Founded by a young man with (allegedly) no formal education, Chagee has quickly become one of the top tea brands in the world. Its recent successful IPO debuted at a market cap of nearly US$6 billion. How did they get here?
In this episode, we dive into the success story behind Chagee’s rapid rise – from humble beginnings to becoming one of Starbuck’s biggest rivals anda hiccup in Vietnam. With over 6,000 global stores and a plan to expand further into the US in these turbulent times, can Chagee become the next global beverage giant?
Also available on Spotify and Apple Podcast
Featured materials:
Chinese F&B report in Southeast Asia, Momentum Works
Will Chagee become “the Starbucks of tea” globally?, TheLowDown
E87: Chagee reenteres Singapore, The Impulso Podcast
Bubble tea in SEA, Momentum Works
[AI-generated Transcript]
[00:00:00] Sabrina: Hi everyone and welcome to the Impulsive Podcast by Momentum Works. So on today’s episode, we’re going to be talking about Chati, and of course, more recently chat’s IPO. So when did the IPO last? Last Friday?
[00:00:12] Jianggan: Last
[00:00:12] Sabrina: Last Friday? Last Friday, TIP, they went public on nest.
Under the stock tickle chart. CHA.
[00:00:21] Jianggan: Yes. The market responded very, very positively the first day, and the price went up, uh, almost 16%.
[00:00:27] Sabrina: So it gave the market cap of about about 6 billion. Million. Billion. Billion. US.
[00:00:34] Jianggan: Billion. Billion, yeah. Wow. 6 billion.
[00:00:37] Sabrina: It’s interesting that their stock is char right. Cha is Chinese for tea.
[00:00:44] Jianggan: It’s Mandarin Chinese for tea.
Yeah. And it’s also similar in many languages, right? If you go to like, uh, India, if you go to Hai, yeah. Um, Arabia is also Chai, I think. I think it’s similar in Russian as well.
[00:00:56] Sabrina: There’s something we did kind of a small slide on. I think Felix can edit it when you’re editing on, in our team episode and our team essentially, is it called Char or t or is.
[00:01:09] Jianggan: It’s, uh, it’s Southern Main or in Southeast Asia, they called kin. It’s one of the dialects. And uh, and it is funny, if you look at this map, right, I mean, across China, only in this region is called de. Mm-hmm. And, uh, and of course, uh, when, but globally, uh, many, many countries took the many languages, took this, uh, pronunciation because, uh, historically they traded with China via the, the maritime Silk Road, right?
[00:01:35] Phyllis: I mean, Japan, they call Ji and
[00:01:38] Jianggan: it’s cha Yeah.
[00:01:40] Phyllis: So
[00:01:40] Sabrina: it’s probably by land.
[00:01:42] Jianggan: Uh, Japan has to be by, because Japan is a series islands.
[00:01:45] Sabrina: So another interesting thing about Cha, which we were discussing I think last week or something else, I think this, I can’t remember when, is that their logo is very, very similar to startup.
[00:01:54] Jianggan: It is. It is. It is indeed. Similar. Yeah.
[00:01:56] Sabrina: But this isn’t their original logo. So obviously when TI first started in China, they had a more traditional logo, right?
Mm-hmm. It was a little more similar to. Chi China,
[00:02:07] Jianggan: Many people say that the Cji actually copied from China, US in terms of, uh, the drinks and the design, et cetera. So China, US is this chain, uh, coming off the central city of Chah, uh, which has. Pretty good products. But the, so, but for, for a long time they just restricted themselves to one city, but they’re like
[00:02:26] Sabrina: everywhere in Shanghai,
I remember
[00:02:28] Jianggan: last year I was there, I mean, at the same street corner I see six stores.
So,
[00:02:32] Phyllis: but they’re not really out of C Shanghai yet.
[00:02:34] Jianggan: They started, they started, um, recently. Where, where was I? I was in, uh. Uh, ing and they started opening stores there. So, so some people say that, uh, because they wanted to focus on occupying Chacha before, uh, going elsewhere. ’cause all the good spots in Chah, I mean six stores, um, on, on the same junction.
Imagine if you had had only one store there. The five could be a competitors.
[00:02:58] Sabrina: I think a picture you have a picture of. Yeah,
[00:03:02] Jianggan: you can find that. Yeah.
[00:03:03] Sabrina: So it’s kind of different, right? ’cause Chati also kind of started in, did they start in
[00:03:07] Jianggan: ti started in. The promise. So this is where the, the founder grew up and, uh, he, I think he stopped studying at very young age.
Then he went to work for a, uh, a store, uh, milk store. The Milk store under Chop Penda, which is another brand chop. And then he grew like, uh, from, from just a, I think a normal employee to the head of the store, et cetera.
[00:03:33] Sabrina: I think the found interesting, right? Because this is something that, um, you’re sharing with us. Essentially when they ipo OA lot of investors
[00:03:41] Jianggan: kind
[00:03:41] Sabrina: of taught you that they regretted.
Not a chance to invest in.
[00:03:44] Jianggan: Well, there, I mean, many investors have been regretting that for the last two years.
[00:03:47] Sabrina: Do you think that like there was a chance that they looked down? Because obviously like we mentioned. Compared to maybe other chains out there, they found the founder of Chat isn’t. As educated.
[00:03:57] Jianggan: Yes. Rumors. I mean, I, I think National Report saying that he didn’t even do, um, primary school education, which is kind of rare in China because the government mandates like nine years of basic education. Um, so yeah. So he, he spent a lot of time working in real world before he started.
I’m here. Well, how old is he? 32 years old. So he started eight years ago, so he was 24 and by that time he already had like eight years of working experience.
[00:04:24] Phyllis: Um, I saw that there were a lot of news articles that said that he is now a billionaire because of the I,
[00:04:29] Sabrina: yeah, because of the IPO. He became a eight years off
[00:04:33] Phyllis: at 32.
He’s a billionaire. 32. But just,
[00:04:35] Sabrina: it depends, right? When you run these kind of businesses, they are so operations heavy. I mean, what would,
[00:04:41] Phyllis: what would do for you?
[00:04:44] Jianggan: I, I, uh, yeah, exactly. So I mean, it can get you to, to write very nice PowerPoint slides, but you can also hire, no, you can also hire someone to do it.
I mean, you probably need a degree to read financial statements, but you can also learn in a hard way. So I. So I think Heidi Law, you know Heidi Law, right?
Yes. The, the, the hot pot chain? Yes. They hired him as a non-executive director, uh, I think two years ago. Oh. So I think had law’s management, uh, is very shrewd, so they must have seen something in him. I think the same reason why XVZ and other investors who invested in him, and I mean, they, they probably saw something,
[00:05:23] Sabrina: I mean, it’s probably like something about his personality or maybe his experience, he.
He understands the scene well. He at least knows what’s going on.
[00:05:30] Phyllis: Maybe he’s like confident.
[00:05:33] Jianggan: I think, uh, I think I, I think having dealt with lots of us from China, there are. They, they can see through, um, good speaker versus a good operator.
I mean, this is unlike many of the Indonesian VCs we see that, uh, that they only invest in people who have a good profile.
[00:05:51] Sabrina: So obviously Chelsea has been doing very well, which is why they managed to do so well when they went public.
Right? So they about six, almost 6,500 stores. Not just in China, but overseas as well.
[00:06:03] Jianggan: Yes. They have about 150 in Malaysia, a few in Singapore, and a few in, uh, uh, Thailand. Right. So, but, but you see the growth, right? 83% growth from 2023 to 2024. Mm-hmm. Uh, they had a GMV of, uh, almost 30 billion.
So 25,000 cups, uh, sold average per month?
[00:06:23] Phyllis: No, but when we were previously in, uh, Shanghai earlier this year, right. Every big tourist attraction had at least one to two chart and every single one of those outlets.
Were very heavily popular. Like there were a lot of people.
[00:06:37] Jianggan: Yeah. So, so they, they went actually quite aggressive with, uh, with the tourist spots, right? Mm-hmm. So, uh, I, I think, I think you can go, go to the, the slide with the, with the Starbucks. So, so, so they fight for very, very prime real estate.
And, and of course, um, many of these cases is the franchisee who’s paying all costs. And, uh, and that gave them a, a, a significant brand exposure. Mm-hmm. And if you look at the store format, it’s large format, right? Similar to Starbucks. I mean, he had place to seat.
[00:07:04] Sabrina: Their store format is actually a lot more similar to Starbucks.
[00:07:07] Jianggan: It’s unlike most of the property stores that you have seen. Right. It’s
[00:07:10] Sabrina: most of them are just like usually a small kiosk that aren’t really like sitting areas, but chat really has a very premium, like store design. Even the stores in Singapore, they have, it’s not just a big space, but it’s like very well designed.
[00:07:22] Phyllis: But if you think about it, right, it’s quite. Like Starbucks is very woody, you know, it’s like dark, but chat is like bright. It bright on the opposite end of the spectrum versus green, you know?
[00:07:36] Jianggan: So. So at this IPO, I mean, we look at these numbers, we said, okay, obviously has grown a lot for the last, I think they got the investment in 2022.
So last two and a half years, three years, it has grown a lot. Uh, a friend of mine who is uh, is a veteran consumer investor and he went to speak with lots of franchisees, and it seems a lot of them are complaining for the last few, uh, month about declining sales. , you, you can see that, uh, I think it had a significant climb in 2023 to, uh, to more than half a million r and b per month, uh, per store. And, but it has since declined. So obviously in Q4, uh, 2024, you see a significant drop compared to, uh, Q3 2024. And even if you remove the Cincinnati, uh, effects, it’s still a quite sign, significant drop.
[00:08:27] Sabrina: But this problem is not just unique, the chat, right?
[00:08:30] Jianggan: Uh, we have looked at, uh, the financials of uh, I think three or four listed, um, sort of tea chains in China. Most of ’em are experiencing this and obviously. This is relate related to the macro economy and everybody’s expecting the government to, to launch a large stimulus.
So if that happens, I think might become better.
[00:08:49] Sabrina: So I guess this is why charity is kind of looking for other markets, markets to grow as well, which is why they’ve, I mean, they entered Malaysia, Thailand, Singapore, they recently reentered Singapore, not so recent. They’ve been here for almost a year.
[00:09:02] Jianggan: But in.
[00:09:03] Phyllis: Less than a year. They’ve opened I think like at least 10. How many stores do they have now?
[00:09:08] Jianggan: Probably more than 10, I
[00:09:09] Phyllis: think 11 if I’m not
[00:09:11] Jianggan: wrong numbers, but, but this number is probably meaningless, right?
Because next month it will be different number.
[00:09:15] Sabrina: Yeah. Open one and one of piece. No, no, I
[00:09:21] Phyllis: office. So I. Oh, but it’s more exciting news. I think they’ve also expanded to the US or they have plans to expand to us. They’re planning to,
[00:09:29] Jianggan: they have, uh, they have one store in, in the us uh, which uh, I think a month ago they said that you will launch very soon.
And uh, and last weekend a friend of mine was saying that Who’s living LA saying that you can already buy it. It is probably on the shower run.
[00:09:42] Sabrina: Oh. So what’s their concept in the us? Are they similarly doing like similar? Similar.
[00:09:48] Jianggan: Similar, similar. So
[00:09:50] Sabrina: they’re positioning themselves very similarly to Starbucks?
[00:09:52] Jianggan: Yes. I
[00:09:52] Sabrina: more
[00:09:53] Jianggan: Ty focused, I think they’ll try to like, uh, like, like, uh, sort of popularize this, this sort of tea concept across the, across, across the globe. And not only the local, right. You see the, how they call their outlets. They call it tea houses. Like Starbucks is like coffee houses, right? So, uh. Whether it work or it will work or not, we don’t know because there’s so many factors which are unknown, but we know it’s very, very tough.
[00:10:14] Sabrina: That’s true. ’cause I mean, even looking at a brand like Starbucks that is already so established, obviously, when they grow to grow and to become established in global markets, there’s a lot of. Resources that you need in the end and you need a very, very good leadership to kind of guide the organization
[00:10:30] Jianggan: yeah, so, so, so, so if you look at the, recently, they already learned a lesson in Vietnam, right?
So their first store in Vietnam, which was about to open. Then they had issue with the map, I mean, mm-hmm. Because, you know, Vietnam and China has this dispute over some islands. Yeah. And that caused a huge backlash in Vietnam.
Uh, but I hope that, uh, because of that incident that they, they have learned and they become more sensitive. They, they hard to write people to do the right checks before they do any launch.
[00:10:53] Sabrina: I think that’s important as well, especially when you’re expanding overseas, right? Yeah. Making sure you hire the right people that can help you.
Mm. Because obviously. Um, now chart is going to the US and I think their first store is slightly to be self-operated.
[00:11:04] Jianggan: They have to do it by themselves, right. First. Right. So to show that, okay, this concept can actually work before they convince anyone to put in money and, and, uh, and become a franchisee.
And charging. Now they have IPO, so they probably have a good war test.
The business in China is still profitable, so they have a bit of time to figure this out.
[00:11:21] Sabrina: I think that’s the thing, right? Obviously it will take them some time to figure out the differences in the market and what kind. Concept would work better. Mm-hmm. Especially for Tati. ’cause it’s not like people in the US don’t drink tea.
[00:11:32] Phyllis: No, I think for them it’s more like boba and coffee for rather than just Yeah. Rather than just tea and having high quality
[00:11:39] Jianggan: tea. Yeah. I mean, how do you convince people to sort of, uh, also say that, okay, let’s hang out. I mean, at the cji instead of Starbucks.
[00:11:47] Phyllis: Yeah. Also, I think charity is probably, that’s more difficult for them to pronounce.
[00:11:53] Sabrina: No, I wanna trust you have a similar price point to Starbucks in the US. ’cause right now, at least in Singapore, it’s slightly cheaper.
[00:12:01] Jianggan: I think these are the, the metrics that they will test because, um, this is something I heard from a friend from, from Lakin and, and they said in China across all the chains and charges the most similar to them in terms of digital operations.
So, I mean, if you see the numbers, uh, they are
they have like 177 million users register members on their mini Per one. On WeChat. On Alipay. Right. So, I mean, which is the equivalent of app outside China. So, so they have the ability to figure out what the customers want. They have the ability to adjust their parameters. So outside China, the main thing is whether they can build organization which fit into that market, leveraging their, their, uh, expertise, uh, as well as the sort of the strength, uh, of uh, I mean the local team we can find in the local market.
[00:12:47] Sabrina: Okay. So thank you guys for tuning into another episode of the Impartial podcast. We hope that you guys enjoyed today’s short episode about chati. If you guys are interested in more about bti, we do have a couple of reports that will be linked in the show notes below.
And of course, if you guys do like this video and subscribe to stay up to date on the latest happenings and trends. In tech, new retail, and the broader digital economy. Thank you, and bye-bye.
[00:13:08] Jianggan: Do you notice I have a charter cup? Yes. Okay. I didn’t show you
[00:13:10] Sabrina: chart. There’s no chart inside because there’s no chat at one.
No.
[00:13:13] Jianggan: Okay. Thank you. Thank
you.
