CHAGEE Eyes U.S. IPO Amid Go-Global Push

in the second half of the year, CHAGEE's major headlines have been centered around its global expansion. In July, the company officially established its global headquarters in Changning District, Shanghai. It is widely expected that CHAGEE will likely pursue an IPO in the U.S. by the end of September or October. The extensive advertising and endorsement activities earlier this year strongly signal the company’s preparations for going public.

U.S. IPO: A Choice or a Necessity?

Looking back at recent tea beverage IPOs, setbacks have been common. In 2021, NAIXUE, hailed as the "world's first publicly traded tea company," was listed on the Hong Kong Stock Exchange, only to see its market value drop from a peak of over HKD 30 billion to just over HKD 2 billion. ChaPanda, which went public in Hong Kong this April, has seen its market cap fall below HKD 8 billion as of this writing. Meanwhile, all tea beverage companies are scrambling to seize this year’s window of opportunity. Domestically, brands in the milk tea sector have largely completed their expansion, and the highly intense competition within the industry is now a widely accepted fact.

If CHAGEE proceeds with its predicted IPO, it would be both reasonable and expected. From an internal strategic perspective, CHAGEE has always aimed for global expansion, as evidenced by its motto, "Using Oriental Tea to Connect with the World." Founder Zhang Junjie has repeatedly stated in public that CHAGEE benchmarks itself against Starbucks, with the ambition to surpass it. While most tea companies that went public in Hong Kong primarily targeted the Asia-Pacific region and focused heavily on Southeast Asia, CHAGEE’s decision to bypass Hong Kong and list in the U.S. would garner global attention and attract a significantly different pool of investors. Moreover, CHAGEE reportedly secured investment from the U.S. hedge fund Coatue in 2023, further solidifying its connections to the U.S. market.

From a macroeconomic standpoint, during the Federal Reserve’s September 19 meeting, it announced a 50 basis point reduction in the federal funds rate range to 4.75%-5.0%. With further rate cuts expected in September and the U.S. presidential election approaching in November, geopolitical risks and uncertainties surrounding global supply chains are expected to increase. October may present CHAGEE with its best opportunity to go public.

Earlier this year, Mixue, Goodme, and Auntea Jenny all filed IPO applications in Hong Kong, but their prospectuses have since lapsed. The market is now looking to CHAGEE, with its stronger financial performance, to shift the capital market’s pessimism toward the tea beverage industry. For CHAGEE, in a market exhausted by intense competition, capturing this final window of opportunity means an IPO is not just a choice, but a necessity.

After Southeast Asia, Is North America the Next Frontier?

"Someone sent me a picture of a Mixue store on top of Mount Tai and asked why they chose that location. My first thought was: maybe there aren’t many stores up there. The base of the mountain is already filled with ChaPanda, Heytea, and others, so Mixue decided to open one at the summit. This gave me a huge insight—competition in China has become so intense that expansion abroad is inevitable," shared a seasoned investor who has invested in multiple tea brands, including Heytea and Mixue, during an event hosted by EqualOcean.

With new competitors constantly emerging and slicing up the already saturated market, from high-end malls in top-tier cities to subway shopping streets and pedestrian zones in smaller towns, the tea industry—where it’s difficult to build a solid competitive moat—faces widespread anxiety. The fact that competition has even reached the "top of Mount Tai" illustrates this point. Expanding internationally has become the only viable path for survival and growth. The strategies forged in China’s hyper-competitive "red ocean" market, combined with the strengths of the Chinese supply chain, are propelling tea brands to explore overseas markets.

Due to factors such as low entry barriers, similar tea cultures, large Chinese communities, and favorable climates, many tea brands have chosen Southeast Asia as their first stop for international expansion. EqualOcean has analyzed this extensively, and readers interested in tea brands’ expansion into Southeast Asia can refer to previous articles.

From a business standpoint, CHAGEE was always destined to go global. The brand began formulating its international strategy early on, even when it had fewer than 100 stores in China. Due to its supply chain, tea culture, and geographic factors, CHAGEE also selected Malaysia, Singapore, and Thailand as its primary overseas markets. The brand now operates more than 130 stores in Malaysia and opened three new directly operated stores in Singapore in August. One of CHAGEE’s major investors even remarked at an EqualOcean event that "CHAGEE is performing exceptionally well in Southeast Asia, even better than local Starbucks stores."

EqualOcean believes that after Southeast Asia, CHAGEE’s next expansion will likely target North America. Although coffee culture dominates in North America, the tea beverage market is gaining traction, especially as younger generations become more health-conscious and open to tea drinks. According to a report by the International Franchise Association, the milk tea category in the U.S. grew by 7.5% in 2023, with much of that growth driven by bubble tea and other Asian tea beverages. Statista forecasts that the North American tea beverage market will see a compound annual growth rate (CAGR) of 13.42% from 2024 to 2029, with market size reaching $1.22 billion by 2029.

If CHAGEE successfully completes its U.S. IPO, the company could establish itself in North America within 1 to 3 years. Recently, local Chinese users shared photos on social media of what appears to be a CHAGEE storefront (or possibly an office) in Newport Beach, Los Angeles. Meanwhile, CHAGEE has been actively posting job listings for various roles in California on LinkedIn via its @CHAGEE USA page. These positions span real estate, finance, HR, strategy (including logistics and consumer insights), procurement, marketing, and sales. At least a dozen full-time employees have already been hired. According to publicly available information on LinkedIn, Jack Chong, who previously led CHAGEE’s operations in Malaysia, has been the Chief Executive Officer of CHAGEE USA since July 2023 and currently oversees operations in both Malaysia and the U.S.

In addition to relocating its experienced team from Malaysia to the U.S., CHAGEE also maintains relatively close relationships with its peers. The founding team is familiar with the team at Heytea. As a "pioneer" that has already opened 15 stores in the U.S. and made North America its main international battleground, Heytea’s success will provide valuable insights for CHAGEE. Although accurate sales data is unavailable, Heytea’s stores in cities like New York and Los Angeles reportedly enjoy high foot traffic, with both online and offline localization efforts being well-developed.

Bubble tea brands such as Gong Cha, HappyLemon, and CoCo have been present in the North American market for over a decade, with each of them operating more stores than Heytea. A product similar to CHAGEE’s offerings, Molly Tea, opened a store in New York this past April, and rumors suggest that its first Los Angeles location is also set to open soon.

Aside from Molly Tea, there are currently very few chain milk tea shops in the North American market offering products similar to CHAGEE’s. The primary competition may come from locally owned, independent tea shops. CHAGEE primarily sells "fresh milk tea made with whole tea leaves," with tea, milk, and sugar as the main ingredients. The preparation process is simpler compared to cheese tea or fruit tea, making training costs lower and timelines shorter. Additionally, the industrial supply chain can be streamlined relatively quickly. This is a significant advantage for CHAGEE, allowing it to reuse its previous experience and accelerate scaling once it secures real estate. Drawing from the experiences of earlier market entrants, most promote freshness and health in their product marketing, such as HappyLemon’s "Enjoy Real Fresh Tea" and HEYTEA’s "Real Milk Real Tea," a strategy CHAGEE could also follow.

From the perspective of consumer awareness, in China, brands like Chayanyuese have already educated the market, completing the groundwork for consumer understanding of fresh milk tea, which allowed CHAGEE to capture the market and expand its stores nationwide. However, in the U.S., tea consumption remains far lower than coffee consumption, and the concept of milk tea is still largely associated with bubble tea (boba milk tea) and cheese tea. The idea of fresh milk tea remains largely unrecognized. That being said, local consumers are highly receptive to health-driven products that tend to have addictive qualities. Additionally, CHAGEE’s milk tea resembles the "tea latte" concept, which aligns with the dairy-heavy consumption habits of North American consumers, potentially making it more acceptable. This, however, requires thorough market research. In the early stages of CHAGEE’s U.S. entry, it is expected that over 90% of its consumers will be from the Chinese community, particularly young students studying abroad. Compared to HEYTEA, which has built a strong brand foundation in China, CHAGEE is less familiar to Chinese consumers who have been living abroad for several years.

At the same time, CHAGEE's brand positioning is currently at an awkward stage. The brand primarily expresses itself through the values it conveys and its visual identity. In terms of values, CHAGEE emphasizes the fusion of traditional Chinese culture with modern tea beverages, positioning itself as an ambassador of Oriental tea. This concept resonates well with Chinese and Pan-Asian consumers and can serve as a key differentiator when marketing to unfamiliar audiences. However, this also increases the challenges of deep localization. Phrases rich in Chinese cultural meaning, such as "Bo Ya Breaks His Zither Strings" or "The Ancient Tea Horse Road," are difficult to translate into low-context English, making it hard to connect with local mainstream communities. From a visual branding perspective, CHAGEE’s logo has evolved to become more minimalist, serving as an Oriental interpretation of Starbucks. Its product packaging, which resembles Dior's tote bag, reflects CHAGEE’s strategy of benchmarking against international brands and using high-end design as part of its marketing approach.

As a rough estimate, based on data from commercial real estate platform CoStar, the rent for a 40-square-meter CHAGEE store in North America would be around $3,333 to $6,667 per month, depending on the location (New York or Los Angeles). Assuming that each store employs 4 to 6 staff members at an average hourly wage of $15, monthly labor costs would range from $9,600 to $14,400. Combining rent and labor costs, the total monthly operating expenses for CHAGEE would be between $12,933 and $21,067. If each milk tea sells for $6 and the cost of ingredients is $2 per cup, with a gross margin of 65%, CHAGEE would need to sell approximately 332 to 540 cups per day to break even. Since this calculation does not include brand marketing and logistics costs, the actual sales volume required would likely be higher. CHAGEE is likely to start by opening stores in cities with large Chinese populations, such as New York, Los Angeles, and Toronto, where the proportion of Asians exceeds 15%.

The industry is closely watching CHAGEE’s IPO, as well as its ability to capture a share of the global market. CHAGEE's performance abroad could become a bellwether for the tea industry. Compared to its aggressive domestic expansion, CHAGEE has been more cautious in its international growth. Before opening its first store in North America, CHAGEE will need to go through a process of careful observation, waiting for the right moment to flourish.