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

Why are the profits of Hu Shang Ayi franchisees being squeezed by dual pressures?

Author: Xiang Qing, Editor: Jia Xin

On March 24, Hu Shang Ayi released its first financial report since going public. In 2025, revenue reached 4.47 billion yuan, a year-on-year increase of 35.96%; net profit attributable to the parent company was reported at 500 million yuan, a year-on-year increase of 52.41%. At the same time, the number of Hu Shang Ayi stores nationwide has reached 11,449, achieving the company’s goal of 10,000 stores set two years ago.

However, beneath the halo of performance growth, the market value has significantly shrunk.

On the first day of trading last May, Hu Shang Ayi’s stock surged 68.49% at opening, reaching 190.6 Hong Kong dollars, with a market value briefly surpassing 20 billion Hong Kong dollars. However, Hu Shang Ayi’s market value is now only 8.2 billion Hong Kong dollars, a drop of about 60%.

This mismatch between soaring performance and halved market value hides the growing pains beneath the scale of 10,000 stores.

We noted that in 2025, Hu Shang Ayi closed 1,383 franchise stores, a 40% increase compared to 2024. At the same time, the number of closed stores is nearing 38% of newly opened stores, meaning that for every three new stores opened, one old store exits the market.

For Hu Shang Ayi, although the company continues to expand its store scale, the profitability of individual stores and the stability of its franchise system are still under significant pressure. The scale of 10,000 stores is merely a new starting point, and the sustainability of future growth remains to be tested.

1. The Cost of 10,000 Stores =========

In the narrative of new tea beverages, the scale of 10,000 stores was once seen as a ticket to the capital market.

In 2023, Hu Shang Ayi founder Shan Weijun announced at the national partner conference: “In 2023, Hu Shang Ayi plans to add 3,000 new stores; by the end of the year, the number of signed stores will exceed 10,000.”

Two years later, this goal has been realized.

As of December 31, 2025, Hu Shang Ayi’s store network has 11,449 stores, a 24.8% increase from 9,176 stores on December 31, 2024, including 26 directly operated stores and 11,423 franchise stores.

In terms of scale, Hu Shang Ayi has entered the “10,000 store club” in the ready-to-drink tea industry, becoming an important player in the mid-range tea beverage market. However, behind the glamorous scale of 10,000 stores lies a persistently high closure rate of over 10%.

The financial report shows that in 2025, Hu Shang Ayi closed 1,383 franchise stores, a 40% increase compared to 2024. Notably, in 2025, the number of franchise stores was 3,654, with the number of closures nearing 38% of newly opened stores, which means that for every three new stores opened, one old store closes.

By the end of 2025, the total number of franchise stores was 11,423, with a closure rate of approximately 12%. According to the company’s prospectus, in 2024, the company closed 987 stores, an increase of 166.8% from the previous year, with the closure rate also exceeding 10%.

In contrast, MXBC, which also delves into the sinking market, closed 2,527 stores in 2025, but with nearly 60,000 stores in total, the closure rate was only about 4%. The gap between the two indicates that Hu Shang Ayi’s store stability is evidently weaker than that of the industry leaders.

The persistently high closure rate essentially reflects the profit pressure on franchise stores.

According to the Times Weekly, Chen Haihui, a franchisee operating multiple stores in East China, revealed that his stores initially could achieve 85% of the revenue, but now it’s down to only 60%. He believes that although there is a general discrepancy between revenue and actual income in the tea beverage industry, other brands do not have such a low percentage.

Meanwhile, the headquarters’ mandatory ordering system further intensifies the financial pressure on franchisees. Chen Haihui stated, “Leaving aside the profit squeeze, the headquarters also forces orders that account for 35% of revenue.”

Many franchisees are expressing their grievances online. Some mentioned, “With actual income below 60%, I can’t even cover next month’s rent,” while others reported, “Actual income is 120,000, but the goods cost only 60,000; after deducting labor, utilities, rebates, shipping, etc., I only earn 20,000.”

This means that under the dual pressures of high discounts and high ordering ratios, the profit margins for franchisees are continuously being squeezed.

From a business model perspective, Hu Shang Ayi’s growth fundamentally relies on franchise-driven + supply chain monetization. Similar to MXBC, Hu Shang Ayi’s main source of income comes from selling raw materials to franchisees, with this revenue in 2025 amounting to 3.616 billion yuan, accounting for 81% of total revenue; franchise services in 2025 generated 690 million yuan, accounting for 15% of total revenue.

The brand attracts franchisees to open stores quickly with low entry barriers and then generates income through material supply. However, as the number of stores rapidly increases and competition in the same region intensifies, individual store revenues are diluted, leading to decreased profitability for franchisees, and a persistently high closure rate becomes an inevitable outcome.

For Hu Shang Ayi, while the scale continues to expand, the quality of growth is in question. If the profitability model for individual stores cannot be improved, the stability of the franchise system will remain under pressure.

2. Where is the Differentiation? ========

Hu Shang Ayi’s early rapid rise largely depended on its differentiated positioning—“freshly brewed grain tea.”

In 2013, Shan Weijun and Zhou Rongrong, who had just left a Fortune 500 company, discovered a small shop in an old alley in Shanghai with a long queue. The owner was a Shanghai aunt who made unique beverages using cooked glutinous rice and other grains with milk tea.

The couple realized that this was an innovative tea drink combining local ingredients, representing a potential gap in the highly homogeneous new tea beverage market at that time. This product also helped Hu Shang Ayi rapidly gain a foothold in first-tier markets like Shanghai.

Initially, they rented a 25-square-meter store at People’s Square in Shanghai to officially establish Hu Shang Ayi. The flagship product was the innovative “glutinous rice milk tea,” emphasizing a healthy combination of “milk tea + grains,” with the first month’s sales surpassing 300,000 yuan, quickly establishing a strong presence in Shanghai.

In 2015, Hu Shang Ayi began to expand through franchising; in 2019, it successfully entered the fresh fruit tea market from its single “grain milk tea” offering, diversifying its product line to cater to a broader consumer demand.

However, with the nationwide store expansion and product diversification, the original differentiation advantage has started to dilute. Fresh fruit tea and milk cap tea have gradually become standardized products in the industry, and Hu Shang Ayi’s “health + grains” label has diminished in consumer perception.

From an industry trend perspective, China’s ready-to-drink tea market is still growing rapidly. According to data from Zhenzhang Consulting, the GMV of China’s ready-to-drink tea industry is expected to grow at a compound annual growth rate of 19.7% from 2023 to 2028, potentially exceeding 500 billion yuan by 2028.

The mid-priced (average price between 10 yuan and 20 yuan) ready-to-drink tea segment holds the largest market share, exceeding 51% in 2023, with the fastest growth rate. Zhenzhang Consulting predicts that from 2018 to 2028, the compound annual growth rate of mid-priced ready-to-drink tea GMV will exceed 20%.

However, for Hu Shang Ayi, its mid-range positioning faces pressure from both ends.

In the high-end market, brands like Heytea and Nayuki firmly lock in consumer perception through social attributes, original flavors, and brand stories. Hu Shang Ayi has advantages in taste innovation and health concepts but struggles to achieve brand premium like the leading brands.

In the low-end market, MXBC has long held an absolute advantage. MXBC has established a standardized raw material procurement and production process through its own central factory and unified distribution system, driving unit costs down to the lowest in the industry. This model allows it to maintain a low price under 10 yuan while keeping high gross margins, thereby establishing an almost unshakeable store density and market share in the sinking market.

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

3. Is a New Growth Path Viable? ===========

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

In 2022, Hu Shang Ayi launched an independent coffee brand “Hu Coffee,” positioning the average transaction price between 11 yuan and 15 yuan, which overlaps significantly with Luckin Coffee’s price range. This attempt seems logical; entering the coffee sector through an independent brand can avoid diversion from tea beverage products and expand new consumption scenarios.

However, from industry rules, the odds of tea brands successfully crossing into coffee are not high.

On the one hand, the coffee sector is highly concentrated with competition, and brands like Luckin, Starbucks, and local chain brands have significant advantages in store density, membership systems, and marketing activities. The 9.9 yuan coffee price war has nearly reached its limit, compressing profit margins, while consumers have high demands for coffee expertise, making it difficult for tea brands, which are inherently leisure and social-oriented, to gain full recognition in coffee scenarios.

On the other hand, supply chain and cost pressures are the biggest constraints. Coffee raw materials require high standards for storage and production; cold brew, coffee beans, and fresh dairy products necessitate independent storage and distribution systems. Although Hu Shang Ayi’s existing supply chain covers the nation, it mainly targets tea beverages, making reuse challenging.

Currently, besides a few leading brands like MXBC’s “Lucky Coffee” that rely on extreme scale and supply chain to stabilize their market, many new tea beverage coffee sub-brands are developing relatively slowly.

In September 2024, Hu Coffee attempted to accelerate expansion by opening single-store franchises nationwide. According to industry media reports, last September, Hu Shang Ayi had already stopped the independent coffee brand “Hu Coffee” franchises, gradually integrating the original coffee business into the main brand Hu Shang Ayi.

Additionally, Hu Shang Ayi also launched an independent new brand, Tea Waterfall, in March 2024, targeting MXBC and emphasizing extreme cost-performance and standardized products, aiming to capture market share in the sinking market.

As of October 2025, the number of signed Tea Waterfall stores has surpassed 1,000. Since the first store opened in March 2024, it has achieved the goal of 1,000 stores in just a year and a half, with an average of about 100 new stores per month. Notably, in the summer of 2025 (June-August), the number of new stores reached 450, showing significant expansion speed.

So, can it carve out a piece of the pie from MXBC? Currently, the challenges facing Tea Waterfall are equally formidable.

On the one hand, the competition in the low-price market is fierce; MXBC holds a high-density store presence and an extreme supply chain in the sinking market, forming an almost unshakeable scale advantage. By 2025, the total number of Tea Waterfall stores nationwide is only 1,000, while the vast MXBC empire has nearly 60,000 stores.

On the other hand, the supply chain remains the core bottleneck for growth. Tea Waterfall relies on Hu Shang Ayi’s existing storage and cold chain systems; however, Hu Shang Ayi’s supply chain capabilities still lag behind leading brands.

Overall, through the brand matrix of “Hu Shang Ayi + Hu Coffee + Tea Waterfall,” the company aims to cover different price segments from low-end to mid-range to light high-end, achieving a full category layout.

This strategy may help cover more consumption scenarios and cities in the short term, but whether it can truly convert into growth in the long term depends on supply chain optimization, improvements in single-store efficiency, and whether new brands can establish independent competitiveness and consumer recognition.

Author’s Statement: Personal opinion, for reference only.