Mixue Group: Lucky Coffee's comeback, is Snow King bottoming out?

How can Luckin Coffee achieve a comeback through differentiation from Mixue?

On March 24, Beijing time, Mixue Group (2097.HK) released its performance for H2 2025. Overall, Mixue’s performance in the second half of the year was average; although revenue exceeded market expectations, the decline in gross margin and the increase in management expenses led to core operating profit that fell slightly short of market expectations. $Mixue Group (02097.HK)

The key points are as follows:

1. Revenue maintains rapid growth. In H2 2025, Mixue achieved revenue of 18.7 billion yuan, a year-on-year increase of 32%. Although the reduction in delivery subsidies in the second half of the year had some impact on same-store growth, the overall growth rate driven by rapid store openings remained relatively high, with a slight decline compared to the first half of the year (39% growth in the first half).

2. Luckin Coffee surges against the trend. In terms of store openings, there were a net increase of 7,075 stores in the domestic market in the second half of the year, which accelerated compared to the first half. Among them, after strategic adjustments, Luckin Coffee achieved “lightning” expansion in the second half of the year, and based on survey information, contributed at least 4,000 new stores. Analyzing the regions of the new stores, the growth primarily relied on second, third-tier, and lower-tier markets.

Overseas, there was a reduction of 266 stores compared to the first half of the year. Dolphin Jun speculates that this is mainly because Mixue was still cleaning up poorly performing, overlapping, and non-compliant stores in Southeast Asia in the second half of the year. Additionally, in December, Mixue officially entered the North American market by opening stores simultaneously on the east and west coasts in Los Angeles and New York.

3. Same-store revenue growth has slightly slowed. Although the company did not disclose specific operational data for individual stores, based on survey information, Dolphin Jun estimates that the same-store revenue growth for Mixue in the second half of the year was in the low single digits, primarily relying on the increase in cup volume, with the cup price expected to remain flat or decline slightly.

4. Gross margin continues to decline. From the perspective of costs, the prices of raw materials such as lemons and coffee beans unexpectedly rose in the second half of the year due to extreme weather. Additionally, the increase in the proportion of delivery channels led to a slight overall decline in gross margin of 2.2 percentage points to 30.7%.

5. Profit slightly below market expectations. In terms of sales expenses, benefitting from the maturity of the Snow King IP, low-cost social media traffic replaced traditional advertising, resulting in a sales expense ratio decrease of 0.7 percentage points to 6%. Management expenses were temporarily elevated due to one-time integration costs from the acquisition of “Fresh Beer Fulu Family” in October. Ultimately, Mixue achieved a net profit of 3.21 billion yuan, a year-on-year increase of 25%, slightly below market expectations.

6. Overview of financial information:

Dolphin Jun’s overall viewpoint:

Overall, in the second half of the year, while Mixue’s main brand faced a slowdown in store openings and declining same-store growth, it relied on the explosive growth of Luckin Coffee’s “second curve” to maintain relatively high revenue growth.

Firstly, for Mixue’s main brand, based on Dolphin Jun’s calculations, excluding Luckin Coffee, the actual growth in store openings for the main brand was only about 20%, which inevitably shows a slowdown, as expected. However, the low single-digit growth of around 2%-3% in same-store sales is not performing well compared to the industry growth of 5%-7%.

Considering that Mixue’s online revenue accounts for about 30%, lower than other tea brands, the reduction in delivery subsidies in the second half of the year had a relatively small impact on Mixue’s same-store performance. In Dolphin Jun’s view, the real driving force behind this is that Mixue’s winter product strength is not keeping up:

For a business model like Mixue that relies on quick cup turnover and places a high value on standardization, long shelf life, and easy delivery product systems, winter is not friendly, as consumers tend to prefer freshly brewed hot beverages.

Now, let’s talk about the unexpectedly successful Luckin Coffee. In the second half of the year, Luckin Coffee not only achieved the strategic goal of “10,000 stores,” becoming the third coffee brand in China to join the “10,000 store club” after Luckin and Kudi, but also made a strategic upgrade from lower-tier markets to first and second-tier cities. In Dolphin Jun’s view, in addition to the beta of the ready-to-drink coffee industry, there are two important supports behind it:

1. To address the previous issues with product strength, Luckin Coffee reorganized a 400-person marketing team to directly connect with the R&D department and shared the R&D team with Mixue’s main brand, achieving rapid conversion from demand to product. Moreover, in terms of new product launch strategies, Luckin Coffee avoided the milk coffee focus of Luckin and Kudi and differentiated itself by entering the fruit coffee market, filling a gap in the affordable fruit coffee market and attracting a large number of consumers.

2. Additionally, regarding the franchise policy, Mixue increased its support for Luckin Coffee in the second half of the year, shifting from broad subsidies to targeted incentives, covering both new and existing franchisees, as well as first-tier cities and key regions.

In terms of valuation, after the previous decline, considering that the reduction in subsidies in 2026 will likely lead to negative growth in Mixue’s same-store performance, Dolphin Jun revised the model and estimated a 13% profit growth for 2026, with a net profit of 6.7 billion, corresponding to 17x. Compared to Dolphin Jun’s estimated 15% CAGR growth over the next three years, this remains relatively high. Therefore, to leave a safety margin, Dolphin Jun suggests adjusting to below 15x, corresponding to 114.2 billion HKD before considering entry.

Below is a detailed interpretation of the financial report:

1. Revenue slightly exceeds market expectations

In H2 2025, Mixue achieved revenue of 18.7 billion yuan, a year-on-year increase of 32%. Although the reduction in delivery subsidies in the second half of the year had some impact on same-store growth, the overall growth rate driven by rapid store openings remained relatively high, with a slight decline compared to the first half of the year (39% growth in the first half).

From the revenue structure, the proportion of franchise-related services decreased by 0.4 percentage points to 2.2%. Dolphin Jun speculates that this is mainly due to increased subsidies in the second half of the year to attract Luckin Coffee franchisees.

2. Luckin Coffee drives “explosive” store openings

In terms of store openings, there was a net increase of 7,075 stores in the domestic market in the second half of the year, which accelerated compared to the first half. Among them, after strategic adjustments, Luckin Coffee achieved “lightning” expansion in the second half of the year, and based on survey information, contributed at least 4,000 new stores. Analyzing the regions of the new stores, the growth primarily relied on second, third-tier, and lower-tier markets.

Based on the previous analysis, Dolphin Jun estimates that the main brand opened 3,000 new stores in the second half of the year, a year-on-year increase of 20%, which is noticeably slower than in previous years. In fact, Dolphin Jun has analyzed in “Mixue Ice City: Luckin Coffee’s ‘Unluckiness’, Mixue’s Next Big Bet ‘In the Fields’?” that the rapid expansion bonus period in high-tier cities is nearing its end, and the future battleground lies in lower-tier markets, so the slowdown in the main brand’s store opening speed is as expected.

Additionally, it is worth noting that in October, Mixue spent nearly 300 million yuan to acquire a 53% stake in Fulu Family and officially entered the fresh beer business. As of the end of last year, the number of Fulu Family stores was around 1,800.

From the underlying intent, Mixue ultimately aims to form a 24-hour consumption closed loop of “Morning Coffee (Luckin Coffee) - Afternoon Tea (Mixue Ice City) - Evening Beer (Fresh Beer Fulu Family)” and further expand its customer base through scenario extension.

However, in Dolphin Jun’s view, fresh beer contains active yeast and is greatly affected by temperature, time, and environment during the fermentation process, so the fresh beer supply chain cannot simply reuse Mixue’s existing tea and coffee systems; it must invest heavily to build a new cold chain and production capacity. Therefore, while the vision is beautiful, Dolphin Jun believes that the specific implementation may not be very optimistic and will need continued tracking.

Overseas, there was a reduction of 266 stores compared to the first half of the year. Dolphin Jun speculates that this is mainly because Mixue was still cleaning up poorly performing, overlapping, and non-compliant stores in Southeast Asia in the second half of the year.

Additionally, in December, Mixue officially entered the North American market by opening stores simultaneously on the east and west coasts in Los Angeles and New York.

3. Cup volume is the core driver of same-store revenue growth

Although the company did not disclose specific operational data for individual stores, based on survey information, Dolphin Jun estimates that the same-store revenue growth for Mixue in the second half of the year was in the low single digits, primarily relying on the increase in cup volume, with the cup price expected to remain flat or decline slightly.

4. Gross margin continues to decline

On one hand, from the perspective of raw materials, the primary lemon producing areas in Sichuan Anyue and Yunnan have suffered from extreme weather including late spring cold, spring frost, and summer drought, leading to a significant drop in fruit set rates and a nationwide production decline of 30%-50% year-on-year; the five major lemon producing areas globally (the U.S., South Africa, Turkey, etc.) have also been affected, further pushing up domestic prices due to international supply gaps, with the farm gate price of lemons in Sichuan Anyue doubling compared to the same period in 2024.

On the other hand, from the channel structure perspective, the continuous growth of high proportion, low-margin delivery orders has also lowered the overall gross margin of the group. Ultimately, the overall gross margin declined slightly by 2.2 percentage points to 30.7%.

5. Profit slightly below market expectations

In terms of sales expenses, benefitting from the maturity of the Snow King IP, low-cost social media traffic replaced traditional advertising, resulting in a sales expense ratio decrease of 0.7 percentage points to 6%. Management expenses were temporarily elevated due to one-time integration costs from the acquisition of “Fresh Beer Fulu Family” in October. Ultimately, Mixue achieved a net profit of 3.21 billion yuan, a year-on-year increase of 25%, slightly below market expectations.

Longbridge Dolphin Research “Mixue Ice City” Historical Articles:

Deep Dive

June 11, 2025: Mixue Ice City: “Doubling” Mixue: Overseas Still Not “Sweet”, Investment Hard to “Honey”

June 10, 2025: Mixue Ice City: Luckin Coffee “Unfortunate”, Is Mixue’s Next Big Bet “In the Fields”?

March 13, 2025: “The Pinduoduo of Ready-to-Drink Beverages” Mixue Ice City: Where Does the “Snow King” Confidence Come From?

Commentary

August 28, 2025: Mixue: Surging in Lower-tier Markets, Luckin Coffee’s Comeback Makes Sense for High Valuations

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