In the world of bubble tea, a seemingly innocuous beverage has brewed a story of remarkable business acumen and strategic foresight. This is the tale of Mixue, a Chinese brand that has not just entered the bubble tea arena but has reshaped its very landscape.

Rewind to the origins of bubble tea, and you’ll find Taiwan at the heart of it. A delightful mixture that has won over the taste buds of millions worldwide, bubble tea’s roots are undeniably Taiwanese. But as history has shown us time and again, being the first mover doesn’t always guarantee sustained leadership. Google wasn’t the first search engine, and the iPhone wasn’t the first smartphone. Innovation and adaptability often trump early starts.

The Rise of Mixue in the Bubble Tea Universe

In the bustling landscape of the bubble tea market, Mixue, a Chinese brand, has emerged as a formidable contender. Its expansion is staggering: over 20,000 stores in China and a rapidly growing presence in Southeast Asia, with more than 3,000 stores across 11 countries, including Vietnam, Indonesia, Singapore, Thailand, South Korea, Japan, and Australia??. 

The Covid lockdown, a crisis for many, became an unexpected catalyst for Mixue. As restrictions tightened in China, they turned their gaze overseas, with Southeast Asia being the nearest and most feasible market. Here, they leveraged tax advantages stemming from free trade agreements, a move that further cemented their position in these new territories. 

While Taiwanese brands either slowed down or shifted focus to the American market – with Sharetea leading the pack – Mixue was rapidly expanding its empire in Southeast Asia. From my rough estimation, there will be a total of 235 Mixue stores in Malaysia alone, open for business in the next few months. 

This monumental growth marks Mixue as the fifth-largest fast-food chain globally, trailing only behind giants like McDonald’s, Subway, Starbucks, and KFC??.

Affordable Delight: Mixue’s Strategy in Outpricing Competitors

Mixue’s disruptive business model in the bubble tea industry is characterized by its affordability, setting it apart in a market traditionally dominated by higher-priced offerings. To understand Mixue’s pricing strategy, it’s helpful to compare it with other well-known bubble tea brands.

In China, Mixue targets smaller cities and offers cups of bubble tea for less than ten yuan, contrasting sharply with the pricing strategies of other major brands in China that is typically RMB20-30 per cup. 

In Malaysia, the pricing competition in the bubble tea market is tighter, yet Mixue still manages to offer remarkable value. For instance, Gong Cha offers pearl milk tea at RM11. Tealive, equally popular in Malaysia, sets the starting price for their original pearl milk tea at RM7.45. In comparison, Mixue undercuts these prices by offering their bubble tea at just RM5.50, and this includes the added benefit of two toppings, enhancing both value and variety for their customers.

Mixue’s strategic positioning with significantly lower prices not only makes it accessible to a broader demographic but also differentiates it starkly from these competitors. While brands like Chatime, Gong Cha, and Tealive target more upscale urban markets with higher pricing, Mixue’s focus on affordability caters to cost-conscious consumers. This approach not only allows Mixue to tap into a different market segment but also challenges the traditional pricing norms in the bubble tea industry, making it a masterstroke in market differentiation.

Innovative Franchising: Mixue’s Game-Changing Approach

Mixue’s innovative franchising model starkly contrasts with traditional approaches in the bubble tea industry, marked by its low-cost entry and operational simplicity. This model stands out by eliminating common franchise fees, management fees, and renovation costs, which are typical in other franchising models. The sole recurring cost for Mixue franchisees is material fees, making it a unique and accessible opportunity.

Comparing the franchising opportunities between Tealive and Mixue in Malaysia reveals distinct differences:

  1. Franchise Fee: Tealive requires a substantial franchise fee of RM75,000, whereas Mixue offers a much lower entry point, as low as only RM8,000.
  1. Royalty Fees: Tealive charges a 3% royalty fee, which includes marketing and advertising. Mixue, on the other hand, does not impose any royalty fees.
  1. Initial Investment: Starting a Tealive franchise necessitates an initial average capital of around RM460,000. In contrast, Mixue’s initial investment requirement is significantly lower, though the exact figure isn’t specified.
  1. Brand Positioning and Market: Tealive is a well-established, homegrown Malaysian brand with over 240 branches, known for its localized taste catering to Malaysian consumers. Mixue, while popular in Malaysia, emphasizes its affordability and is recognized as having one of the lowest priced drinks in the market.

Overall, Tealive and other players position themselves as a premium, well-established brand with a higher investment and royalty structure, while Mixue offers a more accessible entry point with its low-cost franchising model and no royalty fees, appealing to a different segment of entrepreneurs.

Mixue’s approach achieves two significant objectives: 

  • It broadens the pool of potential franchisees by making entry more affordable.
  • It ensures a consistent revenue stream through material sales. 

This strategy not only attracts a wider range of entrepreneurs but also creates a sustainable business model where franchisees are more likely to succeed due to lower initial and operational costs. By contrast, other brands’ higher upfront costs and ongoing fees could potentially limit the pool of entrepreneurs able to afford a franchise, thereby impacting the rate of expansion and diversity of franchise ownership.

Operational Mastery: Mixue’s In-House Supply Chain

To maintain its competitive edge and sustain growth, Mixue’s reliance on a self-constructed supply chain is pivotal. This approach not only supports their commitment to quality and affordability but is also crucial for their mass-market positioning in international markets??. 

Their aggressive expansion strategy includes owning their supply chain and producing their own materials, so much so that even competitors buy from them.

While the traditional bubble tea players focus on brand and drink differentiation and profit from franchising, Mixue makes their profit from being the material supplier.

Cost-Efficiency Tactics: How does Mixue Maintain its low-cost advantage? 

The answer lies in their strategic investments and operational choices. Forgoing freezers, focusing on production efficiency, and carefully managing inventory to avoid capital getting stuck – these are just a few of their cost-saving measures. This, coupled with their unique franchise model offering short contracts and covering labor costs, allows them to expand rapidly.

Here’s a breakdown of the key factors:

  1. Mass Market Penetration in Lower-Tier Cities: Mixue targets tier 3 and 4 cities with an extremely low-cost and low-price strategy, offering products at an average price between Renminbi ¥3-10 (US$ 0.4-1.5)??.
  1. In-House Supply Chain Management: Following a melamine incident in 2008, Mixue started building its own supply chain, taking control of raw material procurement, production, warehousing, and logistics. This move eliminated third-party intermediaries, significantly lowering costs and improving reliability??.
  1. S2B2C Business Model: (Supplier to Business to Consumer) Mixue’s model covers product development, procurement, production, sales, warehousing, and logistics, as well as all aspects of chain operation. This comprehensive approach, supported by companies like MIXUEBINGCHENG Co., Ltd, Daka International Food Co., Ltd, and Shangdao Zhihui Supply Chain Co., Ltd, forms a complete industrial chain. Franchisees are required to buy ingredients and packaging materials from Mixue, ensuring quality control and revenue consistency??.
  1. Strategic Store Location and Size: Overseas, Mixue continues its low-price strategy, focusing on Chinese and college student groups. Locations are chosen strategically near universities, and stores are typically 20-40 square meters with a width of 3-4 meters, resulting in lower operating costs and easy replication??.
  1. Efficient Store Management: By forgoing expensive installations like freezers and focusing on production efficiency, Mixue keeps operational costs low. Careful inventory management prevents capital from being tied up in unused stock.
  1. Franchise Model with Short Contracts: Mixue’s unique franchise model offers short contracts and covers labor costs for store renovations, encouraging rapid expansion and attracting more franchisees.
  1. Volume-Based Negotiating Power: The large volume of customers and franchisees gives Mixue significant negotiating power to procure raw materials at cheaper costs, sustaining its low-cost advantage.

By integrating these strategies, Mixue has created a business model that not only keeps costs low but also ensures a steady revenue stream, allowing it to expand rapidly while maintaining affordability for customers and franchisees.

Economies of Scale: Mixue’s Customer-Centric Pricing Model Mirroring Costco and Amazon

In the bubble tea industry, Mixue’s business model exemplifies the concept of sharing economies of scale with customers, a strategy also employed by giants like Costco and Amazon

Here’s how the models are similar:

  1. Volume-Driven Cost Reduction: Like Costco, which uses bulk purchasing to reduce costs and offers products at low prices with fixed, slim margins, Mixue capitalizes on high-volume sales to achieve lower costs for raw materials. This allows them to offer bubble tea at the lowest price no other competitor can match.
  1. Dynamic Price Reduction: Amazon continually lowers prices in its retail and AWS segments to attract more customers. Similarly, Mixue’s focus on keeping prices low, even as they expand, draws in a larger customer base.
  1. Rapid Expansion Feeds Economies of Scale: As Mixue grows larger, their expanding network of stores and increasing sales volume further drive down costs, akin to Amazon’s and Costco’s growth strategies. This growth reinforces their ability to maintain low prices, creating a moat not seen in the bubble tea retail industry.
  1. Creating a Business Moat: This approach creates a competitive advantage, as seen with Amazon and Costco, making it difficult for competitors to match the low prices without a similar scale. Mixue’s adaptation of this model in the bubble tea industry sets a high barrier for competition.

Mixue’s replication and adaptation of this economic model in the bubble tea industry demonstrate how traditional retail strategies can be effectively applied to other sectors, creating a formidable presence and challenging competitors to match their scale and pricing strategies.

Mixue’s Masterstroke – Beyond Bubble Tea to Business Excellence

This story of Mixue is more than just about bubble tea. It’s a lesson in strategic foresight, adaptability, and the relentless pursuit of efficiency. It’s a reminder that in the world of business, it’s not always about who started first, but who adapts and innovates continuously. Mixue, in its journey, has not just overtaken the pioneers of the industry but has set a new benchmark for how to build and scale a business effectively. As we sip our bubble teas, let’s toast to this extraordinary tale of a brand that turned a simple beverage into a global business phenomenon.

Will their success persist? That’s something only time will reveal.

Here are the top 10 lessons from Mixue’s success story:

  1. Target Untapped Markets: Mixue’s focus on lower-tier cities showed the value of serving less competitive markets.
  2. Streamline Cost Structure: Their cost-effective operations and lean business model have been key.
  3. Innovative Franchise Model: Mixue’s low-barrier franchising approach broadens potential partnerships.
  4. Supply Chain Control: Managing the supply chain in-house can significantly reduce costs.
  5. Adaptable Business Strategy: Their pivot during COVID-19 lockdowns illustrates adaptability’s importance.
  6. Economies of Scale: Leveraging volume to negotiate better prices and maintain low costs is crucial.
  7. Customer-Centric Pricing: Offering high-value products at low prices can drive customer loyalty and market dominance.
  8. Aggressive Expansion: Rapid and strategic expansion can consolidate market presence.
  9. Strategic Location Choices: Choosing the right location, especially in overseas markets, is vital for success.
  10. Continuous Innovation: Regularly refining business processes and product offerings to stay ahead of market trends.

KCLau
KCLau

Personal finance author and trainer

    4 replies to "Mixue’s Mastery: A Bubble Tea Empire’s Rise to Dominance"

    • Sol

      Hai kclau. How do i get to open the franchise? Mixue is now our family fav choice. Especially the lemonade drink. Is that ok for me to open one in residential. But got 3 schools nearby. Next to my residential area already got one outlet

      • KCLau

        You can contact them directly, details shown on their website.
        Wish you all the best.

    • Ray Loh

      I’ve Stop tealive long ago seems this company didn’t well train the staff for standardized mixing tea in most of their outlet. I pick up Mixue once and continue to buy two to three flavour of their beverages due to it’s not so sweet and economical compared to many Bublé tea. Frankly speaking their price is what I called reasonable and I believe they will be very successful further..

      • KCLau

        Ray,

        Thank you for sharing your experience with Mixue’s beverages. It’s always valuable to hear direct feedback from customers who have a keen sense of what they enjoy in a beverage.

        I’m intrigued by your positive experience with Mixue, especially in terms of the sweetness level and pricing of their drinks. Since you’ve become a regular customer, enjoying two to three flavors of their beverages, I’d love to hear more about your insights.

        Could you share which specific flavors or types of drinks from Mixue have particularly impressed you? Also, how do you find the overall quality and consistency across different visits? Your perspective on these aspects would be really insightful, especially considering your previous experience with other bubble tea brands.

        Additionally, if there are any improvements or suggestions you’d like to see implemented at Mixue, I’m curious to know. Customer insights like yours are invaluable for understanding consumer preferences and trends in the beverage industry.

        Looking forward to hearing more about your thoughts and experiences with Mixue’s offerings.

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