The only round of financing for Mixue Ice Cream & Tea: The luck of being chosen.

Text | Shi Jiaxiang

Editor | Chen Zhiyan

It took four years for Mixue Bingcheng to realize its dream of going public. From submitting its prospectus to the Shenzhen Stock Exchange for the first time in 2022, to switching to the Hong Kong Stock Exchange more than a year later, and finally submitting the prospectus again at the beginning of this year, it finally listed on the Hong Kong Stock Exchange today, with its market value exceeding 100 billion at the opening.‍ 

In the 28 years since its establishment, before going public, this largest ready-to-drink tea enterprise in China had only received one round of financing, which was more than 2 billion yuan in December 2020 from Hillhouse Capital, Meituan Longzhu, and CPE Yuanfeng, regarded by the outside world as a pre-IPO round. This was interpreted at that time as an adjustment of the capital structure before going public. 

At that time, Mixue Bingcheng was not the most dazzling one in the capital market: the biggest star was Heytea, with a valuation of 60 billion yuan. The valuation of Mixue Bingcheng with 10,000 stores was comparable to that of Cha Yan Yue Se with hundreds of stores.

This was still the era of "Internet consumption". The main theme was: "All the tracks verified by traditional retail are worth doing again in an Internet way." 

The intensively capitalized new-style tea drinks were the product of this period. A typical example is Nayuki, the first brand to take the high-end route. It created a store model with one tea and one package, adhered to the policy of not opening franchises, trained an employee in two months, and sold a cup of fruit tea for 30 yuan; 

Another example is Heytea. This tea drink brand, which received a joint lead investment of 100 million yuan from He Boquan and IDG in 2016, even attracted Coatue, which specializes in investing in TMT. At the peak of the sentiment, its valuation reached an unprecedented 60 billion yuan. 

However, in the second half of 2021, the dream of new consumption shattered. Many logics of Internet investment were proven wrong in the consumer market. Those brands good at using traffic and marketing also began to learn from the traditional giants in the track to be down-to-earth. The awakened investors began to systematically look for investment targets like Mixue Bingcheng with good net profits and stable growth. 

But they soon hit a wall. Why should the "old world" that doesn't lack money accept external financing? It should be noted that Mixue Bingcheng's net profit in 2021 was 1.9 billion yuan, which was not much different from the amount of its only round of financing.

Or, with the valuation having skyrocketed to tens of billions or an astronomical figure, is the investment still worthwhile? "The window period for investment is so short. It's hard to make a move if you don't invest before the valuation explodes," a consumer investor summarized. 

According to "AnYong Waves", many consumer investors tried to seize Mixue Bingcheng's only investment opportunity, but almost all of them failed. When a consumer investor listed several missed opportunities in the tea drink industry for us, he first mentioned the name of Mixue Bingcheng and then immediately added, "Of course, it's impossible to invest in Mixue." 

This also conforms to a long-standing view: a consumer goods company with good fundamentals really doesn't need external funds. They have their own stable cash flow. This is also the significant difference between consumer companies and Internet and technology companies. 

But Mixue Bingcheng still carefully selected its capital circle of friends before heading to the public market: Hillhouse Capital, Meituan Longzhu, and CPE Yuanfeng. 

Obviously, in this short financing story, the amount of funds and valuation is not the key. What Mixue Bingcheng really needs are partners who have knowledge, experience, and methods in specific aspects for its future sustainable development. 

For example, Meituan, which Longzhu relies on, has a natural channel connection with offline tea drinks, and CPE Yuanfeng also has years of experience accumulated in the consumer and chain industries. 

But why did Mixue Bingcheng choose Hillhouse Capital among a group of comprehensive investment institutions? 

As is well known, Hillhouse Capital has invested in and been deeply involved in the transformation of companies such as Blue Moon and Belle, and has many investors with industrial rather than pure financial backgrounds. For example, Gan Jiawei, Shen Haoyu, and Chen Wenyuan, who just joined Hillhouse Capital in the news these days and was previously the CEO of PepsiCo Asia-Pacific. These people are most abundant in practical experience in the business world. 

At the same time, there is also Hillhouse Capital's post-investment service that has been verified many times. Different from a group of leading institutions with the style of US dollar VCs, Hillhouse Capital has actually participated in building digital process construction and membership systems for enterprises such as Belle, Topsports, Miniso, and Liangpinpuzi. 

According to "AnYong Waves", Mixue Bingcheng once specified that it hoped Li Liang, the founding partner of Hillhouse Capital, to serve as a director, precisely because of Li Liang's experience during the Belle period. After Hillhouse Capital took control of Belle in 2017, it took the lead in establishing a new retail platform at Belle, leading e-commerce and dataization, and at least grafted Belle's cooperation with Hillhouse Capital's invested enterprises such as Tencent New Retail and Horizon Robotics in terms of data. 

What happened later exceeded expectations. Even Zhang Yuan, a Hillhouse Capital consumer investor who participated in the early due diligence and investment decision of Mixue Bingcheng, joined Mixue Bingcheng as CFO in early 2023. This is not the first time that there has been such an interaction between Hillhouse Capital and its invested companies. Similar "talent flow" has occurred in investment cases such as Gaoji Medical, MiniMax, and Youzan. 

In addition, Mixue Bingcheng has also established cooperative relationships with new material enterprises such as Element Drive and digital suppliers such as Qunhe Technology invested by Hillhouse Capital. This can be regarded as an example of the "dumbbell theory" repeatedly mentioned by Hillhouse Capital, that is, investing in technological innovation at one end and the real economy at the other end, and then combining the two to let technological innovation serve real enterprises. 

For Hillhouse Capital, which was very active in the new consumption field from 2018 to 2021, it did not stop at investing in "hotshots" such as Peets, Heytea, Harmay, and Perfect Diary, but continued to advance into the unfamiliar sinking market. This active identification and active approach were also important factors for it to invest in Mixue Bingcheng. 

People close to Hillhouse Capital revealed that when the consumer market was full of discussions about consumption upgrading around 2019, the rise of Pinduoduo made Hillhouse Capital realize that "the sinking market is vast" and that "one of the values of the Internet lies in price equality." They then flocked to third - and fourth - tier cities and discovered Mixue Bingcheng, which had only more than 4,000 stores at that time, with simple store decoration styles and product appearances and was not very noticeable. 

Therefore, only investors who don't regard themselves as financial institutions may invest in this traditional consumer brand that started from the real economy. Or rather, for companies and industries where "capital is no longer the most crucial factor", "having different kinds of money" is no longer just a fancy phrase but the foundation for survival. 

Three years ago, when the consumer market was frantically chasing traffic, investors probably wouldn't have thought that the player who would have the last laugh would be the "Snow King", which squeezes profits from the supply chain, earns a few cents per cup, and can expand both its barriers and scale at the same time.

Some entrepreneurs of similar age once asked Zhang Hongfu how he managed to open thousands of stores and why only a dozen stores were opened in the first year. Zhang Hongfu told them, "You're so lucky. It took us ten years to open just one store." 

To some extent, Mixue Bingcheng's story stands in contrast to the entire venture capital market: it doesn't rely on financing to expand its scale or on traffic to boost sales. Its current glory just proves the essence of the consumer industry: the most extreme supply chain and products that satisfy consumers. 

For the "Snow King" that dreams of "opening one million stores", going public is just a footnote on its journey forward. Its territory is about to expand from 11 overseas countries to the whole world. 

Photo source | IC Photo

This article is from the WeChat official account "AnYong Waves". Author: AnYong. Republished by 36Kr with permission.