Chagee Holdings Ltd.

Chagee Holdings Limited operates in the rapidly evolving and highly competitive freshly-made tea drinks market in China and overseas, aiming to transform tea drinking into a modern lifestyle and social concept, similar to international coffee chains. The company's business model is primarily driven by an extensive franchise network, which accounted for 88.5% of its total net revenues in 2025 ¹. As of December 31, 2025, Chagee had 7,453 teahouses globally, with 7,108 in China across 32 province-level divisions and 345 overseas locations ². The company's core business model revolves around generating revenue from franchised teahouses through sales of raw materials, packaging, and teahouse equipment, as well as various service fees including monthly royalties, initial franchise fees, and annual brand license fees. Additionally, a smaller portion of revenue is derived from sales of freshly-made tea drinks directly to consumers at its company-owned teahouses ³.

The company's product family is centered on a simple core menu of universally appealing tea drink recipes, with approximately 89% of its GMV generated within China in 2025 attributed to its signature tea latte products ⁴. The top three best-selling tea lattes accounted for approximately 54% of GMV generated within China in 2025 ⁵. Key product categories include Signature Tea Latte, Teapuccino, and Teaspresso, with other creative tea drinks like vitality fruit teas offered in certain regional markets. Product development is driven by a team of 71 tea experts, focusing on market research, consumer consumption patterns, and industry trends, leading to 25 new products launched in 2025 ⁶. The company also continuously enhances existing recipes, such as the Jasmine Green Tea Latte, which has undergone over ten rounds of upgrades, with the Jasmine Green Tea Latte (Floral) officially introduced in November 2025 ⁷.

For the fiscal year ended December 31, 2025, Chagee Holdings Limited reported total net revenues of RMB12,907.4 million (US$1,845.7 million) ⁸. Gross profit, calculated as total net revenues less total operating expenses, was RMB1,347.2 million (US$192.6 million) ⁹, resulting in a gross margin of approximately 10.4% ¹⁰. Operating expenses totaled RMB11,560.2 million (US$1,653.1 million) ¹¹. Net income for the period was RMB1,186.3 million (US$169.6 million) ¹². Diluted EPS is not explicitly provided in the filing. Cash and cash equivalents stood at RMB7,607.3 million (US$1,087.8 million) ¹³, with restricted cash of RMB26.2 million (US$3.7 million) ¹⁴ and time deposits of RMB259.0 million (US$37.0 million) ¹⁵. The company reported a net working capital surplus of RMB6,000.5 million (US$858.1 million) as of December 31, 2025 ¹⁶. Total debt figures are not explicitly provided in the summary financial tables.

Year-over-year, total net revenues increased by 4.0% to RMB12,907.4 million (US$1,845.7 million) in 2025 from RMB12,405.6 million in 2024 ¹⁷. Net revenues from franchised teahouses decreased by 1.9% to RMB11,417.1 million (US$1,632.6 million) in 2025 from RMB11,632.4 million in 2024 ¹⁸, primarily due to a decrease in sales of teahouse equipment and other supplies. Conversely, net revenues from company-owned teahouses surged by 92.7% to RMB1,490.3 million (US$213.1 million) in 2025 from RMB773.2 million in 2024 ¹⁹, driven by the expansion of the company-owned teahouse network, which grew from 169 in 2024 to 615 in 2025 ²⁰. Total operating expenses increased to 89.6% of total net revenues in 2025 from 76.7% in 2024 ²¹, attributed to investments in global corporate infrastructure and internal process optimization. Net income decreased to RMB1,186.3 million (US$169.6 million) in 2025 from RMB2,514.6 million in 2024 ²².

During 2025, Chagee Holdings Limited completed an initial public offering in April, offering and selling 16,886,589 Class A ordinary shares in the form of ADSs, with trading commencing on April 17, 2025, on the Nasdaq Global Select Market under the symbol "CHA" ²³. All previously issued preferred shares were automatically converted into Class A ordinary shares upon IPO ²⁴. The company expanded its overseas footprint by entering four new markets: Indonesia, the United States, Vietnam, and the Philippines, bringing its total overseas presence to seven countries ²⁵. In December 2025, the company upgraded its CHAGEE membership program, refining tiers and benefits, which now comprises six membership tiers ²⁶. The company also launched new products such as Lychee Black Tea Latte and Signature Pu-Erh Tea in 2025 ²⁷. In December 2024, Chagee obtained ISO27001, ISO27701, and ISO38505 certifications, and in December 2025, it obtained the Cybersecurity Trust Mark (CTM) from the Cybersecurity Agency of Singapore (CSA) ²⁸. The company also paid a special dividend of US$0.92 per ordinary share or ADS in 2025 ²⁹.

Chagee Holdings Limited anticipates continued investment in branding, sales, and marketing to acquire and retain consumers, following expenditures of RMB1,362.5 million (US$194.8 million) in sales and marketing expenses in 2025, representing 10.6% of net revenues ³⁰. The company expects to continue to invest significantly in these areas. While no explicit revenue, margin, or EPS guidance for the upcoming period is provided, the company's strategy indicates a focus on sustained growth through teahouse network expansion and product diversification.

A major growth area for Chagee is the expansion of its teahouse network, both domestically and internationally. As of December 31, 2025, the company had 7,453 teahouses, including 7,108 in China and 345 overseas, with a net increase of 1,013 teahouses in 2025 ³¹. The company plans to further expand geographic coverage and enhance market penetration by encouraging existing quality franchise partners to open more teahouses and seeking cooperation with new franchise partners. In 2025, Chagee entered four new overseas markets: Indonesia, the United States, Vietnam, and the Philippines, bringing its overseas footprint to seven countries ³². This international expansion is being pursued through various business models, including joint venture arrangements with local partners and franchise-based models, to scale its presence overseas.

Another significant growth vector is product innovation and diversification. The company's product development team, consisting of 71 tea experts, is continuously exploring new flavor combinations, brewing techniques, and high-quality ingredients ³³. In 2025, Chagee launched 25 new products, including the well-received Lychee Black Tea Latte and the popular limited-time return of Melon Oolong Tea Latte, as well as the Signature Pu-Erh Tea in December 2025 ³⁴. The company also continuously enhances existing recipes, with its signature Jasmine Green Tea Latte undergoing over ten rounds of upgrades, and the Jasmine Green Tea Latte (Floral) officially introduced in November 2025 ³⁵. This commitment to innovation aims to cater to evolving consumer tastes and preferences in China and overseas.

Operationally, the company is focused on enhancing cost management and supply chain resilience. The cost of materials, storage, and logistics decreased to 46.4% of total net revenues in 2025 from 50.4% in 2024, attributed to enhanced cost management initiatives, changing revenue and product mix, upgraded tea drink recipes, and favorable supply contract terms due to increased procurement scale ³⁶. The company is actively expanding its overseas supply chain by developing regional and local suppliers for dairy products, syrups, and packaging materials, and has established a two-tiered warehousing system with centralized and regional warehouses to improve efficiency and reduce costs ³⁷. The company's supply network has expanded to nine locations in the APAC region and two in North America, with inventory turnover days of approximately 11.5 days in China in 2025 ³⁸.

Chagee Holdings Limited's planned capital allocation includes continued capital expenditures, which were RMB452.3 million (US$64.7 million) in 2025, primarily for property and equipment and intangible assets ³⁹. The company intends to fund its material cash requirements, including contractual obligations of RMB187.6 million (US$26.8 million) as of December 31, 2025, with its cash balance and cash from operating activities ⁴⁰. The company also plans to make capital contributions or provide loans to its PRC subsidiaries for further expansion of its teahouse network, utilizing cash proceeds from overseas financing activities ⁴¹.

Chagee Holdings Limited faces several material risks, including those related to its rapid growth and competitive market. The company operates in a highly competitive and rapidly evolving freshly-made tea drinks market, with well-established competitors possessing greater financial and marketing resources, and the potential for new, well-funded entrants. Intense promotional competition, such as "delivery price wars," could lead to reduced sales and reshape consumer expectations, potentially undermining the company's pricing strategy. The company's historical growth may not be indicative of future performance, with observed declines in average monthly GMV per teahouse in China and deceleration or decline in quarterly same-store GMV growth in 2025. Expanding the teahouse network faces challenges in identifying suitable locations, securing leases, engaging qualified franchise partners, obtaining necessary licenses, managing supply chain, and recruiting skilled employees. The company's reliance on franchise partners, who account for the vast majority of net revenues, exposes it to risks from limited control over their operations, potential conflicts of interest, and their failure to comply with legal and regulatory requirements, including obtaining necessary licenses and permits. As of the date of the annual report, some company-owned teahouses have not completed required as-built acceptance fire safety filing and fire safety inspection, which could lead to fines up to RMB300,000 per teahouse for operating without passing inspection, or up to RMB5,000 per teahouse for failing to complete filing ⁴². The company also faces risks from fluctuations in raw material costs, availability, and quality, given the short shelf life of key ingredients like tea leaves and dairy. Brand recognition and reputation are critical, and negative publicity, food safety incidents, or adverse public opinions about product health effects could severely harm the business. The company's expanding global footprint increases susceptibility to cross-border reputational risks, with negative publicity in international markets potentially impacting its brand in China. Data privacy and security risks are significant due to the large volume of personal and transactional data processed, with evolving regulatory frameworks and potential for security breaches leading to reputational, financial, legal, and operational consequences. The company's limited operating history in overseas markets presents increased risks due to lower brand awareness, unfamiliarity with local conditions, and geopolitical tensions, trade restrictions, and currency fluctuations. The company has limited insurance coverage for its operations, and uninsured risks could result in substantial costs. Furthermore, the company is subject to various legal and operational risks related to being a China-based company, including substantial influence from the PRC government over business operations and evolving regulatory policies. Uncertainties exist regarding the PRC Foreign Investment Law and its potential impact on the company's corporate structure. The company relies on dividends from PRC subsidiaries, which are subject to PRC regulations and restrictions on cash transfers out of China, including a withholding tax rate of up to 10% on dividends to non-PRC resident enterprises ⁴³. Fluctuations in exchange rates between Renminbi and the U.S. dollar could adversely affect results of operations and investment value. The company may be classified as a "PRC resident enterprise" for tax purposes, potentially leading to a 25% enterprise income tax on global income and withholding taxes on dividends to non-PRC shareholders ⁴⁴. Non-compliance with PRC regulations regarding employee stock incentive plans and labor laws, including exceeding the 10% threshold for dispatched workers, could result in fines of RMB5,000 to RMB10,000 per dispatched worker exceeding the threshold ⁴⁵. The company also faces the risk of delisting from U.S. national securities exchanges under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect its auditor for two consecutive years.

Management's message to shareholders emphasizes a commitment to transforming tea drinking into a modern, global lifestyle, underpinned by a focus on universally appealing core menu items and operational efficiency powered by technology. They highlight the rapid expansion of the teahouse network, which reached 7,453 teahouses globally as of December 31, 2025 ⁴⁶, and the strong operating results, including a 4.0% year-over-year increase in net revenues to RMB12,907.4 million (US$1,845.7 million) in 2025 ⁴⁷. However, management also acknowledges a moderation in store-level performance in China during 2025, reflected in a decrease in average monthly GMV per teahouse and deceleration or decline in quarterly same-store GMV growth. Key strategic priorities for the period ahead include continued expansion of the teahouse network both in China and overseas, with a focus on encouraging existing quality franchise partners and seeking new ones, and diversifying product offerings to increase the consumer base and enrich consumer experience. Management also stresses the importance of maintaining a strong oversight approach for the franchise network to ensure consistent product quality, supply chain management, and consumer service excellence, leveraging digitalization for real-time insights and seamless collaboration with franchise partners.