The premium tea chain aims to expand through franchising to boost its growth amid intense competition 

By Teri Yu 

Premium tea seller Nayuki Holdings Ltd. (2150.HK) on Wednesday reported its first annual profit since its IPO three years ago, as its core young customers resumed spending on its trendy drinks with a return to normal consumption patterns with the end of the pandemic. 

Nayuki reported an adjusted net profit of 20.9 million yuan ($2.9 million) last year, reversing a 461 million yuan loss in 2022 when pandemic restrictions were still in effect. Its net margin improved from a negative 10.7% in 2022 to 0.4% last year on improving sales and efficiency. 

The company’s store-level operating profit for its self-operated flagship Nayuki stores rose over 76% year-on-year to 828 million yuan, while operating profit margin for this type of store also improved to 17.7% in 2023 compared to 11.8% in 2022. 

Nayuki made a strategic move in the middle of last year with its decision to begin franchising its brand to gain more presence in smaller Chinese cities. It added over 200 franchised stores as of February. The company said it plans to aggressively expand its franchise network to 3,000 stores within two to three years. Nayuki also extended its overseas footprint by opening a store in Thailand at the end of 2023, complementing existing stores in Hong Kong and Japan. 

The company’s annual revenue last year grew 20.3% to 5.16 billion yuan, with self-operated stores still contributing over 90% of the total. In terms of its product mix, freshly made tea drinks accounted for over 73% of the revenue.  

Shenzhen-based Nayuki is one of China’s larger sellers of modern-style premium tea drinks, operating two flagship teahouses, Nayuki and Tai Gai, selling a selection of freshly made tea drinks, as well as classic milk tea and lemon tea drinks. The company also operates smaller format Nayuki Pro stores specializing in delivery and takeout. Nayuki was listed in 2021, raising HK$4.8 billion ($614 million) to expand its network of teahouses. 

Its biggest rival at the time was HeyTea. But both chains have been overtaken more recently by upstart rivals using a pure franchise model that has allowed them to quickly open thousands of stores. Many of those are now filing for new Hong Kong listings, including Chabaidao, Auntea Jenny and industry leader Mixue Bingcheng.  

China is famous for its tea drinking culture with over 4,000 years of history and as the world’s largest tea market. New-style teas that combine fresh tea with milk or cream and fruit tea are popular among young Gen Z consumers and are driving growth in the industry. The total number of tea beverage outlets grew 28% to reach 486,000 in 2022, according to a report by Daxue Consulting. 

Nayuki’s stock fell after the release of its annual results, closing down 10.16% at HK$2.74 by the midday trading break on Thursday. The stock now trades at a fraction of its IPO price of HK$19.80. 

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