Why is the closure rate of Auntie Shanghai three times higher than that of Mixue Bingcheng?

Author | Qing Xiang Editor | Jia Xin

On March 24, Hu Shang Ayi released its first financial report after listing. In 2025, revenue reached RMB 4.47 billion, up 35.96% year over year; net profit attributable to shareholders was RMB 500 million, up 52.41% year over year. At the same time, Hu Shang Ayi’s number of stores nationwide has reached 11,449, and it has achieved the 10,000-store target that the company proposed two years ago.

However, beneath the halo of earnings growth, its market value has shrunk dramatically.

On the first day of its IPO last May, Hu Shang Ayi jumped 68.49% at the open, to HK$190.6, and its market capitalization once exceeded HK$20 billion. But currently, Hu Shang Ayi’s market value is only HK$8.2 billion—down by about 60%.

Behind the mismatch between performance soaring and market value being cut in half, lies the pain brought by operating at a 10,000-store scale.

We note that in 2025, Hu Shang Ayi closed 1,383 franchise stores, up 40% compared with 2024. At the same time, the number of store closures is approaching 38% of the number of new stores opened. Put in simple terms: for every ~3 new stores opened, ~1 old store leaves the market.

For Hu Shang Ayi, even though the company keeps expanding its store footprint, the profitability of individual stores and the stability of its franchise system still face significant pressure. The 10,000-store scale is only a new starting point; whether future growth is sustainable still needs to be tested.

The cost of the 10,000-store scale

In the narrative of new-style tea drinks, “10,000 stores” was once seen as a ticket to the capital markets.

In 2023, Hu Shang Ayi founder Wei Junjun announced at the National Partners Conference: “In 2023, Hu Shang Ayi plans to add 3,000 stores; by year-end, signed stores will exceed 10,000.”

Two years later, this target was delivered.

As of December 31, 2025, Hu Shang Ayi’s store network had 11,449 stores, up 24.8% from 9,176 stores as of December 31, 2024. Of these, there were 26 direct-operated stores and 11,423 franchise stores.

From a scale perspective, Hu Shang Ayi has already joined the “10,000-store club,” becoming an important player in the mid-end tea beverage segment. But behind the glossy look of the 10,000-store scale is a closure rate that remains above 10%.

The financial report shows that in 2025, Hu Shang Ayi closed 1,383 franchise stores, up 40% compared with 2024. Notably, in 2025, the number of franchise stores was 3,654, and the number of closures was close to 38% of the number of new stores opened. Converted into figures: for every ~3 new stores opened, ~1 old store closes.

By the end of 2025, the total number of franchise stores was 11,423, and the closure rate was roughly 12%. According to the company’s prospectus, in 2024 the company closed 987 stores, up 166.8% from the prior year; the proportion of closed stores also stayed above 10%.

Compared with Mixue Bingcheng, which also focuses on lower-tier markets, Mixue Bingcheng closed 2,527 stores in 2025, but with a scale of nearly 60,000 stores, its closure rate was only about 4%. The gap between the two indicates that Hu Shang Ayi’s store stability is clearly weaker than that of industry leaders.

According to a report by The Times Weekly, Chen Haihui, a multi-store franchisee operating in East China, revealed that the stores’ initial cash collected could reach 85% of turnover, but now it is only 60%. He believes that although it is common in the tea beverage industry for turnover and cash collected to not match, other brands are not as low as this.

At the same time, the headquarters’ forced procurement system further increases franchisees’ capital pressure. Chen Haihui said: “Let’s not even talk about squeezed profits. The headquarters also forces procurement that accounts for 35% of turnover.”

Many franchisees complain online. Some mentioned, “If cash collected isn’t even 60%, the rent next month won’t be paid.” Others reported, “Cash collected is 120,000, but the goods you load are 60,000. After deducting labor, water and electricity, rebates, freight, and so on, you earn only 20,000.”

This means that under the dual pressure of high discounts and a high procurement proportion, franchisees’ profit margins are continuously squeezed.

From the perspective of the business model, Hu Shang Ayi’s growth essentially relies on franchise-driven expansion plus monetization through the supply chain. Similar to Mixue Bingcheng, Hu Shang Ayi’s main source of revenue is selling ingredients to franchisees; in 2025, this revenue was RMB 3.616 billion, accounting for 81% of total revenue. In 2025, franchise services revenue was RMB 690 million, accounting for 15% of total revenue.

The brand attracts franchisees to open stores quickly with a low barrier, and then generates revenue through material supply. But when the number of stores increases rapidly and competition within the same area intensifies, store-level revenue is diluted and franchisees’ profitability declines; a consistently high closure rate becomes an unavoidable outcome.

For Hu Shang Ayi, the scale is still expanding, but the quality of growth is questionable. If the per-store profitability model cannot be improved, the stability of the franchise system will continue to face pressure.

Where is the differentiation?

Hu Shang Ayi’s rapid rise in its early stage depended to a large extent on differentiated positioning—“freshly brewed millet and grains tea.”

In 2013, Wei Junjun and Zhou Rongrong, a couple who had just left the Fortune 500, found a small shop in an old lane in Shanghai, with a long line in front. The shop owner was a Shanghai “Ayi.” She created a unique drink using blood glutinous rice and other grains brewed/steeped, together with milk tea.

The couple realized this was an innovative tea beverage that combined local ingredients. At the time, in a new tea market that was highly homogeneous, it represented a potential blank space. This product also helped Hu Shang Ayi quickly gain traction in first-tier markets such as Shanghai.

Initially, they leased a 25-square-meter shop in People’s Square in Shanghai, opened it, and officially founded Hu Shang Ayi. The pioneering product was the innovative “blood glutinous rice milk tea,” featuring a healthy combination of “milk tea + grains.” In its first month, sales exceeded 300,000 yuan, quickly establishing itself in Shanghai.

In 2015, Hu Shang Ayi began franchising expansion. In 2019, having successfully entered the fresh fruit tea market with the single offering of “millet-and-grains milk tea,” its product line began to diversify, catering to the needs of a broader consumer group.

However, as stores expanded nationwide and products diversified, the original differentiated advantage started to be diluted. Fresh fruit tea and milk cap tea gradually became standardized products across the industry, and consumers’ recognition of Hu Shang Ayi’s “healthy + grains” label declined.

From an industry trend perspective, China’s fresh-brew tea beverage market is still growing rapidly. According to data from Zhishì Consulting, between 2023 and 2028, the GMV of China’s fresh-brew tea beverage industry will grow at a CAGR of 19.7%, and by 2028 it is expected to exceed RMB 500 billion.

Meanwhile, the mid-price segment (average selling price from RMB 10 to RMB 20) has the highest market share, accounting for more than 51% in 2023 and also growing the fastest. Zhishì Consulting predicts that from 2018 to 2028, the CAGR of GMV for mid-priced fresh-brew tea beverages will exceed 20%.

But for Hu Shang Ayi, this mid-end positioning is being squeezed from both directions.

In the high-end market, brands such as Heytea and Nai Xue firmly lock in consumers’ minds through social attributes, original flavors, and brand stories. Hu Shang Ayi has advantages in flavor innovation and health concepts, but it is difficult to achieve brand premiumization like leading brands do.

In the low-end market, Mixue Bingcheng has long held an overwhelming advantage. Mixue Bingcheng forms standardized ingredient procurement and production processes through its own central factories and a unified distribution system, driving unit costs down to the lowest level in the industry. This model enables it to maintain low pricing below RMB 10 while sustaining relatively high gross margins, thereby building an almost unshakable level of store density and market share in lower-tier markets.

In the future, whether Hu Shang Ayi can break through the ceiling of the mid-end market by strengthening differentiation and optimizing its supply chain will directly determine the quality of its growth.

Can the new growth path work?

Hu Shang Ayi is trying to explore new growth paths through a matrix of sub-brand configurations.

In 2022, Hu Shang Ayi launched an independent coffee brand, “Hu Coffee,” positioning the average customer ticket price at RMB 11 to RMB 15, which overlaps highly with Luckin Coffee’s price range. This attempt seems, at first glance, to be straightforward: entering the coffee category through an independent brand can avoid diverting tea beverage products and expand into new consumption scenarios.

But according to industry rules, tea beverage brands’ chances of success when crossing over into coffee are not high.

On the one hand, competition in the coffee sector is already highly concentrated. Luckin Coffee, Starbucks, and local chain brands have clear advantages in store density, membership systems, and marketing activities. A coffee price war at RMB 9.9 has nearly been pushed to the limit, compressing profit margins, while users have higher requirements for professional coffee expertise. Tea beverage brands come with inherent leisure and social attributes, making it difficult to be fully recognized in coffee settings.

On the other hand, supply-chain and cost pressures are the biggest constraints. Coffee ingredients require stricter standards for storage and preparation. Cold brew, coffee beans, and fresh dairy products all require dedicated warehousing and distribution systems. While Hu Shang Ayi’s existing supply chain currently covers the entire country, it is mainly designed for tea beverages, making reuse difficult.

At present, it seems that besides a few leading brands such as Mixue Bingcheng’s “Lucky Coffee” which relies on extreme scale and a supply chain to hold its market position, most other new-tea-turned-coffee sub-brands are developing more slowly.

In September 2024, Hu Coffee attempted to accelerate expansion by opening single-store franchise opportunities nationwide. According to industry media reporting on tea-and-coffee, in September of last year Hu Shang Ayi had already stopped franchise recruitment for the independent coffee brand “Hu Coffee,” and its existing coffee business was gradually integrated into the main Hu Shang Ayi brand.

In addition, Hu Shang Ayi also launched an independent new brand, Tea Waterfall, in March 2024, benchmarking Mixue Bingcheng. It focuses on extreme value-for-money and standardized products, aiming to capture share in lower-tier markets.

As of October 2025, Tea Waterfall’s signed stores had already exceeded 1,000. Since the first store opened in March 2024, it achieved the 1,000-store target in only a year and a half. It expanded by an average of about 100 stores per month, and especially in the summer of 2025 (June to August) it opened 450 stores, with a significantly fast expansion pace.

So, can it take a slice of the pie from Mixue Bingcheng? For now, the challenges facing Tea Waterfall are also not to be underestimated.

On the one hand, competition in the low-price market is fierce. Mixue Bingcheng has high-density store coverage in lower-tier markets and an extreme supply chain, forming an almost unshakable scale advantage. As of 2025, Tea Waterfall’s nationwide store count is only in the thousands, while the huge Mixue empire has nearly 60,000 stores nationwide.

On the other hand, the supply chain remains the core bottleneck for growth. Tea Waterfall relies on Hu Shang Ayi’s existing warehousing and cold-chain system, but Hu Shang Ayi’s supply chain capabilities still lag behind those of leading brands.

Overall, through its brand matrix of “Hu Shang Ayi + Hu Coffee + Tea Waterfall,” the company is attempting to cover different price tiers—from the low end, the mid end to the light high end—to achieve a full-category layout.

In the short term, this strategy can help cover more consumption scenarios and cities. But in the long run, whether it can truly translate into growth depends on supply-chain optimization, improvements in per-store efficiency, and whether the new brands can build independent competitive strengths and earn consumer recognition.

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