Some of us in Singapore might have seen the $1 ice cream from Mixue and their quite popular bubble tea varieties. But who actually is Mixue?

Nicknamed the ‘Pinduoduo of beverages’, Mixue has achieved fast expansion through low-cost, low-price strategy. It is one of the most well-funded new tea (or bubble tea) brands in China (US$3 billion valuation) and had a revenue of US$960 million in 2019.

History of Mixue

Mixue started in 1997 as a shaved ice and drinks stall around schools in Zhengzhou in China’s central Henan province – far from the economically advanced east coast.

By 2000, Mixue had opened up stores and also sold sundaes at a much cheaper price than the market average. 

They explored the franchise model in 2007 and built their own factory in 2012. In 2014, Mixue took it a step further and took a step to open their own warehouse and logistics center. In 2018, Mixue set up their first store outside China, in Hanoi, Vietnam and quickly expanded into other Southeast Asian countries.

Currently, they have more than 20,000 stores in China and more than 1,000 stores in Southeast Asia – and still expanding.

How did they win the mass market?

Compared to other well-funded peers like HEYTEA and Nayuki, Mixue took a different approach – by penetrating mass market / Tier 3/4 cities through an extremely low-cost / low-price strategy. 

With an average product price between ¥3-10 (US$ 0.4-1.5), Mixue has quickly amassed a large group of customers. 

With the volume it has accumulated, Mixue can work on its supply chain – taking raw materials processing, warehousing and logistics into its own hand, cutting out third-party intermediaries and keeping its cost structure extremely low and reliability high. 

This translates into low price, which attracts more customers and franchisees looking to profit from Mixue’s formula – making the brand more easily accessible and keeping it top-of-mind. 

A fast-growing franchise network allows training ground for Mixue to refine its franchise management and operation system – to provide effective support from store selection, store renovation, staff training, store management, store software and hardware maintenance – this attracts more franchisees. 

With more franchisees (and more raw materials demand), Mixue is able to maintain high negotiating power to procure raw materials at a cheaper cost, thus sustaining its low-cost-low price flywheel. 

Mixue went on to replicate this formula overseas, starting with Vietnam. 

You can read more about Mixue and the bubble tea ecosystem in our Bubble Tea Report here.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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