Selling Shovels and Digging Gold: The Mixue IPO
In a gold rush, sell shovels. This has been a common wisdom for businesses looking to capitalize on a market boom. Take Nvidia, for example; the company became the cornerstone of the AI revolution by being the company that provides the shovels for the AI gold rush in the form of their GPUs. But Mixue, the largest bubble tea company in China and the largest fast-food chain in the world in terms of store count, believes that selling shovels and digging for gold is not mutually exclusive. So, they asked the question: why not sell the shovels but also dig for the gold yourself?
By early 2025, Mixue had grown from a single kiosk shaved ice business in 1997 into a sprawling international chain of over 46,000 stores, outranking even giants like Starbucks and McDonald’s in total outlet count. Then, on March 3, 2025, Mixue completed its IPO in Hong Kong, raising about HK$3.45 billion (US$444 million). Yet very few people outside of China have ever heard about Mixue, and even fewer truly understand their unique business model. Here is an analogy to give light on what makes their business so special: If all the different types of fast-food chains and boba tea shops are like the countless up-and-coming AI models trying to differentiate themselves, then Mixue is simultaneously both the Open AI (the leading player) as well as the Nvidia/TSMC (the leading supplier) of the bubble tea industry. And I promise that at the end of this blog, this analogy would make much more sense.
In analyzing Mixue’s journey and its IPO, the story is more than just the continuous expansion of its bubble tea franchise business. I see a story of how a founder with humble roots can upend the freshly made drinks and desserts market by taking a simple idea, and taking it very, very seriously. And this reminds me of one of my favorite quotes from someone I admire, Charlie Munger, “take a simple idea, and take it seriously.” The company’s journey demonstrates a simultaneously dynamic interplay of a vertically integrated supply chain, rapid growth through low franchising fees, and creative brand building with a boring, but obsessive desire for low prices. For me, Mixue’s success invites comparisons to Sam Walton’s uncompromising discount model for Walmart but also Rockefeller’s obsession with vertical integration in the later years of Standard Oil (obviously minus the horizontal integration and buyout of competitors). In this blog, I will be dissecting Mixue’s entire arc from an unremarkable self-made shaved ice to a global beverage powerhouse, culminating in one of the most oversubscribed IPOs in recent memory. And here are the key questions that I’ll be looking to address: What exactly is Mixue? How did it become the largest fast-food chain in the world by store count? What is their business model? What is the rationale behind the IPO, and what does it mean for the global IPO markets? And finally, what does the future hold for Mixue, the IPO markets, and the food service industry?
Company Overview:
The earliest innings of Mixue began in 1997, on a sweltering street corner in Zhengzhou, China, where the founder, Zhang Hongchao, opened a modest shaved ice kiosk called “寒流刨冰” translating to “Cold Current Shaved Ice.” Armed with nothing more than a homemade ice-shaving machine and an angel investment from his grandmother of 3,000 yuan (roughly $420 at the time), Zhang began his entrepreneurial journey selling affordable shaved ice to local pedestrians. But that tiny kiosk, little did Zhang know, would ultimately grow into the largest fast-food chain on the planet by store count, surpassing even global giants like McDonald’s, Starbucks, and Subway.
First ever products of Mixue’s founder at his shaved ice business
The early days of the business were challenging, to say the least. The initial stand struggled, experiencing three closures and four forced relocations within a couple of years, largely due to external factors like the aggressive urban redevelopment projects in Zhengzhou, where the government forced housing demolition and relocation. But like all successful entrepreneurs, Zhang was undeterred and repeatedly resurrected the business, each time refining his model to adapt better to local tastes and logistical realities. And in observing all the competitors that broke down and never got back up, Zhang learned two crucial lessons early on: first, affordability could never come at the expense of quality; second, the consumer’s desire for affordability is unshakeable. In other words, quality and value were both paramount, and these two insights formed the bedrock of Mixue’s identity for decades to come.
A crucial turning point for the business’s transformation came in 2005. Observing a long queue at a local premium ice cream shop selling cones for 18 yuan (then about $2.25), Zhang recognized an unmet demand: affordable ice cream that didn't compromise quality. Thus, he purchased a second-hand ice cream machine, and after weeks of late-night experimentation and unpleasant trips to the bathroom, Zhang developed a smooth, tasty, soft-serve vanilla cone that cost only 0.5 yuan to produce. Then, by pricing the cone at just 1 yuan (about 12 cents USD at the time), the ice cream business soon became a revolutionary success. Customers flocked to Zhang’s store, mesmerized by the value proposition of a delicious treat at an almost absurdly low price. Within months, Zhang was inundated with franchising requests from people eager to replicate his newfound success.
First ever Mixue that sold ice cream. Notice the 1 yuan price labeled at the top right corner of the storefront; price has always been their competitive advantage.
At this crucial stage of Mixue’s growth, Zhang’s younger brother, Zhang Hongfu, joined the enterprise. Together, the brothers designed an unconventional franchise model. Instead of imposing hefty upfront franchise fees (typical of other chains), Mixue set minimal franchise entry costs. However, franchisees were mandated to source all their raw ingredients, packaging materials, and equipment exclusively from Mixue’s centralized supply operations. This approach, innovative at the time, set the sights for Mixue to ultimately transform from merely a retail ice cream and beverage vendor into a formidable, vertically integrated supply-chain enterprise that made the big bucks by selling supplies to its large network of franchisees.
Source: Mixue IPO Prospectus
By 2007, Mixue had officially transitioned from a shaved ice stand to a fully franchised beverage and ice cream chain, rebranding itself as “蜜雪冰城,” which is the Mixue group we know today. This name roughly translates to “Sweet Snow Ice City.” By standardizing every component, from ingredients and recipes to equipment and store layouts, Mixue ensured product consistency and brand uniformity across its rapidly multiplying outlets. Yet, unlike Western giants such as Starbucks or McDonald's, which often demanded hefty initial investments from franchisees, again, Mixue’s approachable financial requirements attracted thousands of eager entrepreneurs—many were young, first-time business owners or people with modest capital who otherwise would not have had opportunities to own a business. This grassroots franchising strategy helped Mixue proliferate rapidly into China's overlooked lower-tier cities and towns, far beyond the usual scope of multinational chains.
As Mixue grew, its aggressive pricing strategy solidified into something approaching cultural folklore. Even as competitors repeatedly increased their prices due to rising raw material and operational costs, Mixue resolutely refused. They maintained incredibly affordable core products priced between 1 and 6 yuan, reminding me of Sam Walton and Sal Price’s uncompromising desire to set low prices for goods at Walmart and Costco, respectively. Among college students and young, price-sensitive consumers, Mixue affectionately became known as a “poverty-saving saint,” underscoring the strong emotional and cultural attachment the brand cultivated through its relentless focus on affordability.
But it is one thing to want to offer low prices to customers and to actually be able to do so, and the key to Mixue’s ultra-low prices was a relentless investment into its upstream supply chain. Recognizing early that suppliers held too much power over raw material prices and quality control, the Zhang brothers took aggressive action. Beginning in 2012, Mixue pioneered the development of large-scale central production facilities— becoming China’s first beverage chain to do so. They established their first central factory in Henan Province and subsequently opened additional manufacturing bases across Hainan, Guangxi, Chongqing, and Anhui provinces. These factories produced everything from powdered tea extracts and ice cream mixes to flavored syrups and packaging materials. By centralizing production, Mixue gained not only significant economies of scale but also absolute control over product quality, consistency, and cost structure.
To further this vertical integration, Mixue began acquiring stakes or direct partnerships with agricultural producers, particularly for critical raw materials such as lemons, tea leaves, coffee beans, and dairy products. In Sichuan’s renowned lemon-producing county, Anyue, Mixue established its own agricultural subsidiary called Snow King Agriculture, which ensured stable, low-cost supplies of lemons for its best-selling item at the time: the 4 yuan ($0.55) lemon iced tea. By 2023, Mixue was sourcing an astonishing 115,000 tons of lemons annually, positioning itself as China's largest lemon buyer and giving it significant leverage in price negotiations.
Source: Mixue IPO Prospectus
Moreover, Mixue’s commitment to logistical excellence matched its production capabilities. As early as 2014, it began constructing its proprietary logistics network, ensuring rapid, cost-efficient delivery of ingredients from factories directly to franchise stores. Uniquely, Mixue offered franchisees free logistics services, an enormous competitive advantage that further entrenched loyalty and discouraged franchise churn. This investment in supply chain infrastructure might seem extravagant for a budget-focused beverage chain, but it was essential to Mixue’s ultimate ambition: to make cheap beverages accessible literally everywhere.
Fueled by Mixue’s vertical integration and aggressive franchising model, Mixue grew rapidly with an unprecedented wave of store openings in the 2010s and early 2020s. By 2024, the brand had become the world’s largest fast-food chain by store count, boasting over 46,000 locations worldwide. To put this achievement into perspective, Mixue’s expansion rate outpaced industry leaders by miles, opening stores at a pace of nearly 25 locations per day at its peak. Its outlets permeated even the most remote Chinese villages, extending further into Southeast Asia, Japan, South Korea, and even Australia. Now internationally in countries like Thailand and Vietnam, Mixue is replicating the same cost-leadership playbook of building local supply chains, ensuring product consistency, and leveraging ultra-low pricing to win over customers.
But the story of Mixue would not be complete without mentioning Mixue’s nationally adored mascot: The Snow King. Throughout the years, Mixue invested significantly in brand building and marketing, and in 2018, introduced the iconic “Snow King” mascot—a playful, crowned snowman holding an ice cream scepter. Through catchy jingles, “你爱我，我爱你，蜜雪冰城甜蜜蜜” (They actually have an English version too: “I love you, you love, Mixue Ice Cream & Tea~”), and whimsical online and offline marketing campaigns, Snow King became a social media sensation and cultural symbol. The brand’s marketing cleverly avoided costly celebrity endorsements, instead leveraging user-generated content, virality, and interactive social campaigns. This grassroots marketing further reduced costs, reinforcing Mixue’s core mantra: provide the greatest value at the lowest possible cost.
Finally, we are coming close to the present day of this company’s history. Despite all of its success, Mixue also learned critical lessons from early missteps. Around 2010, Zhang Hongfu attempted to launch a premium-style ice cream shop which they claimed to be modeled after Dairy Queen after all of the brand’s success moving into China, hoping that higher quality may begin to justify higher pricing and better margins. But even though the remodel was initially popular, the store quickly faltered as even the most loyal but price-sensitive consumers abandoned it for cheaper competitors. This painful failure reinforced Mixue’s fundamental strategic identity and reminded Zhang of his earliest beliefs that for customers, value is just as unshakeable a desire as quality. From that moment, the Zhang brothers refocused firmly on affordability and volume, never wavering from their “price-first” commitment. Thus, in recent years, even amid rapid expansion and billion-dollar revenues (which surged from RMB 104 billion in 2021 to RMB 203 billion in 2023), Mixue’s leadership remained famously humble and disciplined. Founder Zhang Hongchao and his brother continued to manage operations closely, eschewing the lavish lifestyles associated with newly minted billionaires. In all interviews with the brothers, they continue to emphasize their deep commitment to affordability and accessibility, using their rural upbringing to sympathize with ordinary consumers’ struggles and desires.
Now, in March 2025, Mixue’s IPO on the Hong Kong Stock Exchange was both a testament to its incredible journey and an ambitious step to fuel further expansion. The IPO raised HK$3.45 billion ($444 million), setting records with a staggering oversubscription of more than 5,000 times. In the recent IPO market dominated by tech names and pharma companies, for investors, Mixue offered a uniquely compelling proposition: a profitable, debt-free business with industry-leading margins (approximately 15-16%) and an unmatched network of tens of thousands of profitable franchisees. Unlike many high-growth consumer IPOs driven by market hype, Mixue’s financials were fundamentally robust, backed by its disciplined supply chain, extraordinary scale, and still, lots of room for growth internationally and in tier-1 cities in China.
To end the section with some light on the company’s financials, in 2023 (the most recent year with full-year financial data), Mixue recorded a revenue of 20.3 billion yuan and a net profit of 3.2 billion yuan. Then, in the nine months that ended on September 31st, 2024, the company recorded nine-month revenues of 18.3 billion yuan, with net profits already exceeding that of the full year 2023 with a value of 3.5 billion yuan. Furthermore, Mixue has consistently generated net cash inflows from operating activities, which totaled 1.7 billion, 2.4 billion, 3.8 billion, and 5.1 billion yuan in 2021, 2022, 2023, and the nine months ended September 30, 2024, respectively. For context, one yuan or RMB is roughly worth $0.14, in other words, $1 is worth RMB7.25 as per the FX rate on March 24th, 2025.
Industry Overview
Mixue, as stated on its IPO prospectus, operates within the “freshly made drinks market,” which encompasses non-alcoholic beverages prepared on-site such as tea drinks, coffee, ice cream, and fresh fruit beverages. From 2018 to 2023, this sector grew at a compounding annual growth rate (CAGR) of 5.4%, reaching a global gross merchandise value (GMV) of approximately $779 billion in 2023. The trajectory ahead is even more robust, with market forecasts indicating an accelerated CAGR of 7.2% through 2028, positioning the global freshly made drinks market to surpass $1.1 trillion.
Source: CIC, International Monetary Fund, United States Department of Agriculture
Unsurprisingly, central to this remarkable global growth are the rapidly expanding markets in China and Southeast Asia, whose growing consumer markets and rising disposable incomes underpin the explosive regional demand. China's freshly made beverage sector alone, valued at RMB 517.5 billion ($72 billion) in 2023, is poised for substantial expansion at a projected CAGR of 17.6%, nearly doubling to RMB 1,163.4 billion ($162 billion) by 2028. Southeast Asia is anticipated to surpass even this vigorous pace, expanding at a CAGR of 19.8%, driven by similarly compelling demographic and economic trends. Collectively, these two regions are expected to represent approximately 40% of the incremental global market growth over the next five years, with their combined market share nearly doubling from 12% to roughly 19.4% by 2028. In particular, China’s exceptional growth potential stems largely from its relatively low per capita consumption of freshly made beverages compared to more developed markets. Annual per capita consumption in China currently stands at only 22 cups—substantially lower than mature markets such as the U.S. (323 cups), Europe (306 cups), and Japan (172 cups). This notable disparity highlights considerable untapped potential, especially in lower-tier cities and rural areas, where store density and market penetration remain significantly below first-tier urban centers. First-tier cities currently have store densities approaching 474 stores per million residents, whereas third-tier and lower-tier cities average only 273 stores per million, underscoring the enormous latent demand and room for aggressive market expansion by companies positioned to deliver affordable, accessible, freshly made beverages.
Within this already dynamic landscape, the mass-market segment— defined as products priced under RMB 10 per item and the primary segment in which Mixue operates— is the clear growth leader. Between 2018 and 2023, mass-market freshly made drinks in China grew at an exceptional CAGR of 23.3%, significantly outpacing mid-priced and premium categories. This mass-market segment is expected to continue its strong momentum, growing at an anticipated CAGR of 22.2% from 2023 to 2028, reaching RMB 371.9 billion. The driving force behind this robust growth is a combination of increasingly value-conscious consumers, rising consumption frequency, and a growing preference for affordable yet quality-oriented daily indulgences.
Source: CIC, National Bureau of Statistics of the PRC, International Monetary Fund
Moreover, despite significant fragmentation, with roughly 660,000 individual freshly-made beverage shops across China, the market has produced a few dominant leaders. Foremost among these is Mixue, which holds a commanding market position. By the close of 2023, Mixue emerged as China's largest freshly made beverage brand in terms of GMV, accounting for 11.3% of the entire market. The brand’s dominance is even more pronounced in total consumption volume, with Mixue selling approximately 6.9 billion cups annually—more than the combined volume of the next four largest competitors. Mixue’s competitive advantage primarily arises from a uniquely integrated, supply-chain-focused business model, enabling the company to consistently deliver remarkably low prices alongside dependable product quality and consistency. Competitors in China's freshly-made beverage sector typically pursue mid-tier or premium pricing strategies—brands such as HeyTea, Nayuki, or Chabaidao position themselves at higher price points, frequently exceeding RMB 20 per cup. This leaves Mixue uniquely positioned as the leader of the mass-market category, securing unmatched store density, particularly in lower-tier cities. Mixue’s extensive store network, unparalleled economies of scale, and cost-efficient operations collectively reinforce its market-leading position.
Yet, despite this optimistic outlook, the industry faces notable challenges. Foremost among these are concerns surrounding food safety and hygiene compliance, which increasingly influence consumer purchasing decisions. Mixue addresses these risks through stringent supply-chain controls, standardized operations, and robust quality assurance practices. Additionally, fluctuations in raw material prices— particularly dairy, fruits, and coffee beans— pose operational risks, though Mixue’s vertical integration mitigates some of this exposure. Finally, steadily rising labor costs present ongoing operational pressure, emphasizing the necessity of continued efficiency improvements, automation investments, and tightly managed store operations.
Deal Structure and Rationale
Mixue’s IPO is structured as a "Global Offering," meaning shares are offered simultaneously to investors both within Hong Kong and internationally. As stated in the IPO prospectus, the company initially plans to issue 17.06 million shares, representing roughly 4.52% of the total shares after the IPO. Additionally, there's an option for underwriters to issue around 2.56 million extra shares (15% of the original offering size) if demand from investors exceeds expectations. This option, known as an "over-allotment," helps stabilize the stock price once trading begins. Priced at HK$202.50 per share, Mixue expects to raise about HK$3,291 million ($423 million) after deducting fees and expenses associated with the IPO.
But why IPO now? Well, I’d like to break down Mixue’s rationale for going public from both internal and external perspectives. Internally, the decision to IPO is about capitalizing on the company’s recent growth momentum. With the company expanding rapidly in recent years, both within China and abroad, it now sees merit in raising further capital to finance investments in future operations.
To summarize the stated uses of the IPO funds, I can categorize Mixue’s plans to use the IPO proceeds in three strategic ways. First off, approximately two-thirds of the funds (66%, or HK$2,172 million) will directly support its supply-chain expansion. This involves significantly expanding the company's own factories in China, notably a new major facility in Hainan. The Hainan location offers special economic benefits, including tax advantages as part of China's "Free Trade Port" policy, which makes it cheaper and easier for Mixue to supply ingredients internationally. Further investments in production facilities in Henan, Guangxi, Chongqing, and Anhui will also support Mixue’s rapidly growing network of stores by increasing the production of critical ingredients such as ice cream powder, syrups, coffee products, and packaging materials. As Mixue opens new stores, especially in lower-tier Chinese cities with significant growth potential, having efficient and scalable production becomes essential.
The second main use of funds lies in international expansion. About 12% of the funds (HK$395 million) will finance the construction of a regional supply-chain center in Southeast Asia, a market where Mixue already has a strong presence (more than 4,000 stores). This regional center will help reduce costs and improve logistics efficiency by locally sourcing and processing ingredients, supporting Mixue’s strategy to replicate its successful affordable beverage model internationally.
Mixue opened its first store in Australia in 2023 with a flagship store in Sydney.
Finally, the third main use of funds, constituting about 12% (HK$395 million) of the IPO proceeds, will go towards strengthening its brand identity. The company’s "Snow King" mascot, already highly recognizable in China, will be further developed into multimedia products such as animated TV shows or branded merchandise. The Snow King already has his own animated TV series and likely some funds will go into new seasons of the TV show. There have also been rumors of a Snow King-themed theme park, and all of this spending would be aimed at building a deep sense of customer loyalty and emotional linkage with the brand identity.
Other miscellaneous uses of funds include investing in digital technology upgrades across Mixue’s entire business and general business operations, which take up about 10% (HK$329 million) of the IPO funds.
IPO proceeds raised in USD from 2020-2025
Now from the external perspective, Mixue carefully timed the IPO to leverage favorable market conditions in Hong Kong. After several subdued years in the IPO market, investor enthusiasm started to rebound in 2024, particularly for profitable consumer companies demonstrating clear growth potential. The strong performance of recent IPOs, such as Chinese consumer brands like Midea, highlighted this renewed interest. Mixue capitalized on this favorable investor sentiment, achieving massive oversubscription; in fact, its retail offering was oversubscribed by a whopping 5,125 times, with investors committing around HK$1.8 trillion or about US$231 billion in liquidity. The IPO attracted significant institutional interest as well, with notable investment firms like Hillhouse Capital and Meituan’s investment arm committing as cornerstone investors, meaning they purchased shares ahead of public trading and agreed not to sell them for at least six months, which further signals strong confidence in Mixue’s long-term growth prospects.
Overall, Mixue’s IPO was strategically timed and structured to take advantage of rebounding market conditions, raising equity capital at attractive terms to both finance aggressive expansion plans and provide liquidity to founders and early shareholders. This fresh capital combined with Mixue’s detailed expansion plans position Mixue to solidify its leading market position in China’s affordable freshly made drinks sector and successfully replicate its business model on the global stage.
Deal Discussion:
What Exactly is Mixue’s Business Model and How Did It Succeed?
I thought the easiest way to answer this question might actually be to pose another one— one that could trigger nightmares for anyone reflecting on their past finance interviews: How would you value a company like Mixue? Perhaps a DCF analysis? I mean sure, they do have relatively stable cash flows, but they are still a very fast-growing company that may be hard to predict growth. What about maybe comparable companies? Now, that’s immediately problematic, considering no real peers match Mixue’s distinctive business structure. In reality, Mixue is essentially two intertwined businesses operating in tandem: one part franchise-driven bubble tea retailer and one part vertically integrated supplier that generates revenue from selling raw ingredients and beverage-making supplies to a vast network of franchisees that must exclusively order supplies from Mixue. So, if I had to answer this valuation question in an interview, I think I would opt for a sum-of-the-parts valuation analysis to grasp Mixue’s unique model. Here’s what I mean.
1. Vertical Integration
Unlike most food service franchises that gain profitability from franchising fees and the actual sales of food and beverages and vertical integration merely a way to cut on costs and increase margins, the upstream supplier segment of Mixue’s business is far from an afterthought and is the foundational backbone of its entire model. As a vertically integrated supplier, Mixue mandates its store owners to exclusively source all key ingredients, packaging materials, and even equipment directly from Mixue itself. Owning the full upstream value chain allows Mixue unmatched control over ingredient quality, price stability, and most importantly corporate profitability. Initially triggered by a melamine contamination scare in China in 2008, Mixue built extensive production capabilities and its own sourcing channels across China, notably in provinces like Henan, Hainan, Guangxi, Chongqing, and Anhui. In Sichuan’s Anyue region alone, Mixue’s subsidiary, Snow King Agriculture, now dominates the lemon market, sourcing approximately 115,000 tons annually, making Mixue China’s single largest lemon buyer.
Returning to the analogy I used in the introduction, Mixue acts as the Nvidia or TSMC of the bubble tea market: it provides the infrastructure (the “shovels”) that empowers thousands of franchisees (“gold diggers”) to succeed. These supplier profits constitute an extraordinary 98% of Mixue’s revenue base, illustrating just how foundational this vertical integration truly is.
2. A “Loss Leader” Franchise Model: Low Fees, High Volume
But supply-chain dominance alone can't fully explain Mixue’s staggering success and just because franchise fees only constitute 2% of Mixue’s revenue doesn’t mean franchising isn’t part of the company’s core strategy. To truly understand Mixue’s rapid expansion, we have to pivot our attention to its radically accessible franchising model. Most global fast-food franchises— like McDonald's or Starbucks— require substantial initial franchise fees, hefty royalty payments, and significant upfront capital investments. Mixue took the opposite approach, radically reducing barriers to entry by charging minimal upfront franchise fees and eliminating ongoing royalties entirely. As written in the IPO prospectus, Mixue charges their “franchisees on an annual basis without regard to their operational results.” In other words, they do not earn any revenue from the actual sales of its drinks and ice cream at franchised stores (which is literally 99.8% of their stores). Thus, this once again highlights the importance of its business as a supplier given its profits stem almost solely from the continuous supply of ingredients and materials to its franchisees.
Nevertheless, this low-friction and low-cost franchise entry allowed Mixue to rapidly penetrate China’s third- and fourth-tier cities, typically underserved by premium international chains. By making franchise ownership achievable for first-time entrepreneurs and younger demographics, Mixue created a legion of dedicated store operators. At peak expansion, Mixue was opening an astonishing 25 new locations every single day. But when you think about it, the more franchisees that Mixue ultimately has, the more “customers” they have that must exclusively purchase ingredients and supplies from Mixue, therefore increasing revenue and profits. This reminds me almost of a venture capital investment in its franchisees. By subsidizing entrepreneurs with low franchise fees and entry costs upfront, Mixue acquires new customers who must be 100% loyal to Mixue and continuously purchase Mixue’s products in the form of raw ingredients and equipment. This makes it so that Mixue can almost operate like a SaaS company, where their franchisees are subscribing to a delivery service of ingredients and supplies, and Mixue can enjoy strong recurring cash flows and low churn rates like the software companies that investors love. Thus, one can think of Mixue’s franchising business as a customer acquisition/retention strategy, sacrificing some franchising fees for more profits via the lifetime value of the franchisees that will exclusively source supplies from Mixue forever.
3. Operational Discipline
Now that we understand the two core strategies that lay the foundation for Mixue’s success and economic moat, several other factors have also contributed to Mixue’s rise to the top of the freshly made drinks industry. Like most successful businesses, has grown to have an incredibly lean operational structure. Stores typically occupy modest spaces (often between 20–40 square meters), are strategically located near schools or pedestrian-heavy areas, and deliberately exclude costly equipment like freezers to reduce overhead. Moreover, its disciplined inventory management prevents cash from being tied up unnecessarily, further enhancing operational efficiency. For me, Mixue perfected the playbook first pioneered by retail giants like Walmart or Costco: relentless cost control coupled with extreme affordability. Their mass-market appeal lies precisely in offering quality beverages at unmatched prices, enabling Mixue to generate staggering volumes. This operational discipline translated directly into robust profitability, boasting consistent net profit margins between 15% and 16%, even amid rapid expansion and intense price competition.
4. Brand Building: Snow King and Grassroots Marketing
Finally, there is one more aspect of Mixue’s success that even vertical integration and operational excellence don't fully explain, and that is Mixue’s cult-like brand affinity and strong intellectual property with their iconic mascot: The Snow King. After introducing the icon in 2018, rather than pursuing expensive celebrity endorsements or traditional media advertising, Mixue leveraged the organic virality and digital-first marketing strategies inherent in social media, amplifying Snow King's popularity through user-generated content, viral memes, and catchy music. The whimsical appearance of the Snow King, holding his iconic ice cream scepter and radiating friendliness and warmth, quickly captured the imagination of millions.
The key to Mixue’s marketing strategy was in humanizing the brand. What truly differentiates Snow King from typical brand mascots is how effectively it permeates everyday life, fostering a sense of collective nostalgia and emotional resonance. Snow King's carefully cultivated image—upright, friendly, passionate, and determined—has transformed the mascot into more than just a branding tool; it is a relatable symbol of joy, comfort, and sweetness that consumers across generations associate with happy memories and simple pleasures. This emotional dimension ensures customer loyalty not just through transactional value but also through lasting emotional bonds.With approximately 315 million registered members and nearly 47 million followers across major Chinese social media platforms—including Weixin, Douyin, Kuaishou, Rednote, Weibo, and Bilibili— Snow King possesses the single largest follower base in China’s freshly-made drink industry by far. The numbers are simply staggering. Snow King-related hashtags and Mixue’s theme song “I Love You, You Love Me, Mixue Ice Cream & Tea” have garnered over 19.5 billion and 9.7 billion views, respectively. Beyond mere branding, Snow King has permeated popular culture through Mixue’s strategic production of animated TV series such as “The Legend of Snow King”, which amassed more than 220 million views since its 2023 debut, followed by the successful launch of another series, “Snow King and the Sands of Mystery”, in late 2024.
Moreover, Snow King serves as a cost-effective yet highly impactful marketing tool. User-generated content— spanning from memes and fan art to remixed songs and amateur animations— amplifies Snow King’s reach organically. Fans become co-creators of the brand’s narrative, enhancing authenticity and significantly reducing the company's marketing costs. Indeed, despite this extraordinary brand reach, Mixue spent only 0.9% of its revenue on branding and promotion in the nine months that ended September 2024—highlighting Snow King’s unparalleled efficiency as a marketing channel. To capitalize further on this momentum, Mixue plans to invest significantly (approximately HK$395 million from IPO proceeds) in enhancing Snow King’s intellectual property. This includes further multimedia content such as animated films, new merchandise lines, and strategic collaborations with global brands. By solidifying Snow King’s position in broader popular culture, Mixue effectively diversifies its revenue streams beyond beverage sales, opening pathways to long-term sustainable growth driven by IP monetization.
In essence, Snow King functions similarly to legendary IPs such as Mickey Mouse, Pokémon, or even Hello Kitty. These characters’ enduring cultural significance ensures customer loyalty that persists across generations, powered by nostalgia and emotional connection. For Mixue, Snow King isn’t merely just a branding or marketing strategy, they see it as a strategic asset that secures the company’s future growth by embedding its identity into the collective consciousness, making Mixue not just a beverage brand but a cornerstone of pop culture for generations to come.
Synthesizing Success: More Than Just the Sum-of-the-Parts
“The Whole is Greater Than The Sum of Its Parts”
Returning to our initial valuation analogy, this is where a sum-of-the-parts analysis becomes illuminating. Mixue’s exceptional performance isn’t attributable to a single isolated factor. Instead, it's the seamless integration of these distinct yet interdependent components—vertically integrated supplier dominance, radically accessible franchising, disciplined operational efficiency, and innovative grassroots branding—that collectively generates its unmatched competitive advantage. To put it plainly, Mixue succeeded because it took a simple idea, and took it very seriously. But at the same time, although Mixue picked and stayed in the same one lane on the highway of businesses, it redesigned its lane to make sure they would be in front. In a fiercely competitive industry, Mixue’s true moat isn’t just low prices or wide distribution but the careful orchestration of its business model components, each reinforcing the other. And the result? Mixue is more than just the sum of its parts and a pioneer with a uniquely defensible position as a global leader in freshly made beverages.
A Primer on the IPO Process & Are IPOs Finally Back?
If Mixue’s IPO reignited your curiosity about the IPO market, or perhaps even your optimism, you might not be alone. As an M&A-focused blog, this is the first time I have covered an IPO or any type of financing deal. After looking at how IPOs really work and the recent developments in IPO markets, I really think there isn’t a better time for me to write my first IPO post. In recent years, after the IPO boom of 2021, high-profile listings have slowed dramatically amid global macroeconomic uncertainty and tighter regulations, but perhaps Mixue’s blockbuster Hong Kong debut in March 2025 could signal the market’s revival. But before making rather far-fetched claims such as declaring the IPO drought as officially over, let’s first start with the basics and unpack exactly how an IPO works, why Mixue’s offering was so enthusiastically received, and then ultimately put a verdict on whether this marks a sustainable turning point for public listings in Asia and beyond.
Understanding the IPO Process: From Filing to Debut
At its core, an Initial Public Offering (IPO) marks a financing event that represents a private company's debut on a public stock exchange, offering shares to institutional investors (i.e., asset managers like BlackRock, sovereign wealth funds, pension funds, endowments, etc.) and retail investors (average stock market participants like most of us). This process not only allows companies to raise substantial capital but also provides an exit or liquidity event for early investors and employees, as well as raising the firm's public profile. Here is an overview of the IPO process from the prospectus filing to the trading debut:
Decision and Preparation:
The company’s board of directors, in consultation with senior management and financial advisors, decides that going public is the best strategic move to support growth and unlock value. This decision leads to extensive internal audits, valuation exercises, and the preparation of financial statements according to international standards (e.g., IFRS or GAAP).
Selecting Underwriters and Advisors:
The company then selects investment banks and legal advisors to manage the IPO process. These underwriters help determine the offer price, structure the deal and market the shares to potential investors. Think of these underwriters as the middleman between the corporation looking to IPO (the seller) and the investors that will invest in the corporation (the buyer). From what I know, there are two types of equity underwriting. One is called “firm commitment,” where the underwriter/investment bank agrees to purchase the entire issue of shares from the company and then resells the shares to the public. This is a more common type of underwriting, but in doing so, the investment bank bears the risk of unsold shares if the IPO does not attract enough demand. In other words, the corporation will still raise its intended capital no matter what happens in the IPO, and all the execution risk is transferred to the underwriting investment bank. The other type of equity underwriting is called “best efforts,” essentially saying we, the investment bank, will do our best to market and sell the intended issuance of shares. But if we can’t, we won’t bear the risk of unsold shares and are not obligated to make whole for a corporation’s shortage in intended funding. So, in this case, it is the corporation looking to go public that bears the execution risk, as they don't know for certain how much capital they will raise.
Due Diligence and Prospectus Preparation:
After the underwriters are chosen, the investment bankers work closely with the management team of the company filing for the IPO and begin to prepare the documents needed to file the IPO prospectus. This phase involves lots of due diligence, where the company’s financials, operations, legal structure, and risks are thoroughly vetted. This information is compiled into the IPO prospectus, which is a detailed document often spanning hundreds of pages worth of content that outlines the business model, growth strategy, risks, the intended use of IPO proceeds, etc.
Regulatory Filings and Approvals:
The prospectus is then submitted to regulatory authorities (e.g., the Securities and Futures Commission in Hong Kong or the Securities and Exchange Commission, aka the SEC, for all US-based IPOs) for review. The approval process can be rigorous, ensuring that all disclosures are accurate and that the offering complies with relevant laws.
Marketing the IPO:
Often referred to as the “roadshow,” this phase sees company executives and investment bankers meeting potential investors (mainly institutional investors) to pitch the value proposition and generate interest in the upcoming share offering. The roadshow also helps gauge investor appetite and demand for the IPO, which will help with the next step in the process: Pricing the IPO.
Pricing and Allocation:
Based on investor feedback and market conditions, the final offer price is set. Shares are then allocated to investors, sometimes with an overallotment option that allows underwriters to cover excess demand.
Trading Begins:
Once all approvals and allocations are finalized, the company’s shares begin trading on the designated stock exchange, marking its official transition into the public market. And of course, this is the moment where company executives can do the honor of ringing the bell.
And that’s an IPO process at a high level, in a nutshell, from a college student who has never run an IPO process… So maybe take everything here with a grain of salt.
Why Do Companies IPO?
Now we know how IPOs work; but why would companies want to go public in the first place? Here are a few common rationales for companies looking to go public:
Capital for Growth:
This is the original rationale for companies going public. The capital raised in an IPO can be used to expand operations, invest in new technology, pursue acquisitions, etc.
Liquidity for Shareholders:
An IPO provides a way for early investors and employees to cash out their stakes. This is especially important for private companies/startups that use a lot of stock-based compensation as salary for their early employees.
Brand Credibility and Market Visibility:
Being listed on a major stock exchange enhances a company’s public profile and credibility, especially since public companies must clearly disclose the financial health of their companies in quarterly and annual reports (10Qs and 10Ks).
Currency for M&A:
This rationale isn’t always thought of, but companies often acquire or merge with other companies using stock as a method of payment, thus, publicly traded shares can also serve as acquisition currency for future mergers and strategic deals.
There can obviously be a lot more rationales for companies filing for IPOs, such as to satisfy the ego of a business founder, but I think these are more or less the main reasons for companies looking to go public.
IPO In Context: The Mixue IPO Process
Now, we can put what we’ve learned in context. For Mixue, the IPO journey began several months prior to its March debut with the filing of its detailed IPO prospectus. For Mixue, the prospectus was particularly crucial, given investors’ need to fully grasp the nuances of its vertically integrated supply chain and franchise strategy that serves as a powerful moat that protects the company’s profitability from other competitors.
The company then embarked on a structured “roadshow,” where its executive leadership, accompanied by underwriting banks (in this case, global giants like Goldman Sachs, Morgan Stanley, and China International Capital Corporation), presented directly to institutional investors across the globe. These roadshows allow investors to deeply question management on everything from growth assumptions to potential pitfalls. This phase is crucial in gauging institutional appetite and determining an optimal IPO price range.
Once investor demand was assessed, Mixue’s IPO was priced at HK$202.50 per share. Interestingly, IPO pricing often represents a careful balance between maximizing proceeds for the company and ensuring attractive first-day trading performance for investors— a delicate equilibrium Mixue appears to have mastered, given its spectacular market debut. Finally, Mixue’s stock began trading on the Hong Kong Stock Exchange on March 3rd, 2025.
Analyzing the Mixue Mania: Why Such Enthusiasm?
So now we know what Mixue had to go through to ultimately become a public company trading on the HK stock exchange. But going public is one thing and being a successful IPO is another. And Mixue’s IPO was not just successful, it was a blockbuster. Again, the IPO raised approximately HK$3.44 billion or US$444 million by offering 17 million shares at HK$202.50, and the retail tranche of the offering was oversubscribed over 5,000 times. On debut, Mixue’s stock opened at HK$262 and surged as high as HK$298 before closing the day up around +47%, making the IPO the strongest first-day performance in Hong Kong since 2021. In my view, this extraordinary performance can be attributed to several converging factors.
First, pent-up investor demand played a significant role. Following years of subdued IPO activity across Asia, particularly in Hong Kong, Mixue represented the type of high-quality, profitable growth story investors had eagerly awaited. After high-profile IPO disappointments (like Coreweave most recently) and an IPO market concentrated in tech and pharma companies, Mixue stood out with its proven profitability, clear operational discipline, and attractive growth narrative.
Second, the stability of Mixue’s financial model was a stark contrast to recent trends in consumer and tech IPOs, which have typically emphasized rapid growth at the expense of near-term profits. I mean, a lot of companies, especially in the tech space like Coreweave, are going public before they are even profitable. In contrast, Mixue’s profitability was robust and growing, with net profit margins consistently around 15–18%, operating without substantial leverage, and boasting steadily rising revenues. The clarity and simplicity of its model, consisting of low prices, high volumes, and predictable earnings from supplying its own franchisees, offered investors a comforting narrative amidst ongoing economic uncertainty.
Additionally, Mixue’s consumer appeal translated into extraordinary retail investor enthusiasm. Unlike niche tech or biotech IPOs, Mixue was already a household name across China and increasingly throughout Southeast Asia. Retail investors, in particular, often gravitate toward familiar consumer brands, a factor Mixue strategically leveraged by carefully structuring its IPO to include a substantial retail tranche and engaging in accessible public marketing. This high visibility resulted in massive retail subscription demand and a sharp increase in share price after the debut.
IPO Market Revival: A New Dawn or a Temporary Bounce?
So, does Mixue’s stellar debut signify the sustained revival of IPO markets? Or is this merely a spectacular, but isolated, event?
On the one hand, the Mixue IPO suggests that investor sentiment is improving significantly not only in Hong Kong but also in global markets. In psychology, a high-profile success can often break negative feedback loops; in the context of markets, Mixue’s success is shifting the IPO conversation from “the IPO window is shut” to “Who’s next?” Indeed, soon after Mixue’s IPO, news emerged that Contemporary Amperex Technology (CATL) – the world’s largest EV battery maker – was moving forward with preparations for a massive $5B Hong Kong listing in 2025. Similarly, Chery Automobile, a major Chinese carmaker, indicated plans for a Hong Kong IPO in 2025. Perhaps most interestingly, one of Mixue’s key competitors in the bubble tea market in China, Chagee, just filed their IPO prospectus and is looking to go public on the NASDAQ stock exchange, which displays how market sentiment can ripple across global markets— from Asia to the US. All of these upcoming IPOs are exactly the kind of “emerging deals” that require a confident market to succeed. Their willingness to launch implies that Mixue’s success is seen not as an isolated case, but as evidence of a broader revival of investor appetite for new equity issues in Hong Kong and beyond.
Yet, on the other hand, caution is definitely warranted before declaring that IPO markets are fully back. Mixue’s IPO enthusiasm was partly driven by scarcity— investors desperate for attractive, profitable listings after years of uncertainty. Sustained revival in IPO activity will depend on broader macroeconomic conditions, regulatory environments, and investor confidence beyond the consumer sector, which to be honest, feels a little hard to come by given all the uncertainty from the United States and Trump’s policies (we won’t get into that discussion today). Beginning with the US, global uncertainties remain pronounced, including interest rate volatility, geopolitical tensions, and lingering economic slowdowns, all of which could temper IPO momentum.
Nevertheless, Mixue’s success has definitely reinvigorated some investor and issuer confidence. According to local brokerage heads quoted in Hong Kong media, Mixue’s IPO was akin to an “adrenaline shot,” renewing optimism for both retail investors and institutions previously hesitant to commit to new listings. Thus, we can see Mixue’s IPO as a bellwether that indicates improved investor sentiment and fits into the largely anticipated narrative of early 2025 “green shoots” for IPOs, after a long dry spell.
The Bottom Line
Looking at the global IPO landscape in recent years, from 2020–2025, IPOs have cycled from booms to busts to now a budding recovery. But looking at history, whether it’s the dead silent IPO markets during the global financial crisis from 2008-2009 or the drastically muted activity after the dot-com bubble of the early 2000s, it’s evident that IPO winters eventually give way to spring. And how long do IPO winters last? Looking at historical data, it is surprisingly not very long, often around 1–3 years. The early 2000s was about a 2.5-year freeze, and 2008–09 was about 1.5 years, so if the current IPO slowdown began in early 2022, from an optimistic perspective, the coming year may well mark the beginning of a new spring for IPOs in the U.S., Hong Kong, and around the world.
Notice the drop in IPO activity in the years following the Dot com bubble of 2000 and during the 2008-2009 GFC. However, IPO levels resurged in both scenarios after a ~2-3 year downturn period. We are seeing that trend developing again after the IPO boom in 2021. We may be getting close to Spring…
For readers and market participants, I think the key takeaways of this IPO discussion are, first, watch the bellwethers (each major IPO is a barometer for the next), second, focus on quality (companies coming to market now tend to have stronger fundamentals, like Mixue), and third understand the global interplay of markets (what happens in Hong Kong can influence sentiment in New York, London, Shanghai, etc., and also vice versa).
So, the bottom line, in my opinion, is this: Mixue alone is obviously not going to single-handedly resurrect global IPO markets, especially given all the macroeconomic and geopolitical uncertainty from the Trump administration’s hazy long-term policy strategy. But Mixue’s debut success certainly underscores that investors remain eager for great companies, solid fundamentals, and compelling stories, essentially kicking open the door for the backlog of IPOs to start entering the market again.
Bear or Bull?
Bull Case
1. Competitive Moat via Scale Economies:
Mixue’s unprecedented scale— 46,000+ stores and counting— provides it with unparalleled market penetration and buying power. With more scale comes better margins, stronger supplier leverage, and barriers to entry nearly impossible for competitors to replicate swiftly. Mixue’s dominance in the mass-market segment, especially within lower-tier cities in China and Southeast Asia, positions it to continue benefiting disproportionately from growing demand.
2. Robust and Proven Profitability:
Unlike many consumer IPOs of recent years characterized by high growth but unproven profitability, Mixue already boasts industry-leading margins of 15–16% and strong cash flows (operating cash inflow of RMB 5.1 billion for the first nine months of 2024 alone). This profitability is underpinned by predictable, recurring revenue streams from supplying raw materials to franchisees. As Mixue expands further domestically and internationally, these dynamics are likely to strengthen, solidifying investor confidence.
3. Significant International Growth Potential:
While already massive in China, Mixue’s model has ample runway abroad. Early success in Southeast Asia (over 4,000 stores), combined with capital raised from the IPO, positions Mixue to replicate its successful blueprint in markets with similar demographics and consumer behaviors, such as Vietnam, Indonesia, and the broader Asia-Pacific region. Additionally, Mixue’s strategic plan for localized supply chains enhances its competitiveness internationally, where few competitors have invested similarly.
4. Favorable Macro Trends:
Mixue sits squarely at the heart of the rapidly expanding mass-market beverage industry, particularly in emerging markets with rising disposable incomes. With global freshly made drinks expected to reach over $1.1 trillion by 2028 and China’s consumption per capita still significantly below mature markets, Mixue has ample headroom to sustain aggressive growth rates.
5. Strong Brand Equity and Cultural Resonance:
Mixue’s beloved “Snow King” mascot has transcended typical branding, embedding itself culturally among younger demographics. This brand power provides cost-effective marketing leverage, increasing customer loyalty and reducing the need for expensive advertising. This brand equity protects margins even as Mixue grows exponentially and provides a foundation for Mixue’s diversification of revenue streams as it enters more peripheral business opportunities.
Bear Case
1. Saturation Risk:
At its enormous scale, Mixue faces a real risk of saturation in its core domestic market, not only from competitors but literally from itself. With Mixue stores opening at a rapid pace, 25 per day at its peak, cannibalization of sales and declining per-store profitability are potential threats, especially in densely populated markets. Overexpansion in lower-tier cities could result in diminishing returns, affecting franchisee profitability and, ultimately, Mixue’s core strength in the market.
2. Execution Risk in International Markets:
There is still the chance that Mixue’s success in China and early gains in Southeast Asia might not translate smoothly to newer markets. Cultural nuances, regulatory complexities, and entrenched local competition pose meaningful hurdles. The aggressive localization of supply chains, while beneficial long-term, initially demands substantial capital and operational expertise, exposing Mixue to potential execution missteps or delays.
3. Commodity Price Volatility:
Mixue’s razor-thin pricing model makes it acutely sensitive to volatility in commodity prices (e.g., sugar, dairy, fruit). Despite extensive vertical integration providing some cost control, sudden or prolonged price spikes in raw materials could materially erode margins, given Mixue’s limited flexibility to pass costs onto highly price-sensitive consumers.
4. Brand Fatigue and Evolution Risks:
Just to play the role of devil’s advocate here, as much as people love the Snow King today, the immense popularity of Mixue’s brand and mascot could eventually face fatigue or declining relevance among younger consumers who drive current growth. Relying heavily on one iconic mascot creates vulnerability, necessitating constant innovation and brand reinvention—a challenge many large-scale brands historically have struggled to navigate.
5. Regulatory Scrutiny and Governance Pressures Post-IPO:
As a newly listed public entity on the Hong Kong Stock Exchange, Mixue will face increased scrutiny, higher governance standards, and potentially restrictive regulatory environments, particularly concerning food safety, franchise management, and operational transparency. Such pressures might lead to higher operating costs, slowing down agility and responsiveness. Not to suggest that Mixue isn’t doing a good job with compliance, but the story of Luckin Coffee’s meteoric rise and fall (and rise again now) with their accounting scandal in 2020 is a recent cautionary tale for Chinese beverage franchises that are displaying rapid growth.
Final Verdict: Bull
For me, Mixue’s IPO presents a pretty compelling bull case. Actually, it’s one of the deals that I am most optimistic about out of the recent deals that I have covered on this blog. Its unique business model as a supplier, vertically integrated supply chain, substantial scale advantages, disciplined operational execution, and exceptional branding collectively outweigh potential risks such as domestic market saturation, international execution complexities, and vulnerability to commodity price fluctuations. These risks also appear manageable given Mixue’s demonstrated strengths: robust vertical integration helps insulate against supply chain disruptions and commodity volatility; carefully planned and well-paced international expansion and localization efforts minimize execution risk; and the company's continued reinvestment into branding and digital infrastructure can mitigate saturation concerns domestically. Furthermore, the IPO was also appropriately priced and was well received by investors, as evidenced by the stock’s growth in recent weeks. Thus, the robustness of Mixue’s fundamentals, supported by proven profitability and a clear roadmap for future expansion, positions the company confidently for sustained growth and market leadership.
Truth is, either way, whether the company goes on a historical bull run or files for Chapter 11 sometime in the future, they can count on me to be there for a lemon iced tea anytime, anywhere, for the Snow King. But the likely scenario that I can imagine is the Snow King’s eventual coronation as the new king of the global food service industry.
