A Chinese businessman becomes a billionaire by selling cheap milk tea

Wang Xiaocun, founder and chairman of Cha Panda, has joined the ranks of the world’s billionaires after a latest funding spherical valued his Chinese language tea chain at $2.1 billion.

In accordance with Wang, 40, his web value is presently $1.1 billion. Forbes estimates. His fortune relies on a virtually 60% stake within the Chengdu-based beverage chain, which has expanded quickly over the previous three years because it now has a community of greater than 7,000 shops. The chain’s signature drinks embrace mango pomelo sago, taro tea, and inexperienced tea with jasmine milk, and most are priced at $3.60 or much less.

Wang’s spouse, Liu Weihong, has additionally amassed a whopping $700 million fortune primarily based on her 33% stake within the firm. Liu chairs a supervisory committee and is answerable for overseeing Cha Panda’s day-to-day operations, based on a preliminary prospectus filed on the Hong Kong Inventory Trade. The corporate didn’t reply to an emailed request for remark.

Cha Panda’s funding spherical, which closed in June, noticed its shares bought for 13.2 yuan ($1.8) per share to traders together with CICC, Orchid Asia and Shanghai Loyal Valley Investments, based on the prospectus.

The corporate has but to disclose every other particulars of its preliminary public providing, together with the timeline and dimension. Analysts say Cha Panda wants recent funding to open extra shops to maintain up with the fierce competitors in China’s tea beverage market.

“In the case of consuming milk tea, persons are not loyal in any respect and at all times select from a number of manufacturers,” says Jason Yu, managing director of Kantar Worldpanel Larger China in Shanghai. “So whoever has extra shops has a greater probability of being seen by shoppers, in addition to getting an even bigger share of their spending.”

The origins of Cha Panda might be traced again to 2008, when Wang began promoting fruit and bubbles from a small store close to a college in Chengdu, southwest China, which is legendary for its spicy meals and in addition for being house to massive pandas.

Over the subsequent decade or so, Wang managed to develop the Cha Panda retailer community to 531 as of 2020, however the firm actually took off when it embraced the franchise mannequin.

Cha Panda’s technique now’s to develop its personal drink recipes, after which promote the elements, reminiscent of fruit and tea leaves, to Cha Panda branded beverage shops. By doing so, Wang can hold the chain’s prices decrease than rivals reminiscent of Hong Kong-listed Nayuki Holdings, which has to spend extra on worker salaries and rental bills for its straight operated shops.

The whole variety of Cha Panda-branded shops has grown to 7,117 as of August this 12 months, and the corporate prospectus says it had simply six of these shops beneath its direct administration within the first quarter.

Final 12 months, Cha Panda managed to generate $580.3 million in income, up 16% from the earlier 12 months. The corporate’s revenue jumped 24% to $132.3 million. It was the third largest tea store by retail gross sales in China, based on analysis by Frost & Sullivan cited within the prospectus.

To extend model consciousness amongst youthful shoppers, the corporate additionally sponsors music festivals and different offline cultural occasions to complement its on-line promotions. In June, Cha Panda confirmed his help for the Chengdu Analysis Base of Big Panda Breeding by adopting one of many big pandas on the facility, based on press release Heart issued.

However in the long run, success comes all the way down to controlling prices and providing value-for-money merchandise, says Yu Kantar Worldpanel. “Shoppers are paying extra consideration to prices as a result of milk tea manufacturers do not actually differentiate from one another,” he says. “The merchandise are comparable as a result of they’re all blends of tea and different elements, reminiscent of fruit.”

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