Chinese tea and ice cream giant Mixue goes public

China's largest iced tea, other drinks and ice cream company Mixue Group is seeking to raise HK$3.45 billion ($443.66 million) in an initial public offering (IPO) on the Hong Kong Stock Exchange, according to Reuters, citing documents filed with the capital markets authority.

The company began bookbuilding on Friday to sell 17.1 million shares at HK$202.5 each. The shares are set to be listed on the Hong Kong Stock Exchange on March 3.

Mixue will be valued at $9.8 billion, with five major investors having subscribed for $200 million worth of shares, the source said.

Mixue, which had previously planned to raise up to $1 billion through an IPO, has reduced the size of its offering because it is not "desperately" in need of cash, sources told Reuters.

The company has 45,000 stores in mainland China and 11 other countries through a major franchise network. Mixue, famous for its mascot - a snowman known as the Snow King, who wears a crown and a red cloak - has quickly become a popular brand among young consumers in recent years. Mixue is a well-known brand of fruit drinks and tea, coffee and ice cream, usually priced at around $1.

As of the end of September 2024, more than 99% of Mixue's more than 45,000 stores were franchised, according to documents filed with the regulator. On the revenue side, the company does not rely on franchise fees. These accounted for only 2.4% of total revenue in the first three quarters of 2024, according to the source.

Most of the revenue comes from selling goods and equipment to franchised stores, which are required to buy these items from Mixue.

The company is considered the world's largest fast-food chain by number of stores, but there is still room for growth in China, says independent analyst Zhu Danpeng, noting: "In counties, cities and villages, there are still many small, non-standard stores. As far as I know, there are nearly 200,000 such stores that could be replaced by Mixue."

Mixue sold 7.1 billion drinks in the first nine months of last year, according to Reuters.

The company was created in 1997 in the northern city of Zhengzhou by founder Zhang Hongchao, who started the business with a homemade shaved ice machine (shaved ice is a dessert made from very thin shavings of ice or crushed ice, flavored with syrup or other sweet ingredients).