Source: Gu Ming's official website.
Author |Li LanlanEdit |Xie JiajiaAt the beginning of the new year of 2024, the new tea beverage brands Gu Ming and Mixue Bingcheng submitted their listing applications to the Hong Kong Stock Exchange on the same day. As they look around them, the new tea industry has entered the second half of the competition, with many brands involved in the IPO sprint. Gu Ming said, "Along the way, the deep cultivation of the sinking market has enabled us to have a deep insight into consumers and the market. However, "Drink Home" found that also relying on the sinking market, there are still many differences between Gu Ming and Mixue Bingcheng. One is the volume gap, with 9,000 stores and 36,000 stores, it is only a quarter of the size of Mixue Bingcheng. The second is the difference in layout strategies, compared with the Mixue Ice City spread across the country, the layout of Gu Ming is significantly more concentrated, with 8 provinces contributing 87% of GMV, and generally concentrated in the southern region. Of course, the steady and steady centralized layout has its advantages, such as regional brand advantages, stable cold chain warehousing and logistics capabilities, and performance growth brought by scale effects. However, at the same time, it is also facing the hidden concern that the growth rate of stores in mature areas is slowing down and it is difficult to expand into new markets. When many tea brands embark on the road of scale, trying to grasp both the high-end market and the sinking market, it remains to be considered whether the centralized layout that Gu Ming relies on can still make it wrestle with major tea brands. 
Source: Gu Ming's official website.
Det: Stabilize the grain and grass
Diluted costs
Gu Ming is clearly a conservative among the many tea players. Unlike other tea brands, Gu Ming believes that having more than 500 stores in a single province indicates that the region has the basis to highlight the scale effect, which is called "key scale", and uses the experience and advantages accumulated in provinces that already have key scales to strategically enter neighboring provinces. According to CIC, in terms of GMV as of September 30, 2023, Gu Ming ranked second among China's ready-made tea brands, accounting for 8With a market share of 3%, the No. 1 Mixue Bingcheng reached 20%. In the past development, Gu Ming did not show its edge, steadily won a large market share in the southern region, and ranked among the ranks of the middle and waist brands of new tea drinks. As of December 31, 2023, Gu Ming has established a presence in 15 provinces across the country, of which 8 provinces have reached what it considers to be a "critical scale", contributing about 87% of GMV. However, Gu Ming's expansion speed is more "restrained" than other brands, and there are still 19 provinces, including Beijing and Shanghai, which have not yet had store layouts. 
Screenshot of Gu Ming's prospectus
To a certain extent, the centralized layout has enabled Gu Ming to "build the largest cold chain warehousing and logistics capacity in the industry", and it also claims to be "the only company that can frequently distribute short-term fresh fruits and fresh milk to stores in lower-tier cities". According to the prospectus, as of September 30, 2023, Guming operates 21 warehouses with a total construction area of more than 200,000 square meters, and more than 75% of the stores are located within 150 kilometers of the warehouse, so as to ensure that more than 97% of the stores can provide 2-day cold chain distribution services. Guming has even set up its own cold chain freight fleet with a scale of about 300 vehicles. The soldiers and horses did not move, and the grain and grass went first. For any chain tea beverage company, stable production is the bottom line requirement, and what is needed behind this is a stable logistics guarantee. In 2023, Chabaidao said in a round of financing that the financing will focus on the upstream construction of intelligent production and processing bases and **chain bases. The prospectus of Mixue Bingcheng also mentions strengthening the ability and improvement of the ** chain. Therefore, the construction of the first chain is still one of the important destinations for Gu Ming's fundraising. Another benefit of a centralized layout is that it can use economies of scale to dilute costs. The prospectus mentions that the average distribution cost of Gu Ming from warehouse to store accounts for about 0% of GMV9%。From 2021 to the first three quarters of 2023, Gu Ming's business was 438.4 billion yuan, 555.9 billion yuan, 55$7.1 billion; The net profit was 239920,000 yuan, 39.2 billion yuan, 100.2 billion yuan. In other words, in 2022, Guming's net profit increased by 18 times year-on-year, and the revenue and net profit in the first three quarters of 2023 have not only exceeded the previous year, but also grown significantly. Among them, the help brought by the "critical scale" should not be underestimated. Gu Ming also said in the prospectus, "We continue to encrypt the store network in various provinces, although in the context of macroeconomic fluctuations, we have been able to maintain same-store GMV growth in the provinces and the whole country for the past three consecutive years." lost: Lack of stamina in mature areas
The blank market is surrounded by enemies
However, the centralized layout of Gu Ming is not impregnable, and it still faces certain development difficulties and growth concerns. According to the GMV data of a single store, the growth rate of mature areas of ancient tea has slowed down significantly. Zhejiang Province, as the base camp of ancient tea, has more than 2,000 stores, accounting for more than 20% of the company's total stores in the country, but its same-store GMV growth rate in 2023 is only 51%, which is lower than the national same-store GMV growth rate (9.).4%), which is much lower than the growth rate of same-store GMV in other provinces (about 12%). At the same time, Gu Ming also stated in the risk factors of the prospectus: "We may not be able to enter new geographical markets or expand our competitiveness in existing markets. Looking around today's tea stock market, there are already strong enemies around. There are tea Baidao in Sichuan and Chongqing, tea in Hunan, tea in the north, and Bawang tea in Yunnan, all of which are brands with certain regional influence. As of September 2023, Mixue Bingcheng has a total of 36,153 stores (including 2,900 stores of its coffee brand "Lucky Coffee"), of which more than 320,000 stores in mainland China and about 4,000 stores in 11 overseas countries. The expansion rate is much faster than that of Gu Ming. At the same time, the sinking market of second-tier cities and below is also being divided and occupied. In 2022, Hey Tea and Nai Xue's tea have lowered their products** and chose to exchange prices for the market. The following year, Heytea opened up to join, reducing dimensionality. The 10-20 yuan ** range where Gu Ming is located is also the most crowded track for China's chain milk tea brands, gathering many brands such as Gu Ming, Tea Baidao, Coco, Yidian, Bawang Tea Ji and so on. 
Screenshot of Gu Ming's prospectusThe huge competitive pressure forced Gu Ming to rush out of his comfort zone. Franchise is the standard answer for rapid expansion. However, there are also internal and external risks in the franchise business. An ancient tea franchisee in the Hunan area said in an interview with "Beverage Home": "I spend my own money to open a store, but in fact, I am working for Meituan and selling goods for the company." She said that a pack of 300g walnut kernels has risen from 30 yuan to 60 yuan in a year, and the ** of cups, straws and other materials is also **. The fruits of the Gu Ming headquarters are much more expensive than the ** of the same quality outside, and sometimes the quality of the fruits received is not good, such as wrinkled peach skin, sour grapes, green mangoes, etc., in the summer of 2022, grape drinks buy one get one free, many stores have reported receiving moldy grapes. According to the "Daily Economic News", some offline retail franchisees have said that generally speaking, the operating profit margin of the store is more than 20%, and this project can enter the "legal eye" of the franchisee. According to the prospectus, as of September 30, 2023, among the franchisees who have opened Guming stores for more than two years, each franchisee operates an average of 31 store, 75% of franchisees operate 2 or more franchise stores. For the whole year of 2023, the operating profit of a single store of Gu Ming franchisees will reach RMB 3760,000 yuan, and the operating profit margin of a single store of franchisees is 202%, only "just over the line". 
Screenshot of Gu Ming's prospectusAt the same time, the gross profit margin within Gu Ming is not optimistic. According to the prospectus, in 2021, 2022 and the first nine months of 2023, its gross profit margin will be %. The tea Baidao prospectus disclosed that from 2020 to 2022 and the first quarter of 2023, its gross profit margin was respectively. 4% and 352%, which is higher than Gu Ming as a whole. The growth rate of stores in mature areas has slowed down, and the new regional market is surrounded by strong competitors, with low gross profit margins and external franchisees testing the operating profit margin of a single store. Gu Ming, why live in peace? The capital behind the exit
Why compete for the "second share of tea".
Under all kinds of pressure, it is very urgent for Gu Ming to seek to go public in order to gain more market share. In June 2021, Nayuki's tea (2150HK) was the first to be listed on the Hong Kong stock market, and in the following three years, many tea brands competed for the "second share of new tea drinks". In August last year, Chabaidao submitted a listing application to the Hong Kong Stock Exchange and has been filed with the Securities Regulatory Commission. Middle-waist brands such as Shanghai Auntie and Bawang Chaji have also been reported to be listed. Now, Gu Ming and Mixue Bingcheng have also embarked on the road of applying for listing on the Hong Kong stock market. But judging from the current situation of the market, what is the probability that Gu Ming can be successfully listed? Before the rumors of a listing in mid-2023 appeared, some people believed that Gu Ming would not seek to go public in the short term, and the biggest reason was that investors Sequoia China and Meituan Dragon Ball withdrew their shares from Gu Ming in September 2022. According to the enterprise investigation, on November 6, 2020, Sequoia China, Meituan Longzhu, Chongying Capital, and Kotu Capital subscribed a total of 1,43478.27 million yuan, on May 24, 2022, Koutu Capital increased by another 339420.44 million yuan. Sequoia China and Meituan Longzhu's withdrawal from Gu Ming has sparked a lot of speculation in the industry. The specific reasons for the withdrawal of shares by investors before the listing of enterprises are unknown, but many speculations in the market believe that investors do not see the hope of listing. Chabaidao, which is also on the sprint IPO track, is more confident in terms of financing. In June 2023, Chabaidao received an investment of 1 billion yuan from Orchid Asia, with a valuation of 18 billion yuan. Comparing this financing amount with the previous financing amount obtained by Gu Ming, the financing obtained by Gu Ming seems to be "a drop in the bucket". In 2023, the "involution" of the new tea beverage market will intensify, and in the industry reshuffle, Gu Ming, who can still stand in front of the Hong Kong stock market, is enough to show that it has built a moat for itself with the conservative strategy of centralized layout. In the huge wind and waves, Gu Ming, who is conservative as the background, seems to be a little passive. In the large-scale competition of horse racing, the moat of Gu Ming may become an obstacle to restricting development. For Gu Ming, a successful IPO to get funds to grab land in its blank market may be becoming the key to its development.