“One small goal we have set for 2024 is that China's sales will surpass Starbucks China.”

When Zhang Junjie, the founder of Overlord Tea Princess, called out this goal on May 21, it meant that six years ago, she was only hoping that Overlord Chahime, who was the target of Starbucks, had a new dream — surpassing Starbucks.

Wanting to surpass Starbucks as a whole may seem like an unattainable story for Chinese coffee and tea brands, but in the Chinese market, the Starbucks myth has been shattered. Last year, Lucky surpassed Starbucks China in terms of revenue and became the highest-grossing coffee brand in the Chinese market.

In the first quarter of this year, the total sales (GMV) of Overlord Chahime exceeded 5.8 billion yuan. Zhang Junjie pointed out that Bawang Chaji's sales in the first quarter reached half of last year's full year. Even if the operation continues smoothly, GMV is expected to exceed 20 billion yuan in 2024. This gave Zhang Junjie the ambition to catch up with Starbucks in the Chinese market.

Of course, according to some people in the industry, tea and coffee are on the two tracks, and there is no direct comparison, but this doesn't prevent Zhang Junjie from wanting to use beyond Starbucks to tell a new story.

“Bustling” in 2023

Overlord Chahime saw a huge increase in GMV in the first quarter of 2024, due to the rapid expansion of stores in 2023.

Daowang Chahime was born on Wuyi Road in Kunming City, Yunnan Province in 2017. However, in the five years before the brand was founded, Overlord Chahime didn't make much moves and was biased towards the southwest corner of China.

In 2023, the overlord Chahime entered an outbreak period. With capital support, Chahime, the dominant king in the middle of nowhere, moved from the southwest to the central shopping malls of first-tier cities.

In June 2023, the two flagship stores of King Chahime opened on the same day at Shanghai Global Port and Metro City. The tall door, which is different from the style of an ordinary tea shop, distinguishes it from other brands. And the bag, which looks like a DIOR, made the king Chahime quickly take over social platforms and quickly get out of the circle.

A unique marketing strategy helped the overlord Chahime gain a foothold in first-tier cities. Zhang Junjie revealed that in 2023, the total number of Bawang Chahime stores reached 3,511, with a store growth rate of 233%. Currently, Overlord Chahime has more than 4,500 stores worldwide.

In other words, in 2023 alone, the number of Overlord Chahime stores increased by more than 2,000.

With the support of accelerated expansion, the GMV of King Chahime reached 10.8 billion yuan in 2023, with an average monthly store growth rate of 88%; in 2023, a single store sold an average of 24,000 cups per month, with a peak of 8,687 cups a day.

What really gave Zhang Junjie the motivation to surpass Starbucks in China was its sales for the first quarter of 2024. In the first quarter of 2024, Overlord Chahime's GMV was 5.8 billion yuan. In the same period, Starbucks China's revenue was US$706 million (approximately RMB 5.1 billion).

Of course, for franchise tea brands, GMV will not be fully converted into revenue. However, if they want to catch up with Starbucks in the GMV dimension, it no longer seems out of reach for Zhang Junjie.

Zhang Yi, CEO and chief analyst of Ai Media Consulting, analyzed that the reason for the popularity of Bawang Chahime is due to Bawang Chahime's explosive strategy, and the leading explosives represented by Bao Ya Zechen have contributed greatly to the rapid growth of Bawang Chahime's business and marketing.

Unlike other tea brands, Bawang Chahime only sells light milk tea. Among all categories, the signature Borja Zechen will sell 230 million cups in 2023. Based on the unit price of 16 yuan per cup, its contribution accounted for 76.19% of total sales.

An industry insider believes that this is where the overlord Chahime has an advantage. Compared with fruit tea and traditional milk tea, the raw materials of light milk tea are mainly composed of tea, fresh milk, and sugar. Judging from the cost and production efficiency, the cost is lower and the efficiency is higher. This brought more profit margins to the overlord Chahime.

However, the views in the industry are also inconsistent, and there is a hidden murder behind betting on light milk tea. According to Zhang Yi, a single category also means that the brand's ceiling is relatively obvious. Some tea industry practitioners believe that today's consumer needs are diverse and rapidly changing. To attract consumers' attention in fierce brand competition, brands need to continuously iterate products to meet market demand. Betting on light milk tea is a bit risky.

Capital requires a “new story”

Behind the crazy expansion of Overlord Chahime is preparing for the launch.

Beginning in 2023, there is news that Daowang Chahime is expected to go public in the US in the middle of this year. However, in response to this news, the overlord Chahime said it was “not responding.”

Today, the tea market is becoming increasingly inflamed, from high-end tea brands cutting prices and competing for a sinking market, to coffee brands' 9.9 war blazing into the tea circuit. Under increasingly heated market competition, rapidly expanding the scale, broadening profits, and seeking protection from the capital market in a short period of time, further expansion has gained competitive advantage. It has almost become a standard move for tea brands. As a result, at the beginning of this year, there was a scene of Michelle Ice City, Gu Ming, and Shanghai aunts piling up IPOs.

However, judging from the financing situation of various brands, the current amount of financing and valuation of Overlord Chahime is not very high.

According to the enterprise survey, between 2016 and 2021, Hi Cha received a total of 6 rounds of financing. Investors included IDG Capital, Meituan Dragon Ball, Tencent Investment, Sequoia China, and Gao Lin Capital. The final round of D financing reached 500 million US dollars.

According to public information, Michelle Ice City completed a round of financing totaling more than 2.3 billion yuan in December 2020. Investors include Meituan Dragon Ball, Gao Lin, and CPE Yuanfeng. Gu Ming also received 674 million yuan in financing in 2020. Investors include Meituan Dragon Ball, Sequoia China, Coatue Management, and Abbeay Street. Tea Baidao completed strategic financing of 1 billion yuan in June 2023, led by Lan Xin Asia, and followed by institutions such as Zhengxin Valley Capital, Grassroots Knowledge, CICC Capital, and Tomato Capital.

In contrast, the overlord Chahime has gone through two rounds of financing so far. March 2021 and October 2021, respectively. The first round of financing was led by XVC and Fosun Group, and the second round was led by Cong Biqiushi and followed by XVC. The total amount of the two loans was approximately 320 million yuan. In July 2023, there was news that Overlord Chahime had received a new round of financing, but this was denied by Overlord Chahime.

Compared to the 60 billion yuan value of Hi Cha and the 65 billion yuan valuation of Michelle Ice City, after going through two rounds of financing, Overlord Chahime's valuation is still at 3 billion yuan.

Perhaps the greater coolness comes from Chabaidao. Despite successfully breaking through and successfully becoming the “second milk tea share” of the Hong Kong stock market, Chabaidao, which had the biggest IPO of the Hong Kong stock market so far, broke through its listing, and the final stock price stabilized at around HK$10 per share. Recently, Chabaidao's stock price has rebounded slightly. By the close of Hong Kong stocks on May 21, Tea Baidao had risen 2.61% to HK$11 per share. However, compared to the issue price of HK$17.5, its share price fell by 37.14%.

For Overlord Chahime, this isn't good news. Compared to a few years ago, it is difficult for tea brands to easily win the favor of the market.

In the midst of fierce competition, tea companies are also involved in the supply chain for new products, roll prices, and roll suppliers. However, there doesn't seem to be an absolute barrier between brands. Going out to sea and sinking is a common story for tea companies. When the story converges, what else can tea companies use to impress investors?

Overlord Chahime needs a new story. This is probably because Zhang Junjie, the founder of Bawang Chaji, did not hesitate to offend his peers, and also wanted to distinguish Bawang Chaji from fruit tea that “turned tea into a supporting role” from other milk teas.

Zhang Junjie tried to envision a bright future for investors, surpassing Starbucks China and even becoming the Chinese version of Coca Cola. Now, let's see if any investors are willing to pay for this story.