To The Moon

Overview of the Market:

The global market sees fierce competition, particularly in the Chinese beverage industry. Bawang Tea Ji, a rising star in the New Chinese tea market, has boldly challenged Starbucks $Starbucks(SBUX)$  China, aiming to surpass its sales. With the founder Zhang Junjie projecting total sales of over 20 billion RMB in 2024, Bawang Tea Ji's rapid growth and aggressive marketing strategy position it as a formidable competitor.

Chinese Beverage Market:

Bawang Tea Ji's founder Zhang Junjie announced at the Modern Oriental Tea Innovation Forum that the company's GMV reached 10.8 billion RMB last year and exceeded 5.8 billion RMB in the first quarter of this year. With these figures, Bawang Tea Ji is on track to surpass Starbucks China's sales, which stood at $3.16 billion last year. Despite potential seasonal downturns, Zhang remains confident in achieving over 20 billion RMB in sales this year.

Starbucks Performance:

Starbucks reported a 2% year-over-year revenue decline to $8.6 billion in its second fiscal quarter ending in March, with a 4% drop in global same-store sales. The primary contributor to this decline was the underperformance in the Chinese market, where sales fell by 8% to $706 million, same-store sales decreased by 11%, transaction volume dropped by 4%, and average ticket size fell by 8%.

Competitive Edge of Bawang Tea Ji:

Founded in 2017, Bawang Tea Ji has experienced exponential growth, with registered members increasing from 69 million to over 130 million in less than six months. Its global store count has surged to over 4,500, a significant leap from 500 stores in April 2022. The brand's flagship product, "Boyajue Xian," sold more than 230 million cups in a year. Bawang Tea Ji's explosive growth is attributed to its unique positioning with "original leaf fresh milk tea," a new Chinese style promoting traditional tea culture, and effective viral marketing.

Outlook and Insights:

Considering the competitive landscape, Bawang Tea Ji's growth trajectory appears robust, backed by innovative product offerings and strategic marketing. In contrast, Starbucks faces challenges in the Chinese market, impacting its overall performance. Bawang Tea Ji's potential to surpass Starbucks China's sales highlights the dynamic shifts in consumer preferences and the growing appeal of culturally resonant brands.

Conclusion:

While Starbucks remains a global coffee giant with a strong brand presence, the rapid rise of Bawang Tea Ji in the Chinese market presents a compelling investment opportunity. Investors should weigh the potential of Bawang Tea Ji's continued growth and market penetration against Starbucks' established brand and global footprint. The beverage market in China is evolving, and Bawang Tea Ji's impressive performance and strategic positioning suggest it could be a valuable contender for those looking to diversify their portfolios.

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