Brewing Wars: The latest developments in China's tea market
Consumer Discretionary
The competitive landscape in China's tea beverage industry remains dynamic, with signs of easing price wars but intensifying brand differentiation. While product offerings across brands are largely similar, investors increasingly focus on differences in supply chain efficiency and, more importantly, operational capabilities - especially in digitalisation and private traffic management. CHAGEE continues to generate polarised views due to its premium pricing and same-store trends. Meanwhile, MIXUE's expansion potential remains a key debate point, with opinions split between saturation concerns and confidence in further growth across lower-tier markets. As product boundaries blur, brands like Luckin Coffee are entering the tea space, raising the question of whether long-term competition will centre around operational strength more than product category.
Edition: 216
- 25 July, 2025
Which unit growth stories can be bought at a discount?
Consumer Discretionary / Staples
John Zolidis reviewed 18 unit growth stories in the consumer space, breaking out the value of the existing business from the implied value of the growth option. He then calculated the value of future unit growth using a store level DCF. He compared the implied value of the growth option in the first exercise to expected value creation from store growth in the second. From this John solved for where the market was paying the largest premium to the value of future growth and where growth could be purchased at a discount. The most interesting names on the long side were Academy Sports & Outdoors, Luckin Coffee and Yum China. Sprouts Farmers Market still looks very cheap even after +50% move YTD. Investors are paying the biggest premium for Dollarama, Chipotle and Dollar Tree.
Edition: 176
- 22 December, 2023
Closer to Chinese Markets
Consumer Discretionary
Horizon recently met with investors and exchanged views on China consumer trends. The primary focus of this analysis revolves around Chinese brands "domestic substitution strategy". This strategic approach adopted by local brands involves a calculated penetration into diverse consumer sectors within China, with the exception of luxury markets. Noteworthy achievements by certain companies across various sectors, such as Luckin Coffee, Gambol Pet, Miniso, Anjoy Food, Flyco, etc. These companies have effectively tapped into the lower-tier markets, offering cost-effective products in areas that international brands tend to overlook. Following the acquisition of substantial market shares and the establishment of brand recognition, these local companies subsequently enhance their product offerings and services, thereby cementing their competitive stance.
Edition: 168
- 01 September, 2023
Consumer Discretionary
How can a bankrupt Chinese fraud be a great long? John Zolidis argues that Luckin is conducting what is probably the most remarkable turnaround he has ever seen. Six quarters ago, store-level margins were negative 25%. In the Sept quarter they were positive 28%. In 2020, the company's EBITDA margin was negative 39%. In 2021, John is forecasting a 5% EBITDA margin, hitting 15% by 2023. Despite reporting stellar 3Q results the stock sold-off into year-end, but with no analyst coverage the potential for this equity to be mispriced is very high.
Edition: 126
- 07 January, 2022