Following a recent funding round that valued his Chinese tea chain, Cha Panda, at $2.1 billion, Wang Xiaokun, the founder and chairman, has now entered the billionaire ranks.
Aged 40, Wang’s net worth stands at $1.1 billion per Forbes. His wealth originates from a near 60% ownership of Chengdu’s beverage chain, Cha Panda, which has rapidly grown to over 7,000 stores in three years. The chain’s popular drinks, like mango pomelo sago and taro bubble tea, are mostly priced below $3.60.
Wang’s spouse, Liu Weihong, has amassed $700 million from her 33% stake. She chairs a supervisory committee overseeing daily operations as per a preliminary prospectus with the Hong Kong Stock Exchange, although the company hasn’t responded to an email for comment.
In June, Cha Panda concluded its funding round, with shares priced at 13.2 yuan ($1.8) each, attracting investors such as CICC, Orchid Asia, and Shanghai Loyal Valley Investments, according to the prospectus.
While the company hasn’t disclosed more about its upcoming initial public offering, including timing and scale, analysts note that Cha Panda requires new funding to expand its store network in the highly competitive Chinese tea-beverage market.
“People lack loyalty in their milk tea preferences and often select from various brands,” explains Jason Yu, Managing Director of Kantar Worldpanel Greater China, based in Shanghai. “Having more stores increases visibility among consumers and captures a larger share of their spending.”
Cha Panda’s roots go back to 2008 when Wang initiated sales of fruit and bubble tea near a school in Chengdu, a southwestern Chinese city famous for its spicy cuisine and as the habitat of giant pandas.
In the following decade, Wang expanded Cha Panda’s store count to 531 by 2020, with the real surge occurring when he introduced a franchising model.
Presently, Cha Panda’s approach involves crafting beverage recipes and selling ingredients like fruit and tea leaves to its branded shops. This strategy allows Wang to maintain lower costs compared to competitors such as Nayuki Holdings, listed in Hong Kong, which must cover employee salaries and rent for directly operated stores.
As of August this year, the tally of Cha Panda-branded stores has impressively reached 7,117, with just six of them managed directly in the first quarter, as indicated by the company’s prospectus.
In the past year, Cha Panda achieved $580.3 million in revenue, marking a 16% increase from the previous year, with profits surging by 24% to $132.3 million. Frost & Sullivan’s research, mentioned in the prospectus, positioned the company as the third-largest tea shop in China in terms of retail sales.
To enhance its visibility among younger consumers, the brand sponsors music festivals and other offline cultural events, complementing its online promotional efforts. In a gesture of support, Cha Panda adopted a giant panda from the Chengdu Research Base of Giant Panda Breeding in June, as highlighted in a press release by the center.
However, success fundamentally hinges on cost management and delivering value-for-money products, according to Kantar Worldpanel’s Yu. He notes, “Consumers are more cost-conscious as milk tea brands lack distinct differentiation. The products share similarities, being blends of tea with ingredients like fruit.”