Mixue reaches new high, let's talk about valuation again

If calculated from the IPO, Mixue Bingcheng's stock price has nearly doubled, forming the "three pillars" of this year's consumer stocks alongside Lao Pu Huang Jin and Pop Mart.

On the day of Mixue's listing, a kind friend warned me that "bubble tea stocks" contain huge bubbles. I thanked him for the reminder but still bought at a high price of 265 yuan with a 30% increase on the same day and have held it since.

Many people don't understand how a cup of lemonade can support a market value of 200 billion HKD. So I wrote an article titled "Mixue Bingcheng: A Freshly Made Coca-Cola" to express my favor for this company. Perhaps because my readers have a higher net worth and rarely come into contact with companies and products like Mixue Bingcheng, I’m writing a sequel today as a supplement to the logic behind Mixue.

Before discussing "Mixue," we first need to know what we’re talking about

Mixue Bingcheng is different from other bubble tea concepts. Human demand for beverages can be roughly divided into three tiers:

Purified water, beverages, and flavored beverages

Yu Donglai, the founder of Pang Dong Lai, once said that employees should be provided with beverages, not just water to quench thirst, but to make them feel physically and mentally happy while quenching their thirst.

For humans, beverages are the simplest, most direct, and almost universally affordable drinks. Warren Buffett drank Coca-Cola for most of his life and remained energetic at 95. Although this is not a necessary condition, if it were any other bubble tea, the old man might not have been able to stick with it until now.

Most people haven’t tried drinking Mixue Bingcheng every day. I have, and the experience was excellent

When we discuss how Mixue Bingcheng’s taste doesn’t fully meet our needs, we’ve already placed the problem in the wrong context. Everyone has the need to quench thirst, but only a small portion of people also need to eat boba while doing so.

Therefore, although there’s only a two-word difference between "beverage" and "flavored beverage," they represent completely different user scenarios. Mixue Bingcheng itself is just a "beverage," its function is to "quench thirst pleasantly." So, using the standards of "flavored beverages" to judge Mixue and claim its taste isn’t as good as Heytea or Guming is inherently biased.

When young people are tired from shopping or need a cup of black coffee before working out, Mixue can always be the helpful solution. So when Mixue’s overnight lemons made headlines during the 315 Gala, consumers didn’t criticize but instead, they spoke up for Mixue, saying, "At least they use real lemons."

This brings us to Mixue’s second feature: brand effect

Why does Mixue have the "Snow King IP" and use "You Love Me, I Love You" as its theme song? The core purpose is to reduce users’ trust costs.

When a founder establishes a new brand, the most headache-inducing task is getting consumers to quickly build brand awareness—knowing what the brand can do and in what scenarios it can be used—to quickly establish trust and generate purchase intent.

If a brand adopts overly high-end visual symbols when entering the market, it can increase consumers’ psychological burden, affecting their perception. Every second of hesitation in consumers can give competitors a huge opportunity in business.

So "Hua & Hua" designed the "Snow King IP" for Mixue. This cartoonish, personified image naturally builds a sense of familiarity with consumers. After all, what bad intentions could a playful mascot have?

Finally, let’s talk about valuation. Looking back at Mixue’s 2024 annual report, Mixue is still growing rapidly at a rate of 10,000 stores per year, with Tier 3 and below cities accounting for 57.4% of the total store count.

In terms of business model, Mixue mainly relies on franchising, with 21,000 franchisees and 17 self-operated stores. The number of self-operated stores even decreased by 32 compared to the end of 2023, mainly for market insights and brand strengthening. Mixue’s strength still lies in its supply chain control, from procurement and production to logistics. Its robust supply chain supports the needs of 20,000 franchisees.

Mixue’s current valuation of 220 billion yuan isn’t cheap, but looking at the "1 USD" beverage market, there seem to be no other players. Guming recently launched "1 Yuan Ice Water," which, according to the above logic, still solves the problem of quenching thirst with purified water, falling short of being a beverage.

But for friends who bought in early at the IPO, there should already be enough profits to grow alongside the company. As an outstanding enterprise in Henan, like Pang Dong Lai, Mixue is a good company that strives to benefit consumers. Being a mini shareholder and witnessing its future journey is already a great honor.

June 2, Mars at Qinghe.

$MIXUE GROUP(02097.HK)