MIXUE GROUP is navigating a turbulent period, marked by a stark contrast in its recent performance. On August 27, the company reported a marginal 2.3% year-on-year revenue increase to RMB 15.216 billion for the first half of 2026, but its net profit attributable to shareholders fell sharply by 14.7% to RMB 2.319 billion. This marks the first half-year net profit decline since the company began disclosing its financial data, triggering an 8.37% drop in its share price on the day of the announcement.

Just days later, on August 30, MIXUE GROUP celebrated its membership base surpassing 500 million, a testament to its status as a national beverage giant. However, the juxtaposition of this milestone with the profit decline places the company at a pivotal crossroads. CEO Zhang Yuan described the past few years as "three steps forward, one step back" during the earnings call, acknowledging significant business pressure in the second half of the year. After years of aggressive expansion, the owner of over 64,000 stores appears to be consciously pressing the pause button on its rapid growth.

While widely perceived as a retail company selling tea and ice cream to consumers, MIXUE GROUP is, in fact, a B2B supply chain enterprise. In 2025, sales of raw materials and equipment to franchisees accounted for 97.6% of its revenue, with a gross margin of 29.9%. The company's profits are largely derived not from consumer beverage sales, but from supplying ingredients, packaging, and equipment to its thousands of franchisees. This model relies on low entry barriers to attract entrepreneurs who bear the risks of rent, labor, and competition, while the corporate office leverages its collective purchasing power to secure low costs and profit from the supply chain differential, creating a self-reinforcing growth flywheel of store expansion, franchisee procurement, and revenue generation.

However, the physical limits of this expansion model are becoming apparent. By the end of June, MIXUE GROUP's global store count reached 63,987, a net increase of over 10,000 year-on-year, yet average revenue per store declined by approximately 18%. MIXUE is not alone in this challenge. Competitors like Luckin Coffee and Cotti Coffee, which expanded aggressively on the back of low-price strategies, are also seeing their expansion slow. Data shows Cotti Coffee closed more stores than it opened in the first half of 2026, while Luckin reported a 5.3% decline in same-store sales for its self-operated stores for the second consecutive quarter.

In contrast, Guming, which reported its results alongside MIXUE, achieved a 44% increase in net profit with a 24.1% net margin, despite having only a quarter of MIXUE's store count. By carefully managing store density, Guming has protected its per-store profitability. Similarly, Chagee has designated 2026 as a year for "adjustment and stabilization," with same-store GMV declining 5.5% in the second quarter.

Recognizing the limits of physical expansion, MIXUE GROUP is actively seeking new growth engines. The company is leveraging its supply chain and brand equity to diversify. Its budget coffee brand, Lucky Cup, which surpassed 10,000 stores in November 2025, is now slowing its expansion to focus on improving product quality, such as introducing fresh milk and freshly roasted coffee beans. Additionally, in October 2025, MIXUE acquired Fujia Fresh Beer, extending its reach into the draft beer market. This leverages its extensive cold-chain logistics network to deliver fresh beer to county-level markets, effectively fulfilling the "nighttime" consumption scenario that its tea beverages do not cover.

Another key focus is the commercialization of its "Snow King" IP. This character has become a cultural phenomenon in China, driving a 200% surge in revenue from cultural and creative merchandise in the first half of 2026. Unlike fresh beverages, which are subject to raw material price volatility, these products offer higher margins and no spoilage risks, serving as a financial buffer against shrinking margins in the core business. The company is also developing a Snow King-themed amusement park, aiming to solidify the IP's presence in physical spaces.

Furthermore, MIXUE GROUP is exploring the platformization of its supply chain. With six major production bases and 31 warehousing centers, the company has significant production capacity that could be offered to other brands or retail channels beyond its own stores. This could transform its supply chain into a new revenue stream, supplying standardized retail products like "Snow King Ice Cups" to convenience stores or other food and beverage operators.

Instead of raising prices to counter margin pressure, MIXUE GROUP is investing heavily in a quality upgrade initiative, branded as "Zhen Xian Chun" (Fresh, Pure, Authentic). This involves upgrading recipes from room-temperature syrups to cold-chain juices and freshly ground coffee, and introducing fresh milk. This strategy aims to appeal to a consumer base that now demands both affordability and health. The company plans to invest RMB 1.8-2 billion in this initiative, including expanding processing bases and upgrading its digital infrastructure. This "improve quality without raising price" approach is designed to strengthen its brand reputation and capture consumer mindshare, making it difficult for competitors to match its value proposition without suffering margin losses.

This quality-focused strategy also applies internationally. While overseas markets, particularly Southeast Asia, were once seen as a key growth frontier, the number of stores outside mainland China has actually decreased by 355 to 4,378. This is due to a deliberate shift in strategy to "cultivate and enhance quality" by closing underperforming and brand-damaging locations. In more developed markets like Japan, the company's footprint has shrunk dramatically, highlighting the challenges of replicating its low-cost model in regions with high compliance and labor costs.

For MIXUE GROUP, the path forward involves enduring short-term financial setbacks to secure long-term viability, consumer loyalty, and a healthier franchisee ecosystem. This transition from rapid, extensive growth to a more measured, quality-driven approach is just beginning. Whether the company can successfully navigate this shift and achieve a successful transformation in a fiercely competitive, saturated market remains to be seen.