While China’s domestic coffee and tea industries flourish, Hong Kong’s recent bubble tea IPO flop signals shifting market dynamics. Chabaidao, China’s third-largest fresh tea drink manufacturer, has witnessed remarkable expansion, with store numbers soaring over tenfold to surpass 8,000 in the past four years. Last year, sales surged by more than a third to reach Rmb5.7 billion ($786 million). Luckin, a local coffee chain, also experienced substantial revenue growth, highlighting a broader trend favoring homegrown brands.
However, concerns loom amidst this growth trajectory, as success is no guarantee in an industry marked by low entry barriers and intense competition. Rivals like Mixue, boasting 36,000 stores, are rapidly expanding their footprints, while others, including Sexy Tea, Mixue Group, and Guming Holdings, are poised to pursue listings in the near future.
The underwhelming response to Chabaidao’s IPO is indicative of broader market sentiment, exacerbated by a bearish outlook. Despite being a profitable company, Chabaidao’s listing failed to attract significant interest, underscoring weak local investor sentiment amid a market downturn. The Hang Seng index’s 45% decline from its 2021 peak and a nearly one-third drop in new listings during the first quarter paint a stark picture of Hong Kong’s IPO landscape.
Chabaidao’s disappointing debut sets a precedent for the Hong Kong IPO market in the coming months, highlighting the challenges faced by companies seeking capital amid fierce competition for investor funds.
Bubble tea, a beloved concoction blending tea, milk, sugar, and chewy tapioca pearls, enjoys immense popularity among younger Asians, thanks to its endless variations, from strawberry white chocolate to passion fruit.
However, investor enthusiasm did not translate into success for Chinese bubble tea maker Sichuan Baicha Baidao Industrial Co, commonly known as Chabaidao. Its Hong Kong debut witnessed a staggering 38% plunge, marking one of the worst performances for IPOs of similar size or larger in a decade. Despite raising $330 million through the IPO, Chabaidao’s listing will be remembered for its dismal first-day performance.
