On August 27, Mishi Group released its 2026 mid-year report, with first-half operating revenue of 15.216 billion yuan, up 2.3% year-over-year. Net profit for the period was 2.319 billion yuan, down 14.7% year-over-year. The gross margin was 30.4%, a decrease of 130 basis points year-over-year, lower than market expectations.
(The financial report is shown in the chart below, units: 100 million yuan, source: WIND, compiled by Caixin)
Miyue is relatively cautious about disclosing its business data, and there are fewer analyzable data sources. However, from the scale of its stores, the depth of its supply chain to its revenue, Miyue has become the undisputed leader in China's tea beverage market, with its underlying business logic of "franchise expansion + strong supply chain control" already well-known to the market.
But based on the interim reporting period, an inflection point has emerged in this playbook: store growth is slowing, margins are under pressure, and rising selling expenses are no longer translating into incremental gains. Neither Lucky Coffee nor Fresh Beer Fulu Family appears able to replicate the success of the flagship brand, and Mixue's pool of new growth stories is running dry.
Telling the same story too many times will eventually bore the capital markets. Mishi Xue, which has been listed for a year and a half, has seen its stock price fall back to where it started.
Revenue Hits the Brakes, 'Subsidy Cliff' May Just be an Excuse
In the first half of 2026, Mishi Group reported revenue of 15.216 billion yuan, up 2.3% year-over-year, essentially flat with the same period last year, with growth slowing sharply from over 30%.
Management explained during the earnings conference that large-scale subsidies for food delivery in the first half of 2025 boosted store order volumes, resulting in a high base; with the subsidy retreat in 2026, the growth rate naturally declined.
It sounds reasonable, but we believe this is not the core reason, as a horizontal comparison with other companies in the tea drink track shows that Gu Ming, Cha Bai Dao, and Hu Shang A Yi's mid-year growth rates are all significantly faster than Mixue Ice City, and among the tea drink companies listed in Hong Kong, Mixue's growth rate is only slightly higher than that of Nayuki, which is on the verge of collapse.
At the same time, Mishi's overall gross margin continued to decline in the first half of this year, with gross profit reaching 4.63 billion yuan and a gross margin of only 30.4%, down 130 basis points from the same period last year and 30 basis points from the first quarter, which had a low base.
If the subsidy retreat really has a significant impact on the demand side, then the impact on the revenue side should not be limited to Xiaolongkan alone. Moreover, judging from the first-half data, after the takeout war slowed down, the gross profit margins of Gu Ming and Shanghai Auntie both increased, while Xiaolongkan's gross profit margin actually declined.
MISU is a tea drink company with a relatively low average transaction price. According to its annual report last year, the impact of the food delivery war on its prices was limited. After all, no matter how intense the price war is, prices cannot be lowered to below 10 yuan, and the only result is a plethora of ineffective measures. However, MISU has become the company most affected by the backlash after the food delivery war ended, which is certainly not in line with common sense.
Slowing Expansion May Be the Key Factor Impacting Earnings
Among the scarce financial reporting information, one of the most notable features of Mishi's 2025 performance is the significant slowdown in store expansion, with 5,455 new stores opened and 1,289 stores closed in the first half of the year, resulting in a net increase of 4,166 stores, compared to a net increase of 6,534 stores in the same period last year, a decrease of nearly 2,400 stores.
The main reason for this is the relative saturation of second-tier and new first-tier cities, with the number of new store openings in new first-tier cities increasing by 1,818 in the first half of the year, and second-tier cities adding 2,174, slightly lower than the same period last year.
Third-tier cities are still expanding, mainly benefiting from the expansion of secondary brands. Last year, many media outlets reported that Yonghe Dawang's secondary brand, Lucky Coffee, was strongly promoted. Lucky Coffee's expansion relies on the long-term franchise system built by Mixue Ice City, and many of Lucky Coffee's franchisees are also Mixue Ice City franchisees.
In comparison, the franchise fee for Lucky Coffee is significantly lower than that of Mixue Ice City, as disclosed on their official websites. Excluding decoration costs, the franchise fee disclosed on Mixue's official website is approximately over 160,000 yuan, while Lucky Coffee's fee is only 127,000 yuan. Considering that there are some franchise fee discounts during the expansion period, the actual cost difference may be even greater.
It is clear that Mixue wants to replicate the success of Mixue Ice City through Lucky Cafe. However, unlike the tea beverage market, the coffee market is much more intense, according to the "2025 China Coffee Industry Development Report". In 2025, the number of coffee shops in China increased by over 40,000 to 215,000, a growth rate of 25%. The chain store rate also rose from 46% to 53%.
For the market leaders, Cotti Coffee and Luckin Coffee, the per-item price gap with Lucky Coffee is also relatively narrow, making this a difficult path for Mixue to navigate.
In terms of overseas stores, after a rare decline in 2025, the number of stores continued to slide in the first half of 2026, with 4,378 stores as of the mid-year period, a year-over-year decrease of 7.5%. According to the management's annual report, this is due to the re-selection and integration of locations in the Southeast Asian market. Combining these factors, the momentum of the main brand, Mishi Ice City, has indeed become less sharp and formidable than in previous years.
Fees See Significant Growth as Single-Store Model Reaches Turning Point
On the cost side, as a representative of the "light asset" model for new tea drink brands, Mishi's overall cost control level is not excellent. In the first half of 2026, sales expenses, management expenses, and research and development expenses were 1.12 billion yuan, 610 million yuan, and 40 million yuan, respectively. The three expense ratios were 7.4%, 4%, and 0.4%, respectively, with the sales expense ratio increasing by 130 basis points and the management expense ratio increasing by 100 basis points compared to the same period last year.
During the management's performance meeting, it was explained that the increase in fees was mainly used for IP brand marketing, high-quality store operation support, and rising human resource costs in the middle platform, which are all upfront investments for long-term capacity building.
At the single-store model level, Mishi Xue's overall single-store commodity revenue (commodity revenue/existing store count) was approximately 239,000 yuan in the first half of 2026, a significant decline of 47,000 yuan compared to the first half of 2025. Given the slower pace of store expansion this year, the actual decline in single-store revenue for Mishi Xue is even worse after the end of the food delivery war.
It is clear that Mishi Snow, which focuses on its main brand, can no longer drive an increase in single-store revenue through supply chain integration. For Mishi Snow, which operates a light-asset model, expanding its revenue scale can only be achieved through two channels: increasing store sales by expanding its SKU offerings or increasing its coverage through store expansion. However, Mishi Snow's store coverage is basically saturated, and the growth in SKUs has not significantly driven an increase in single-store sales revenue.
With no significant increase in volume overseas, the existing business appears to have reached its growth limit, making it understandable why Mishi pushed its sub-brand, Lucky Coffee, so hard last year.
Luckin Coffee's Brand Power Limited as Franchising Incentives Tighten
Let's focus on the expansion of Lucky Coffee itself. According to the semi-annual report of Mishi, the revenue breakdown by business type shows that product sales account for more than 90% of the total revenue, which is the core pillar of the group's profitability. However, even in the smaller categories of decoration equipment income and franchise service income, there are also some noteworthy trend changes.
For instance, comparing the service franchise fee revenue in 2025 with the number of new stores opened in 2026 (assuming most service franchise fees are one-time revenues from new stores), it can be seen that Mishi had made significant adjustments to franchise fees to promote Luckin Coffee and attract franchisees. In the first half of this year, the overall franchise service revenue per new store was approximately 77,000 yuan, an increase of 28,000 yuan compared to the same period in 2025.
Additionally, although the official website of Yonghe Dawang does not directly disclose the decoration costs for joining, from the perspective of equipment sales, the revenue contribution of this category has also grown significantly. In the first half of 2026, the single-store equipment sales revenue was approximately 98,000 yuan, an increase of 12,000 yuan compared to the same period in 2025.
From this, we can identify two relatively clear lines of inquiry:
One issue is that, although Luckin Coffee is expanding rapidly, its brand premium has yet to truly take shape. The main brand, Mixue Ice City, has built strong synergistic momentum during its expansion - most old franchisees will not open just one store - and Luckin Coffee's land grab this time around is also highly dependent on this existing franchisee network, trading off expansion efficiency. During its rapid expansion in the first half of 2025, the group chose to make concessions, but once franchisee incentives were tightened, the speed of store expansion slowed significantly.
Secondly, Mishi Xue's light-asset model has full control over adjusting its revenue recognition, but its franchisees are also highly sensitive. The decline in single-store model performance and the slowdown in store expansion pace occurred almost simultaneously in the first half of the year, suggesting that the binding degree between Mishi Xue and its franchisees may not be as tight as the market had imagined, making it difficult to replicate another Mishi Xue success story with Lucky Coffee at this stage.
Looking back at the past three years of growth for Mishi, the business logic it relies on is essentially a continuation of the same expansion script - relying on the existing network of franchisees to quickly replicate stores, using scale in the supply chain to dilute costs, and then using a light-asset model to firmly grasp control over revenue streams.
The successful handover of Lucky Coffee, flexible adjustments to equipment sales, and the relatively immune positioning of mid-range pricing to the withdrawal of food delivery subsidies, all contributed to Manner's hidden advantages after the slowdown of its main brand, extending the period of profit growth.
Although the number of stores is still expanding, the marginal benefits brought by expansion are getting smaller and smaller over time:
For instance, the negative growth of overseas market stores indicates that simply replicating scale is no longer infallible in different market environments. Similarly, the overall slowdown in store expansion in the first half of this year, or the decline in single-store commodity income, are all signaling to the market that the existing business model is yielding diminishing marginal returns.
It is clear that Luckin Coffee's brand power still lags far behind that of the main brand, and the competition in the ready-to-drink coffee market is relatively fierce, with uncertain future profit margins.
At the current point in time, Mishiyou is still undoubtedly in a period of inertial expansion, with its accumulated assets from franchisees, supply chain depth, and brand recognition continuously releasing energy, but beneath this inertia, the boundaries are already vaguely visible.
However, the inertia of expansion brought about by the expansion bonus has already permeated the management team. The acquisition of Fresh Beer Deer House is essentially a lateral transfer of the same logic - using the existing franchisee network and supply chain advantages to replicate a "MIXUE" in another category. The problem is that the competition in the fresh beer track is no less intense than that in the ready-to-drink coffee market, and the capital market is voting with its feet, with MIXUE's stock price continuing to be under pressure since last year, approaching a new low.
Management attributed the slowdown in growth to the company's proactive decision to abandon quantitative growth and shift towards high-quality operations and stock optimization, a statement that doesn't quite align with the typical tone of Mishi.
Looking back at business history, cases such as the Sino-foreign joint venture Dongfeng Nissan, the dominant player in the daily chemicals industry Procter & Gamble, and others all illustrate that from large consumer automotive and real estate companies to the vast majority of consumer enterprises, it is only when expansion is limited that they claim to return to high-quality development. However, companies that can truly achieve growth through so-called high-quality operations and return to a normal growth trajectory are extremely rare.
Telling the same story too many times will eventually tire the audience, and Mishi, it seems, can no longer come up with many new stories.