– Bawang Chaji’s (霸王茶姬) 2025 annual report revealed a sharp slowdown, with net profit halving to 11.71 billion yuan and revenue growth decelerating to 4%, a far cry from previous triple-digit increases.
– The stock price has collapsed approximately 75% from its post-IPO high, erasing around $40 billion in market capitalization, reflecting investor concerns over sustainable growth.
– Key challenges include avoiding intense price wars, over-reliance on core products, a painful transition in franchise models, and slower product innovation.
– While domestic struggles persist, overseas operations show promise, with GMV growing 84.6% year-over-year in Q4 2025, signaling a potential new growth frontier.
– The company’s trajectory mirrors the broader Chinese new tea beverage industry’s shift from reckless expansion to value-focused, profitable operations.
The Stunning Setback: Bawang Chaji’s Performance Hits a Wall
The once high-flying ‘first share of new tea beverages’ has been abruptly grounded. Bawang Chaji’s (霸王茶姬) first full annual report since its listing delivered a sobering reality check to investors and the market. For the full year 2025, the company reported net revenue of 12.907 billion yuan, with year-on-year growth slowing dramatically to just 4%. This pales in comparison to the astronomical growth rates of 843% in 2023 and 167% in 2024. More critically, attributable net profit plummeted by 53.5% to 1.171 billion yuan from 2.516 billion yuan in 2024. The fourth quarter was particularly weak, with revenue declining 10.8% year-over-year and an operating loss of 35.5 million yuan, a stark reversal from a 640 million yuan profit in the same period last year. This dramatic shift in Bawang Chaji’s performance has sent shockwaves through the capital markets, with its stock price adjusting to $9.99, a fraction of its $28 IPO price, and total market capitalization shrinking to approximately $1.9 billion. The core question for global investors is whether this represents a temporary stumble or a fundamental crack in the business model.
Unpacking the Slowdown: Why Bawang Chaji’s Performance Stumbled
The deceleration in Bawang Chaji’s performance is not attributable to a single factor but a confluence of strategic missteps and market pressures. A multi-faceted analysis reveals the underlying vulnerabilities.
The Cost of Staying Above the Fray: Avoiding the Price War
One pivotal decision was the company’s choice to maintain its mid-to-high-end brand positioning and not participate in the fierce 9.9-yuan milk tea promotion campaigns led by platforms like Meituan (美团), Alibaba’s (阿里巴巴集团) Ele.me, and JD.com (京东) in the latter half of 2025. Competitors like Mixue Bingcheng (蜜雪冰城), Gu Ming (古茗), and Luckin Coffee (瑞幸咖啡) engaged aggressively. With delivery sales accounting for over 40% of Bawang Chaji’s revenue, opting out of these promotions objectively impacted order volumes. Founder Zhang Junjie (张俊杰) admitted on the earnings call, ‘We underestimated the impact of the delivery price war on the offline market.’ This highlights a miscalibration in the company’s response to competitive intensity, directly contributing to the 10.8% Q4 revenue decline.
Product Concentration and Innovation Lag
Bawang Chaji’s revenue structure exhibits high dependence on a few core items. The signature product ‘Boyajuexian’ (伯牙绝弦) alone contributes over 40% of sales, with the top three products collectively accounting for 60-70% of revenue. This concentration became a liability when competitors like Luckin launched similar products such as ‘Light Jasmine’ and ‘Light Oolong’ at lower price points and with faster refresh cycles. Simultaneously, Zhang Junjie noted that internal organizational adjustments in H2 2025 slowed response times and new product launches. ‘We basically wasted half a year in 2025,’ he stated. In the fast-paced new tea drink sector, an extended pause in innovation can quickly cede market momentum to rivals.
The Franchise Model Transition and Its Pains
The company’s fundamental revenue model is undergoing a significant shift, creating short-term turbulence. Historically, Bawang Chaji relied heavily on selling raw materials to franchisees for profits. In 2025, it aggressively expanded company-operated stores from 169 to 615, a 263.9% increase. More importantly, starting in 2026, the company is transitioning to a fixed 17% revenue-sharing model based on store GMV. This change places higher profitability demands on franchisees. The strain is evident: average monthly GMV per store in Greater China has declined for eight consecutive quarters, falling from 574,000 yuan in Q4 2023 to 337,400 yuan in Q4 2025—a drop of over 40%. This erosion in single-store economics has increased operational pressure on partners and threatens the stability of the entire network.
Peer Comparison: A Market Dividing Line Emerges
Bawang Chaji’s performance must be contextualized within the broader new tea beverage landscape, which displayed clear divergence in 2025.
Leaders, Laggards, and Different Business Models
The competitive field shows stark contrasts. Mixue Bingcheng (蜜雪冰城) solidified its lead with 2025 revenue of 33.56 billion yuan and net profit of 5.93 billion yuan, growing 35.2% and 33.1% respectively, supported by nearly 60,000 global stores. Gu Ming (古茗) also posted impressive results, with revenue doubling to 12.914 billion yuan and profit reaching 3.109 billion yuan. Brands like Cha Bai Dao (茶百道) and Auntie Shanghai (沪上阿姨) also achieved positive growth. In contrast, Bawang Chaji and Nayuki’s Tea (奈雪的茶) faced greater headwinds. Nayuki’s revenue fell 12% to 4.331 billion yuan, with a net loss of 241 million yuan and a reduction in store count. The divergence underscores the different models: Mixue’s profit is heavily driven by its supply chain, with 97.6% of revenue from commodity and equipment sales to franchisees. Bawang Chaji’s previous similar model is now under stress as per-store productivity wanes, highlighting the challenges for mid-tier brands caught in a squeeze.
Industry Crossroads: Saturation, Regulation, and Global Frontiers
The external environment for new tea beverages in China is undergoing a profound transformation, impacting all players including Bawang Chaji.
Slowing Growth and Intensifying Competition
According to iiMedia Research data, China’s new-style tea drink market size reached approximately 374.93 billion yuan in 2025, but year-on-year growth slowed to just 5.7%, a significant drop from 19.3% in 2023. The total number of tea drink shops hit 449,000, yet about 157,000 closed in the past year. This data signals that the era of growth purely driven by store network expansion has hit a ceiling. The market is shifting from a blue ocean to a red ocean, necessitating a strategic pivot from scale to operational excellence and brand loyalty.Regulatory Normalization and Overseas Opportunities
On a positive note, regulatory bodies have begun curbing excessive subsidy-based promotions, encouraging a shift from destructive price competition to value-based rivalry. Concurrently, overseas markets are emerging as a critical growth vector. Bawang Chaji’s international performance offers a glimmer of hope. In Q4 2025, overseas GMV reached 370 million yuan, surging 84.6% year-over-year and marking three consecutive quarters of growth exceeding 75%. By year-end, it had 345 overseas stores across seven countries and regions in Southeast Asia and North America. The company has declared 2026 its ‘Overseas Foundation Year,’ targeting around 200 new international stores. This geographic diversification could be key to balancing domestic volatility.The 2026 Roadmap: Stabilization, Not Spectacle
Management has set a pragmatic tone for the year ahead, focusing on recovery rather than reckless expansion. The path forward hinges on executing a delicate balancing act.Prioritizing Domestic Store Health and Controlled Overseas Growth
Founder Zhang Junjie (张俊杰) outlined a tempered strategy: prioritizing the recovery of same-store sales as the primary KPI over pursuing high-speed growth. The company expects full-year 2026 revenue and profit to be largely flat compared to 2025. Domestic store expansion will slow markedly, with new openings only in necessary, strategic locations. Overseas, the plan is for steady growth with the targeted 200 new stores. This calibrated approach suggests an acknowledgment that repairing the core business is essential before chasing new frontiers. Encouragingly, Zhang noted that domestic same-store sales data has shown a trend of sequential improvement in early 2026, and the launch of the ‘Return to Yunnan’ product series in late 2025 spurred a 16.2% week-on-week increase in total GMV.Analyst Sentiment and Lingering Challenges
Some analysts see a bottom forming. J.P. Morgan upgraded Bawang Chaji’s rating from ‘Neutral’ to ‘Overweight’ in early April, raising its price target from $11.50 to $16.00. The firm believes the worst of the same-store sales decline may be over and that a gradual stabilization and recovery path exists. However, significant hurdles remain. The over-reliance on ‘Boyajuexian’ persists, consumer acceptance of new products is unproven, and overseas expansion brings its own set of challenges in terms of local competition and operational localization. The key for Bawang Chaji’s performance in 2026 will be stabilizing the domestic base; without that, overseas gains may not fully offset the weaknesses.The Cost of Hyper-Growth: Lessons from a Cautionary Tale
Bawang Chaji’s story is a microcosm of the Chinese new tea drink sector’s painful transition from wild expansion to disciplined operation. The company rocketed from 500 to over 7,000 stores in just three years, creating a business phenomenon. Yet, this blistering pace came with hidden costs: widespread franchisee distress, product innovation stagnation, and organizational capabilities failing to keep up. Now, with the myth of perpetual growth shattered, the market is demanding rationality and sustainable profitability. The era of competing solely on storytelling, speed, and store count is unequivocally over.The repair journey for Bawang Chaji’s performance has just begun. Success will depend on its ability to navigate the price war landscape, diversify its product appeal, successfully transition its franchise model, and capitalize on overseas opportunities without overextending. For investors, this episode underscores the importance of scrutinizing business model durability, same-store sales trends, and management’s adaptability in China’s fast-evolving consumer markets. Monitor the company’s quarterly same-store sales figures and overseas expansion metrics closely to gauge whether this is a true turnaround or the start of a prolonged consolidation. The entire sector’s move from ‘scale kings’ to ‘value champions’ will define the next chapter of investment opportunities in Chinese consumer equities.