The second "scramble" of Hong Kong stocks and new tea drinks has become variable. Shanghai Auntie (Shanghai) Industrial Co., Ltd. *** referred to as "Shanghai Aunt") recently submitted its IPO application documents to the Hong Kong Stock Exchange, announcing that it has officially embarked on the road to IPO in Hong Kong. According to the prospectus documents, in the first three quarters of 2023, Shanghai Auntie's revenue will be 253.5 billion yuan, gross profit of 79 billion yuan, with a gross profit margin of 31 in the current period2%。
The IPO plan of Shanghai Auntie in Hong Kong will raise funds to improve digital capabilities, research and development, strengthen the ability of the ** chain, enhance brand potential and further expand and expand the store network, and invest in various marketing activities.
It is worth noting that this is the third new tea beverage company to submit a prospectus to the Hong Kong Stock Exchange in more than a month. In addition to the tea Baidao, Mixue Bingcheng and Gu Ming, which have submitted applications before, the number of new tea beverage companies currently IPO on the Hong Kong Stock Exchange has reached 4.
On the eve of the IPO, the store was suddenly expanded.
Similar to Chabaidao, Mixue Bingcheng and Gu Ming, which went to Hong Kong for IPO in the same period, Shanghai Auntie also adopted a franchise business model, and its customers are mainly franchisees who have signed a franchise agreement with them to operate franchise stores. Financial data show that the vast majority of Shanghai Auntie's income comes from franchising, mainly including the sale of goods to franchisees, mainly including ingredients and other raw materials and equipment, which accounts for 70%; and franchise service fees. Therefore, the number of franchised stores directly affects its profitability.
According to data from CIC, as of September 30, 2023, Shanghai Auntie is the largest medium-priced freshly made tea shop brand in northern China in terms of the number of stores in the whole system. According to the financial data disclosed by Shanghai Auntie in the prospectus, the company's total revenue increased from 164 billion yuan, an increase of 340% to 21. in 2022$9.9 billion, up from $16.9 billion for the nine months ended September 30, 20224.5 billion yuan, an increase of 541% to 25 for the nine months ended 30 September 20233.5 billion yuan. Gross profit increased from 35.8 billion yuan, an increase of 640% to 5. in 20228.6 billion yuan, and the gross profit margin in the same period increased from 218% rose to 267%；Gross profit increased from 4. for the nine months ended September 30, 20223.3 billion yuan, an increase of 823% to 7. for the nine months ended September 30, 20239 billion yuan, gross profit margin in the same period from 263% to 312%。Behind this eye-catching business data is the result of the surprise expansion of Shanghai Auntie on the eve of the IPO.
Shanghai Auntie further disclosed in the prospectus that the number of stores in its whole system increased by 40 from 3,776 at the end of 20215% to 5,307 stores at the end of 2022 and an increase of 481% to 7,297 stores as of September 30, 2023.
According to the analysis, from the perspective of the reasons, in addition to the multiple rounds of financing during the period to make Shanghai Auntie more confident, Shanghai Auntie's relatively low franchise fee is also an important factor in the rapid expansion of the store.
In April 2023, Shanghai Auntie announced the 10,000-store plan, and Shan Weijun, co-founder, chairman of the board of directors, executive director and chief executive officer of Shanghai Auntie, said at that time that it planned to add 3,000 new stores within the year, and the number of contracted stores reached 10,000, and the previous franchise preferential policy continued to be extended until June 2023.
Some practitioners in the new tea beverage industry told reporters that in fact, as early as September 2022, Shanghai Auntie had announced a preferential policy for joining, specifically, 4The franchise fee of 980,000 yuan can be paid in three years, corresponding to 1 per year660,000 yuan. According to the investment cost estimate table officially released by Shanghai Auntie, as of February 19, 2024, the franchise fee is still calculated in three-year installments, totaling 4980,000 yuan. It is estimated that the total cost of the new store is 170,000 yuan (excluding rent and decoration). Compared with other new tea brands in the same category, the franchise fee of Shanghai Auntie is not only lower than that of brands such as Heytea, Nai Xue's tea, tea Baidao and Gu Ming, which are mainly in the mid-end market, but also far lower than that of the "king of parity" Mixue Bingcheng.
However, the "first-class" growth in the number of stores has also buried hidden worries for brand management. On the one hand, Shanghai Auntie admitted in the risk section of the prospectus that performance growth is closely related to the future store expansion speed, and "may not be able to successfully expand the store network to new markets and achieve satisfactory store performance". Auntie Shanghai said that if it fails to attract new and high-quality franchisees, it will hinder the company's store expansion plan or overall store performance, which will have a material adverse impact on the company's growth and operating results.
On the other hand, franchised stores with uneven quality have also repeatedly become the target of consumer complaints. The reporter found through the national 12315 consumer complaint information publicity platform that as of February 19, the platform publicized a total of 43 consumer complaints involving Shanghai Auntie brand milk tea shops during the month, of which 19 complaints were possible food safety problems.
The competition for new products is fierce.
In the context of the increasingly fierce competition in the new tea beverage track in recent years, with the number of stores becoming denser, the sales growth rate of single stores in mature areas disclosed by some new tea beverage companies in the same industry has declined significantly, which will undoubtedly affect the future revenue and profit growth of these companies. The "2023 New Tea Beverage Research Report" predicts that the market size growth rate of the national new tea beverage market from 2024 to 2025 will be 197% and 124%, compared to the previous 2018-2019The 4 per cent growth rate has dropped significantly.
On this basis, many brands are looking for "new tracks" in subdivided fields, such as "selling coffee" has become a popular direction to expand new categories. Shanghai Auntie introduced its brand "Shanghai Coffee" in the prospectus document, and plans to continue to increase the coffee market.
It is understood that Shanghai coffee will be launched in 2022 and is generally located in the Shanghai Auntie store. The company provides a variety of coffee beverages under the umbrella of Shanghai Coffee, and plans to launch "Oriental Latte", including coffee latte, tea latte and tea coffee latte to broaden market contact. Under this brand concept, the ** range of the main products is usually between $13 and $23 per product.
According to the analysis in the prospectus document, China's freshly ground coffee market is still in the early stage of development compared to the more mature market, but it has huge growth potential. In terms of GMV, the total size of China's freshly ground coffee market has increased sharply from about 27 billion yuan in 2017 to about 134.8 billion yuan in 2022, with a compound annual growth rate of 379%。It is expected that the market size of China's freshly ground coffee industry will continue to grow at 22The CAGR of 5% expands to reach approximately $371.5 billion by 2027, mainly driven by innovative coffee flavours.
However, it is not the Shanghai aunt family who is keeping an eye on the coffee market, and the "same competition" of Mixue Bingcheng, Gu Ming, and Tea Baidao have all revealed their development plans to expand the coffee brand in the prospectus.
For example, Gu Ming revealed in the prospectus that it will enrich its product categories and expand its freshly brewed coffee category while basing itself on the freshly made tea market, so as to grasp more cross-selling opportunities and meet more diversified consumer needs. "In view of the similarity of the consumer groups of freshly made tea and coffee drinks and the synergy between the two beverage consumption scenarios, more and more mature freshly made tea shops with extensive store networks and stable ** chain capabilities are also offering freshly made coffee drinks in their stores. "Gu Ming is optimistic that these new categories will further drive revenue growth by expanding the consumer base and increasing the frequency of consumer purchases.
Mixue Bingcheng has also said that freshly ground coffee is the fastest-growing segment of China's freshly brewed beverage market. In view of this, Mixue Bingcheng has created an independent coffee brand "Lucky Coffee", although the store expansion rate has not been as fast as the "basic plate" of milk tea in more than 6 years, but as of the end of the third quarter of 2023, it has about 2,900 stores.
In the final analysis, the competition in the chain coffee industry should be based on two basic laws: the first law is the background color of homogenization, as the development of the industry enters the middle and late stages, the degree of homogeneous competition is getting higher and higher, and the difference between brands will become smaller with the passage of time, and no brand can monopolize a single product. The second rule is that there are two completely different coffee consumption needs, and the functional needs have lower requirements for taste, are more sensitive to **, and have the lowest loyalty to the brand. Upgrading needs include social, leisure and other diversified needs, with higher requirements for taste, relatively insensitive to **, and more attention to brands. Gong Yizhi, an analyst at IFC, said in an analysis of the overseas coffee industry.
Therefore, in the coffee market, where brands such as Luckin and Cudi have gained a firm foothold, it remains to be seen whether "milk tea shops" such as Shanghai Auntie can occupy a place.
There are still IPO "players" to play.
As the third new tea company to submit a prospectus to the Hong Kong Stock Exchange in more than a month, Shanghai Auntie and Mixue Bingcheng, Gu Ming and Tea Baidao, which had submitted their forms last year, "competed" in the Hong Kong stock IPO. It is worth noting that the above four companies are ranked by the number of stores in the "top four" of the domestic new tea beverage track, and the competition on the road to financing is not fierce.
Why is Shanghai Auntie in a hurry to promote the IPO? In fact, judging from the books, Aunt Shanghai is not "short of money". According to the prospectus documents, as of January 31, 2024, the company's total current assets were 14$2.5 billion, of which cash and cash equivalents totaled $4$5.5 billion, with net current assets of 73.8 billion yuan. Some industry insiders said that looking at the financing history of Shanghai aunts may find the answer.
According to the prospectus, Shanghai Auntie completed Series A financing and Series A+ financing in November 2020 and October 2021 respectively, and the investor is Suzhou Yizhong Venture Capital Partnership (Limited Partnership) (hereinafter referred to as "Suzhou Yizhong"). At that time, a number of new tea brands were scrambling to expand their brands, and the market entered a period of collective explosion, and many brands received financing one after another, and Shanghai Auntie was no exception. In July 2022, Shanghai Auntie completed 2300 million yuan Series B financing, investors include Suzhou Xiangzhong, Nanjing Xiangzhong, Jinyi Capital, Yimei Investment, etc. In February 2024, a number of institutions, including Jinding Capital, Jinyi Capital, Yimei Investment, Zhiyi Investment, etc., participated in Shanghai Auntie 1200 million yuan in Series C financing. Before the IPO, Suzhou Yizhong was the largest institutional investor, holding 776%, in addition, Suzhou Xiangzhong and Nanjing Xiangzhong hold shares respectively28%。It is worth noting that Suzhou Yizhong, Suzhou Xiangzhong, and Nanjing Xiangzhong all have the shadow of Jiayu Capital behind them, and all three parties are managed by Suzhou Weitelixin, which is ultimately controlled by Wei Zhe, the former CEO of Alibaba and the founding partner and chairman of Jiayu**.
From 2020, when the first Series A financing was received, to 2024, when the pre-IPO Series C financing was announced, the consideration per share of Shanghai Auntie Financing increased from 11$96 rose to $50, and the valuation more than quadrupled in four years. At present, the competition in the new tea drink market is fierce, and some insiders in the investment and financing industry said that compared with CICC Capital, the investment institutions behind Tea Baidao, Sequoia and Meituan Longzhu behind Gu Ming, the institutions participating in Shanghai Auntie are more "low-key", and they are more sensitive to risk tolerance.
On the other hand, in addition to Nai Xue's tea, which has been listed in Hong Kong, and four new tea beverage companies in the IPO process, there are still a number of new tea brands "off-site" IPO rumors, eager to try to win the favor of investors, including many well-known brands with similar positioning to Shanghai Auntie. In contrast, whether Shanghai Auntie can break out of the encirclement and demonstrate its strength while gaining the recognition of investors in the "involution" of its peers who are sprinting to the Hong Kong Stock Exchange is a reality test for it.