On International Tea Day in May 2026, Chagee launched its 'World Tea' series across five major Chinese cities, pairing the release with its new 'Geelato' ice cream priced at a premium 18 yuan. On the surface, it looked like a standard brand activation for the first 'new tea' stock on the Nasdaq. Beneath the glossy marketing, however, the move represents a desperate self-rescue attempt by a brand whose market value has evaporated by over 70% since its IPO.
Chagee’s ascent was legendary, compressing a decade of growth into just five years to reach over 7,400 global stores by the end of 2025. This expansion was fueled almost entirely by the capital of franchisees, who operate over 90% of the brand’s footprint. Yet, the momentum has stalled. The once-coveted franchise slots, which previously saw tens of thousands of applicants vying for a single city, have become financial anchors dragging down small investors.
The company’s inaugural post-IPO annual report for 2025 revealed a staggering 52.4% drop in net profit, falling from 2.4 billion yuan to just 1.1 billion. More alarming was the fourth quarter of 2025, which saw Chagee record its first-ever quarterly operating loss. This financial decay is mirrored at the storefront level, where average monthly gross merchandise volume (GMV) has plummeted by 40% from its 2023 peak.
Franchisees are bearing the brunt of this downturn, with typical payback periods stretching from a once-heralded six months to over two years. In high-rent districts, many owners report monthly losses in the tens of thousands of yuan. The brand’s hyper-expansion led to severe internal cannibalization, with some core business districts housing three stores within a single 100-meter radius, effectively splitting a shrinking customer base.
Chagee’s vulnerability stems from its over-reliance on a 'super product' strategy, where a single tea variety, 'Boya Juexian,' accounts for 40% of total revenue. This lack of diversification made the brand an easy target for competitors like Luckin and ChaPanda, who launched aggressive 9.9-yuan price wars. While rivals pivoted to capture price-sensitive consumers, Chagee remained tethered to its 'Oriental Starbucks' positioning, a narrative that is increasingly failing to resonate in a slowing economy.
In a radical shift to stabilize the system, Chagee recently abandoned its traditional model of profiting from raw material markups in favor of a GMV-sharing arrangement. The company is also aggressively reclaiming failing franchise stores to operate them directly, with direct-owned outlets surging by over 260% in a single year. While the COO claims that the company can only profit if franchisees do, the reality on the ground suggests a breakdown in the social contract between the brand and its partners.
The optics of the crisis are further strained by corporate governance choices that favor insiders over the front lines. In late 2025, even as franchisees struggled in a 'hibernation' period, the company distributed 1.77 billion yuan in dividends, with over half going to founder Zhang Junjie. This decoupling of executive reward from franchisee survival suggests that while the 'Oriental Starbucks' vision remains a marketing pillar, the financial foundations of the brand are increasingly fragile.