Below are selections of a sharing that Zhang Junjie, Founder of tea chain Chagee, recently made at an alumni gathering of Hundun – a Chinese business education outfit.

Chagee has expanded very rapidly in the past two years, puzzling a lot of F&B industry veterans. “How did they do almost everything right?” was a common comment we heard. Friends at Luckin Coffee once quipped “in terms of digital technologies, Chagee is the tea brand that resembles us the most”.

This sharing gives a good understanding of the thinking and actions behind Chagee’s rapid expansion, and how it differentiates itself from all the milk tea chains before them.

 

The essence of milk tea

The milk tea industry has faced many challenges over the past thirty years. Many people believe milk tea is unhealthy, filled with artificial ingredients, and is a low-quality, low-cost product. However, this perception is superficial. Stripping away biases, we need to think about what milk tea truly is and what kind of industry it represents.

In my opinion, the essence of milk tea is simply a cup of water—water that 8 billion people need to drink every day, at least 8 cups per day. Based on this understanding, the industry holds immense potential. Thus, milk tea is just a surface phenomenon; fundamentally, the milk tea industry is about making a cup of water using tea logic.

Coffee’s evolution

Coffee has developed over hundreds of years, evolving from agriculture to industrialization and now commercialization. Modern coffee offers universal flavors and extreme standardization, making it highly appealing to consumers. Coffee’s natural dependency and addictive qualities have made it a daily necessity for many. Tea, while similar, has its own unique aspects.

When we travel worldwide, flight attendants often ask, “Coffee or tea?” In many global settings, coffee and tea are considered interchangeable. They may also ask whether you want milk or sugar with your beverage.

This is how we drink coffee today, but if we look back 100 or 200 years, this concept was not widely accepted. Early coffee originated in Ethiopia and was brewed through boiling. Over time, humans developed new brewing methods such as hand drip.

However, today, the most common way of drinking coffee globally is an espresso-based latte with milk—a far cry from its original form.

Building a new consensus around tea consumption

Tea has also undergone multiple transformations over time. In the Spring and Autumn Period (771-256 BCE), people boiled tea over a fire. In the Tang and Song Dynasties (618-1279 CE), whisking tea became popular. The Ming Dynasty (1368-1644 CE) introduced steeping tea, a method still widely used today. However, this method presents challenges such as complex equipment, intricate procedures, and high selection barriers.

We wondered whether tea could be transformed into a modern coffee-like commercial scenario. By offering freshly made tea in retail settings, we aimed to establish a new consensus around tea consumption. Once we identified the core logic, our strategy naturally emerged.

We decided that Chagee’s future would focus on being a single brand, offering multiple product categories across all channels globally. In essence, our goal is to create value through three cups of tea.

The “three cups of tea”

We made bold assumptions about the future of tea consumption and identified three major tea-drinking scenarios, each driving the next:

  1. Lifestyle Tea (Inspired by Starbucks): Starbucks revolutionized coffee consumption, making it an integral part of daily life. We aim to emulate this success by introducing ready-to-drink tea spaces, integrating tea into every aspect of life, and maximizing industrial efficiency.
    Today, Chagee no longer requires three months of employee training. A new employee can scan a QR code and produce a standardised product in just 8 seconds with a deviation rate of less than 0.2%. Industrialisation ensures product consistency, and customers feel that machine-made tea tastes even better than handcrafted tea.
  2. Home & Office Tea (Inspired by Nestle): In the future, ready-to-brew tea machines will be available in households and offices. Imagine inserting a capsule and instantly getting a cup of premium tea. We envision consumers purchasing these machines affordably, enjoying high-quality tea anytime, anywhere.
  3. Bottled Tea (Inspired by Coca-Cola): We aim to develop a ready-to-drink tea beverage that is delicious, healthy, and functional.

With these three tea scenarios defined, I feel that my life’s mission is set, and I am fully committed to making it happen. This mission is already difficult enough and I should not be distracted by other things.

Brand Positioning: Absolutely Good, Relatively Affordable

We firmly believe that strategy should evolve from broad to narrow. Today, our strategy has become “1 centimeter wide, 1 kilometer deep,” aiming for thorough execution. Beyond establishing our “Three Cups of Tea,” we have also considered how to create value beyond tea itself. Just like Starbucks, which focuses on concepts unrelated to coffee—such as the “third place,” community, and connections—we ask ourselves: how can we elevate the value of a cup of tea to the highest level?”

The first step is brand positioning. Positioning determines pricing, and pricing determines market dominance. When it comes to pricing, Chagee adheres to a “high quality, affordable price” philosophy—absolutely good, relatively affordable. Our benchmark is Starbucks, particularly its U.S. market positioning, where the pricing aligns with the daily consumption habits of American consumers.

In this pursuit, we strive to establish emotional connections with consumers at Maslow’s middle and upper levels—addressing their need for esteem and self-actualization—while ensuring that our pricing remains accessible and free of financial burden.

How do we achieve high quality? We believe the first step is to address consumers’ concerns about health. Many people perceive milk tea as unhealthy, and to alleviate these concerns, we took the bold step of publicly disclosing our product formulae. Furthermore, we made the microelement testing reports fully transparent. Each cup of Chagee clearly displays nutritional information such as calories, protein, and caffeine content. While this may seem straightforward, it underscores the importance of standardised production, ensuring that every product carries a unique identity label. In contrast, handmade products can have up to 10% deviation in quality, which could lead to legal liabilities if discrepancies arise.

Additionally, we implemented an ABCD nutritional grading system, originally introduced by the Singaporean government for bottled beverages, focusing on caloric and additive content. Under this system:

  • Grade A: Safe to drink regularly
  • Grade B: Suitable for consumption
  • Grade C: Recommended for occasional consumption
  • Grade D: Not recommended

All our products fall within the A and B categories.

Competition exists within the system, but solutions lie outside of it. By publicly sharing our formulae, we aim to drive the industry toward higher quality and greater safety standards.

Our steadfast commitment to ensuring the healthiness of our tea is ultimately rooted in a long-term perspective—considering how consumers will perceive and value our tea over time.

To further strengthen this perception, we enlisted renowned Olympic champions such as Zheng Qinwen and Liu Xiang to advocate for Chageei’s health benefits. Their endorsements help to establish and extend consumer consensus, gradually turning it into common knowledge.

Automated store operations

At Chagee, store managers do not bear performance pressure, as over 95% of orders are driven by centralised sales operations. Specifically:

  • 56% of revenue comes from membership-driven sales, managed by our 300-member backend team.
  • 40% of sales come from delivery platforms.

This means store teams only need to handle 5% of direct sales, allowing them to focus on customer experience rather than sales targets.

Additionally, our production process is fully automated, ensuring that employees—whether they are 80 years old or 18 years old—achieve consistent productivity levels. We have introduced silent stores nationwide, where even hearing-impaired individuals can work efficiently.

Thanks to our fully digitalized standard operating procedures (SOPs), all operational data is directly shared with upstream suppliers, enabling them to adjust production schedules accordingly. As a result, store managers no longer need to worry about inventory management.

Store operations are fully integrated online, covering scheduling, administration, network planning, and site selection. Once full digitalisation is achieved, franchisees or store managers will have minimal management responsibilities. Ultimately, their primary focus will be enhancing user value.

In the end, our stores will serve two main purposes:

  1. Last-mile product delivery centers: Ensuring customers receive their orders seamlessly.
  2. Customer experience hubs: Providing an engaging brand experience.

Chase also distilled store management into three simple mechanisms:

  1. Piece-rate pay system: Employees earn commissions for each scan, making the process straightforward—each scan earns 1 yuan.
  2. Performance assessment based solely on customer satisfaction.
  3. Mentorship system inspired by Haidilao: Store managers and their apprentices hold shares, ensuring that the final decision-makers at the store level are also stakeholders.

By implementing this management approach, we have significantly improved operational efficiency, empowering our teams while maintaining a high level of consistency and quality.

Chagee’s rapid expansion

Chagee has undergone a significant journey of expansion, marked by two key phases:

  1. The pilot market phase, where patience was key – focusing on brand upgrades and headquarters development.
  2. The national market phase, where speed was crucial – achieving rapid expansion within a short period.

Why did Chagee experience explosive growth in 2022? Because after perfecting our pilot markets in 2021, we implemented a distributed decision-making system across 9+13 provinces in 2022. Before opening any stores, each provincial branch was required to establish a well-structured subsidiary, ensuring alignment with all headquarters functions.

Currently, we have around 30 wholly-owned subsidiaries and a workforce of over 2,000 employees. Each subsidiary operates with a complete management structure, including positions such as General Manager, HRBP etc., forming the smallest operational unit with an independent decision-making cycle.

We believe in the concept of scalability efficiency. As the saying goes, “One person eating a bun takes one minute, and ten people eating ten buns still takes one minute.” The ability to open 300 stores in a single month is the result of the collective effort of our 30 subsidiaries, which is a major victory for our distributed decision-making strategy and a testament to our single product focus approach.

Traits of Chagee’s organisation 

After facing numerous battles, Chagee has undergone tremendous transformation, with the success of our flagship product, Boyang Juexian (Jasmine Green Tea), fueling the milk tea market. Today, we have over 6,200 stores worldwide, including more than 6,000 in China. However, achieving this scale requires a strong organizational foundation to support continued growth.

We are fully aware that what we are attempting is incredibly challenging and will take time. I might not be able to achieve it alone, nor see it through to completion, which is why organizational strength is crucial.

Our organization is characterized by two key traits:

  1. Diversity without fixed traits:
    • We have no biases in hiring.
    • We set no restrictions based on industry background, age, location, or personal history.
    • Our workforce is composed of individuals from varied backgrounds, without stereotypes or preconceptions.
  2. Unity with shared values:
    • Despite our diversity, everyone within Chagee shares a common “flavour” – an authenticity where people act sincerely, focus on doing the right things, and refrain from merely meeting external expectations.
    • Our culture is open, undefined, and unbiased – tasks outweigh individuals, and the organisation outweighs the leader.

To build such a dynamic organisation, I personally dedicate over 50% of my time to finding the right people, establishing trust, and empowering them through full authorisation. This ensures that our team remains aligned and driven toward our shared mission.

Vision for the future

Ultimately, everything at Chagee is driven by our vision—how we want to live and grow as a brand. Our goal is to establish Chagee in 100 countries worldwide, serving 15 billion cups of tea annually and building a global network of 300,000 partners. Through each cup of tea, we aim to connect with consumers in their everyday lives.

Since joining Hundun University, the most significant change for me has been the ability to define our long-term strategic goals. After discussing with our COO, we rapidly moved into execution.

When considering strategic changes for this year, I initially wrote down over 1,000 ideas. However, as our strategy meeting approached, I gradually narrowed it down to just one key focus: building a single brand, offering multiple product categories, and pursuing omnichannel globalization.

How do we achieve this? We adopted Hundun University’s exploration flow methodology, which encourages sharing insights without relying on past experiences or historical assumptions. Eventually, through several days of collaborative strategic meetings, nearly all of my original 1,000 ideas were discussed and thoroughly analysed.

As a result, our organization gradually evolved into a state where “everyone is a founder.”

I have made the decision to step back and let the organization take the lead. I have my own life, and I am merely a part of the company, just as the company is only a part of my life. Thanks to my learning journey with Hundun, I have realized that as my capabilities shrink, my decision-making diminishes, and my influence lessens—but my heart has grown larger, and the organization has flourished.

In the end, I have come to understand that every individual possesses a dual nature—both positive and negative tendencies. We all have grand ambitions but also moments of despair and helplessness. This duality constantly makes me question whether I, as the leader of this company, can maintain a state of equilibrium.

My honest answer to myself is: No, it’s impossible.

I believe that only by making myself less important can I prevent any single individual from wielding too much influence, which could potentially bring catastrophic consequences to the organization.

Ultimately, we at Chagee have chosen a collective path, a shared journey. And no matter how challenging it may be, we are committed to seeing it through—even if we have to crawl our way forward.