while maintaining its focus on affordability. “In ‘Global South’ countries, you have a lot of bottom-of-the-pyramid consumers,” says Yu.

Yu also points out that one of the biggest expansion challenges may lie in markets with stringent labor laws or regulations against below-market pricing. This means the low-price model that fueled its expansion in China could falter.

Even within the Southeast Asia context, Mixue is far from secure. A PR crisis in Indonesia in 2023 involved halal concerns, triggered by the use of garbage bags with misleading labeling and the absence of proper halal certification.

Keeping its cool

Already, Mixue’s cheerful snowman mascot grins from storefronts across the globe, a symbol of accessible joy in an era of economic anxiety. But in China’s unforgiving consumer market, where viral sensations could become cautionary tales overnight, past success guarantees nothing. And given the low prices, there is quite literally no margin for error.

Mixue is, however, not stuck out in the cold. “Experience shows that when Chinese firms leverage their supply chain and operational strengths, they can succeed globally,” Hsu says. “The challenge now is passing on that know-how and updating the mindset.”