Interim Report: Few Highlights, But Signals Everywhere
At midday on Aug. 27, 2026, Mixue Group released its interim results: revenue of 15.216 billion yuan, up 2.3% year-on-year, and profit for the period of 2.319 billion yuan, down 14.7% year-on-year. I double-checked these figures several times to make sure I hadn't misread them.
The contrast becomes clearer when compared with a year earlier. In the first half of 2025, the company's revenue growth was 39.3% and profit growth was 44.1%. Twelve months later, one has fallen to 2.3% and the other has turned into a decline of 14.7%. This is also Mixue's first half-year report with negative profit growth since 2022.
The capital market reacted directly. On Aug. 27, the stock closed down 8.37%, and the next day it fell another 7.11% to close at HK$211.6. By the close on Sept. 3, it was at HK$206.4, giving a total market value of HK$79.1 billion.
The company listed on the Hong Kong Stock Exchange on March 3, 2025, at an offer price of HK$202.5. During the IPO, it locked up HK$1.82 trillion in subscriptions, making it the city's largest IPO by frozen capital at the time. I recall it closed at HK$290 on its first day, and the shares at one point doubled after listing, hitting a market value peak in June 2025.
From that peak to today, the stock has lost 66%. From the offer price, HK$206.4 versus HK$202.5 means almost all of the gains over the past year and a half have been given back.
Management's explanation at the results conference that afternoon was that the food-delivery war in the first half of 2025 pushed average store revenue to unprecedented highs, creating a high base, and the decline in average store revenue in 2026 reflects cyclical factors. At the same time, the company has proactively started a new investment cycle, increasing strategic spending in supply chain, store operations, and brand IP around safety and quality. The group's focus has shifted from growth and expansion to safety and quality.
I'll leave this explanation as is for now, without rushing to a judgment.
Let me first lay out a few more sets of numbers.
Five other listed tea-chain companies also reported interim results.
Guming posted revenue of 7.47 billion yuan, up 31.9% from a year earlier.
Shanghai Aunty reported revenue of 2.589 billion yuan, up 42.4% year-on-year.
Chabaidao's revenue was 2.655 billion yuan, up 6.2%.
Based on its two quarterly reports, Chagee's first-half net revenue was about 6.961 billion yuan, up roughly 6% year-on-year.
Nayuki's revenue was 1.892 billion yuan, down 13.1% from a year earlier.
Among the six companies, only Nayuki posted negative revenue growth; Mixue's 2.3% was the second-lowest.
Chart 1: Revenue growth and gross margin changes for the six listed tea-chain companies in the first half of 2026 (Source: Companies' interim results announcements).
The gross margin line is more interesting.
Guming's gross margin rose to 33.4% from 31.5% a year earlier, up 1.9 percentage points, which the company attributed to improved supply-chain efficiency.
Auntea Jenny's gross margin was 31.6%, roughly unchanged from a year earlier.
Mixue's gross margin fell to 30.4% from 31.6%, down 1.2 percentage points. Chabaidao's declined more, to 30.0% from 32.6%, but it gave a specific reason: aggressively expanding its made-to-order coffee business and proactively offering concessions to franchisees.
Why, with delivery subsidies receding over the same six months, did Guming's gross margin rise while Mixue's fell?
Eighteen months ago, the capital market was willing to give it a high valuation, essentially paying for certainty: 64,000 stores, nearly 30,000 franchisees, and the deepest supply chain in China's made-to-order beverage industry. The machine looked like it would never stop. I thought so too at the time.
The interim report suggests the machine is still running, albeit slower.
Blaming Subsidy Phase-Out Doesn't Hold Up
Let's do the math. Mixue has the lowest average ticket among listed tea companies, with core products priced between 6 and 10 yuan. I modeled the impact of subsidies on this price band. The delivery platforms' subsidies targeted drinks priced above 10 yuan, with a few yuan off per cup; below 10 yuan, there was essentially no room for discounts.
However fierce the price war, by the time it reaches this price point, it's little more than a pile of duds.
The theory that subsidy withdrawal created a high base should have meant Mixue, with its low price point, was the least affected. In fact, it was the hardest hit.
Gross margins tell a different story. Guming's gross margin rose 1.9 percentage points, while Auntea Jenny's was roughly flat — both went through the same delivery war and its aftermath. If subsidy withdrawal were the main variable, it would be an industry-wide factor, not one that singled out Mixue. But the numbers don't bear that out.
Chabaidao's gross margin did fall 2.6 percentage points, but it was transparent about the cause: developing its fresh-coffee business and offering concessions to franchisees — a deliberate expense. Mixue also calls its spending strategic, aimed at improving product quality around its 'fresh, pure' concept. Both are voluntary outlays.
Since both companies say they chose to spend, how much weight does the external explanation of subsidy withdrawal really carry?
Management said something quite candid on the earnings call: average revenue per store for the flagship brand fell by double digits. Two words are worth noting: 'flagship brand' and 'double digits.'
The problem is not demand.
The real variable is supply — the stores themselves.
As of June 30, 2026, Mixue Group had 63,987 stores globally, up 20.7% year-on-year, with 59,609 in mainland China, up 23.5%, while revenue grew only 2.3% in the same period.
Store count rose 20% but revenue rose just 2.3%, leaving a gap of more than ten percentage points that must be explained by per-store performance.
Based on the average store count between period-end and period-start, each franchised store purchased about 239,000 yuan of goods and equipment from headquarters in the first half. Applying the same method to prior years: 257,000 yuan in H1 2024, rising to 291,000 yuan in H1 2025, then falling back to 239,000 yuan this year, down 17.9% year-on-year.
This figure is more telling than revenue growth in my view: the store network is still expanding, but per-store purchasing has reverted to levels of two years ago.
Chart 2: Mixue H1 2026 revenue change breakdown (Source: company interim results announcement, estimated figures)
Incidentally, average franchised store count rose about 24% year-on-year, while the number of franchisees approached 30,000, up 27.2% — faster than store growth. The average number of stores per franchisee fell to 2.15 from 2.26 a year earlier.
More stores, more franchise owners, but fewer stores per owner.
This doesn't look like demand suddenly vanished; rather, opening stores itself has become less rewarding than before.
The subsidy phase-out is only the surface. The deeper problem is that stores are opening ever closer together, leaving each location with a thinner share of business.
The Real Red Flag in This Earnings Report: 2,000 Fewer Stores
First, store openings. In the first half of 2026, Mixue Group opened 5,455 franchised stores and closed 1,289, for a net increase of 4,166. In the same period last year, it opened 7,721 and closed 1,187, a net gain of 6,534.
New openings fell by 2,266 year-on-year, a decline of 29.3%.
On closures, the 1,289 shuttered stores were just 102 more than a year earlier. Based on the number of stores at the start of the period, the closure rate was about 2.2%, actually lower than the 2.6% a year ago.
This detail is key. If franchisees were broadly unprofitable and exiting en masse, the closure rate would be rising. Instead, closures are falling while new openings are contracting sharply, suggesting the squeeze is at the entry point.
New store openings fell nearly 30%. Is that because fewer people want franchises, or because the company itself is tightening?
Management says it's the latter. At the earnings call, they said the deliberate slowdown in domestic store openings is not a temporary adjustment but a strategic direction the company has chosen and will maintain long term. The group will redirect more resources and attention to supporting existing stores and improving their profitability.
I believe that explanation only in part.
A city-tier breakdown reveals another part of the story.
In the first half, net store additions in third-tier and below cities totaled 2,471, the main driver of the group's store growth. New first-tier and second-tier cities added fewer stores than a year earlier. The total in third-tier and below reached 34,590, or 58% of mainland China stores, up 0.4 percentage point from a year earlier.
What really tells the story is another comparison.
For the full year 2025, net additions in third-tier and below cities were 8,261.
In the first half of this year, that number was just 2,471.
Mixue's core base is in lower-tier markets, its comfort zone for the past few years. A few years ago, industry conversations centered on how many stores it could open. Now the room to densify that base is narrowing: the denser the stores, the more each new outlet takes business from existing ones.
These figures speak for themselves.
Chart 3: Mixue's store-opening pace slows and overseas stores shrink (Source: company interim results announcement and public disclosures).
The changes overseas are more direct.
Store count outside mainland China peaked at 4,895 at end-2024, fell to 4,467 at end-2025 and to 4,378 by end-June 2026, a net decline of more than 500 in 18 months.
Existing stores in Indonesia and Vietnam are still being adjusted, with counts in both countries continuing to fall during the half. Mixue, meanwhile, entered new countries: a first South American store in Mexico City in February, a first Brazil store in Sao Paulo in April, and three stores in Kyrgyzstan in June.
Closures and openings are happening side by side, but the net is negative.
Management said its Southeast Asia operations are targeting long-term, high-quality growth and are proactively making systematic adjustments. Overseas business will stick to high-quality development rather than rapidly or blindly expanding stores.
Seen together with domestic, the message is consistent: management says it no longer plans to open at that pace.
But I still want to put another number on the table.
Franchisee count rose 27.2% year over year, outpacing store growth of 20.7%, bringing the average number of stores per franchisee down to 2.15 from 2.26 a year earlier.
The appetite of established franchisees for opening new stores is waning, a shift I view as significant.
This metric is a better reflection of frontline sentiment about the business than total store count.
Per-store revenue drops 47,000 as supply chain scale effect turns negative for the first time
I have dissected Mixue's model more than once. The actual buyers from headquarters are tens of thousands of franchisees, and the paying customers side with the franchisees. Revenue from goods and equipment sales was 14.798 billion yuan, or 97.3% of total revenue; franchise and related services revenue was 418 million yuan, or 2.7%.
It makes money by selling ingredients, packaging materials, and equipment to tens of thousands of stores.
This model has a flywheel.
More stores mean greater procurement scale.
Greater procurement scale strengthens bargaining power over upstream suppliers, boosts capacity utilization at self-built production bases, and lowers the per-cup BOM cost; lower costs make supply prices to franchisees more competitive, and franchisees become more willing to open another store.
More new stores lift procurement scale to the next level.
Mixue's outsized growth over the past few years has been this flywheel spinning faster.
One premise underpins the flywheel: per-store revenue must not collapse.
That premise is now weakening. Where's the problem?
That premise is now weakening. Average per-store semi-annual procurement from headquarters was 257,000 yuan in 1H2024, rose to 291,000 yuan in 1H2025, then fell back to 239,000 yuan in 1H2026. On a merchandise revenue basis, that's down 47,000 yuan year-on-year; including equipment, the decline is 17.9%.
Chart 4: Mixue's per-store semi-annual procurement and gross margin changes (Source: company periodic results announcements; per-store figures are estimates)
Total store count is still rising, up 20%, but per-store procurement has fallen back to two years ago. The flywheel has for the first time started turning in reverse: scale is still growing, yet the benefits of scale are no longer flowing to individual stores.
The changes on the cost side are even more telling.
Selling and distribution expenses were 1.123 billion yuan, up 209 million yuan year-on-year, an increase of 22.9%.
Administrative expenses were 610 million yuan, up 39.4%.
Revenue rose 2.3%, selling expenses rose 22.9%, and administrative expenses rose 39.4%. Taken together, the three figures point to the same thing.
Management says the money went to three areas: supply chain, store operations, and brand IP. I can accept those investments.
The newest of six production bases came online in Yunnan in May. Smart dispensing machines now cover more than 18,000 stores, and a distribution network of 31 warehouses across China reaches 33 provincial-level regions. These are all built with real money.
But there is a time lag between investment and returns.
The 1.12 billion yuan in selling expenses spent over the past six months didn't generate more incremental growth. That's the most painful part.
For a light-asset model like Mixue's, there are only two ways to expand revenue: increase SKUs to lift per-store sales, or keep opening stores to broaden coverage.
There are also moves on the SKU front.
The company now operates 27 flagship stores, with a 2,000-square-meter outlet in Nanjing opened on May 29 becoming a regional landmark. Cultural merchandise revenue rose nearly 200% year-on-year from January to July. The main brand is also piloting freshly ground coffee, with one pilot store selling more than 9,000 cups in 53 days after launch.
But these initiatives are still too small relative to a network of more than 60,000 stores.
As for coverage, as calculated earlier, net additions in third-tier and lower-tier cities were 2,471 in the first half, and 8,261 for the full year 2025.
Looking at gross margin over a longer timeline: 31.9% in the first half of 2024, 31.6% in the first half of 2025, and 30.4% in the first half of this year — three consecutive declines.
This trend is exactly in line with the trend in average procurement per store.
The scale effect hasn't disappeared; it's still there.
But the cost advantage it provides can no longer offset the decline in per-store revenue.
Lucky Coffee, Fulu Family Fresh Beer: Same Script, Third Time Around
After the main brand slowed, Mixue has pinned its hopes on its second brand.
Lucky Coffee is the first replication of this playbook. Its franchise fee is 127,000 yuan, while Mixue Bingcheng's official website discloses franchise fees above 160,000 yuan, both excluding decoration. With additional discounts during the expansion period, the actual gap is even larger. The lower threshold and ready-made franchisee network make expansion naturally efficient.
As of July 2026, Lucky Coffee had over 8,100 stores, adding a net 3,775 in the past year, a growth rate of about 45%. That pace is not slow for the coffee sector.
But what follows matters more. On July 15, 2026, Lucky Coffee released "A Letter to Lucky Coffee Franchise Partners," clarifying that new store openings in the second half of 2026 will not exceed 1,000, and for the full year no more than 2,000. It also said it will invest 500 million yuan in brand upgrades and store support.
The rhythm makes this clear. In the first half of 2026, Lucky Coffee opened over 700 stores cumulatively, with January's 300-plus stores the half-year peak. Openings then declined steadily, with the first two months accounting for nearly 65% of the first-half total.
A young brand that is grabbing market share is voluntarily setting a cap on store openings. I can't think of a second explanation; the reason won't be that the market is too good.
Two more figures in the financial report confirm this.
Franchise service revenue divided by new stores is about 77,000 yuan, up 28,000 yuan from a year earlier.
Equipment sales revenue per store is about 98,000 yuan, up 12,000 yuan year over year.
The rise in both figures suggests the stores opened at the start of the year were attracted by profit concessions.
Once franchise incentives were tightened, expansion quickly lost momentum.
Most veteran franchisees don't stop at a single store — that's where Mixue is most efficient. It also shows Lucky Cup's latest expansion push has leaned on its existing franchisee network, while the brand's own appeal has yet to emerge.
The sector's structure is also different from earlier years.
According to the 2025 China Coffee Industry Development Report, net new coffee stores nationwide exceeded 40,000 in 2025, bringing the total to 215,000, a 25% increase. The chain penetration rate rose from 46% to 53%. By June 2026, Hongcan Big Data counted 284,000 coffee beverage stores, up 20.1% year on year, with a chain penetration rate of 47.3%. The two data providers use slightly different scopes, but the direction is consistent: the sector is still expanding rapidly.
Figure 5: Existing and incremental landscape of the freshly made coffee sector (Sources: Hongcan Big Data, NCBD)
Expansion is happening alongside a shakeout. One estimate shows 53,000 coffee shops opened in the past year, but net additions were just 1,065 — nearly as many closed as opened. Is that expansion or a changing of the guard?
The top positions are largely settled: Luckin Coffee has 36,000 stores, with a net increase of 5,262 in the first half of 2026; Cotti Coffee has more than 15,000; Lucky Cup over 8,100; Nowwa Coffee over 7,700; and K Coffee 3,426.
In the first half of 2026, Luckin Coffee opened more than 5,000 stores, Cotti Coffee over 1,500, Nowwa over 1,000, Kenjoy over 900, and Lucky Cup over 700.
Luckin, at its scale, is still opening dozens of stores a day, with prices in the 10-15 yuan range, almost directly competing with Lucky Cup.
More troubling is the two-way encroachment.
Coffee incumbents are moving into tea, and tea incumbents are moving into coffee.
Guming announced at its partner conference it would invest another 400 million yuan in coffee, aiming to lift coffee's revenue share to 20%-25% from 10%-15%. ChaPanda's coffee-machine coverage rose to more than 2,700 stores from about 200 at the start of the year. Mixue's main brand is also piloting fresh-ground coffee, with one pilot store selling over 9,000 cups in 53 days after launch.
Luckin's problems are just as real.
In the second quarter of 2026, Luckin's same-store sales at self-operated stores fell 5.3% year over year.
Monthly average transaction customers rose 23%, but per-store output declined.
So came the third step. Acquiring Fulujia Fresh Beer transplants the same playbook into a third category: using the existing franchisee network and supply-chain strengths to replicate a Mixue in another category.
In 2025, Mixue Group added 13,344 stores. Lucky Cup's expansion and the Fulujia acquisition contributed more than 6,000; the main brand itself added only about 7,000.
Same script, different stage—twice. That's the most direct assessment I can give.
Chinese Companies Perfect the Art of Extreme Cost-Cutting
Reading this interim report cover to cover, my conclusion is that Mixue is not a milk-tea company.
It's a milk-tea company that sprouted almost incidentally once China's supply-chain capabilities were pushed to their limit.
China's made-to-order beverage industry has a complete domestic supply system at every upstream stage—from tea leaves, fruit, syrups and packaging to ice makers and smart dispensing machines. That system is what lets Mixue squeeze the cost of a drink down to a level others can't reach. Its deepest moat was never that theme song; it's this system.
Chinese companies have taken this craft to the limit: in a single drink, from ingredients to packaging to equipment, virtually every cost that could be cut has been cut.
And that's exactly where the problem lies.
After costs are squeezed to the extreme, growth needs a new engine.
In the past few years, Mixue's engine was store count.
More stores meant larger procurement scale, lower costs, and franchisees more willing to open stores, leading to even more stores.
This cycle hardly failed in the past five years.
Now it has failed. Where did it break?
What broke is the second link of the cycle: stores are still increasing, but the business per store is shrinking.
Chart 6: Changes in Mixue's key metrics in the first half of 2026 versus a year earlier (Source: Company periodic earnings announcements)
I should say upfront: Mixue's financial foundation remains solid.
64,000 stores, nearly 30,000 franchisees, six production bases, 31 warehouses covering 33 provincial-level regions, and a brand built over more than a decade — these assets are still generating value.
But under the momentum, the limits are becoming visible.
Overseas is the clearest example. Net store count fell by more than 500 in 18 months, and existing stores in Indonesia and Vietnam are still being adjusted. The same low prices, franchise system and similar products that work in mainland China require a fresh approach to site selection and localization in Southeast Asia.
Simple replication of scale is not a one-size-fits-all solution.
I read several times the statement at the earnings call about deliberately slowing the pace of store openings and maintaining that stance long-term. The logic is fine; the problem is timing.
When joint-venture automakers said this in China, it was when their market share began to decline.
When the household chemicals leader said this, it was after growth had stalled.
Looking back over the past few decades, most consumer companies started talking about high-quality development only after expansion was constrained, not while it was in full swing.
How many can truly return to growth through so-called high-quality operations?
That's not to say Mixue can't, but the claim itself is not evidence.
Eighteen months ago, the market valued it highly on the assumption that the machine would never stop.
The interim report shows the machine is still running, just at a slower pace.
Mixue now needs to prove whether its 64,000 stores can sell more per store without a major expansion.
That has little to do with how many more stores it can open.
That's harder than opening new stores.
Risk disclosure.
Data sources
1. Mixue Group (02097.HK) 2026 interim results announcement, August 27, 2026; public statements at the 2026 interim results briefing
2. 2026 interim results announcements from Guming, Chabaidao, Shanghai Auntie and Nayuki; Chagee's Q1 and Q2 2026 earnings
3. 2025 China Coffee Industry Development Report
4. Hongcan Big Data's Coffee Beverage Category Development Report 2026, Xinhua Net, August 20, 2026
5. NCBD Food Reference's H1 2026 Coffee Store Openings Ranking, August 2026
6. Franchise fee pages on Mixue Bingcheng and Lucky Coffee's official websites
7. Hong Kong Stock Exchange market data, close of September 3, 2026
8. Related interim report coverage from China News Service Jingwei, Huaxia Times, Securities Times, and The Paper, August–September 2026.