Summary of Key Points
Mixue Ice City’s overseas expansion has met with a setback: For the first time, it experienced a net decrease in overseas stores in 2025 (a reduction of 428). Its “1,000 stores by 2028” plan for the Japanese market was scaled back to just 4 stores, resulting in a completion rate of only 0.4%. The domestic model that made it successful—“low prices + supply chain”—has failed overseas due to high costs, differences in market maturity, and various regulatory challenges. The company is now hoping that its sub-brand, Lucky Cafe (low-priced coffee), can turn things around in Southeast Asia, but it still faces local competition and profitability challenges.
1. The Low-Price Model Doesn’t Work Overseas
In China, Mixue relies on “low margins and high volume” to make profits: each cup generates less revenue, but low rent and labor costs, along with the economies of scale from its supply chain, create a cycle where “the more stores you open, the cheaper it gets; the cheaper it is, the more you can sell.” However, this logic doesn’t hold up in markets like Japan and Hong Kong:
- Exorbitant opening costs: Decoration expenses in Japan are five times higher than in China, and a 10–15-month rental deposit is required. In Hong Kong’s Mong Kok district, the monthly rent for a store is HK$200,000, and selling 22,000 cups of lemonade at HK$9 each is necessary to cover the rent. Local baristas earn between HK$16,000–$22,000 per month, with part-time hourly rates of HK$50–$60, which significantly erodes profits.
- Supply chain disadvantages: With fewer overseas stores, ingredients must be imported in small quantities, leading to additional costs from tariffs, transportation, and exchange rates, sometimes making them more expensive than locally produced ones. For example, the cost of ingredients for Japanese stores is over 30% higher than in China, turning low prices into a costly liability.
2. Overseas Markets Are Not China’s Copycat: Significant Differences in Maturity and Habits
Many of the markets Mixue has entered already have established drink cultures:
- Japan: The drink market is highly mature, with canned tea available since the 1970s. Convenience stores and vending machines offer low-priced beverages (e.g., a bottle of tea for 3–5 yuan). Mixue’s low prices lack competitiveness. Additionally, Japanese consumers prefer low-sugar, strong-tasting tea, so its high-sugar products attract only one-time buyers with low repeat purchase rates.
- Some Southeast Asian markets: Policies have changed dramatically. In Malaysia, after opening 500 stores, the government restricted foreign expansion to protect local brands; similar reasons led to store closures in Indonesia and Vietnam due to policy tightening and the need to clean up inefficient outlets.
- Time constraints: Opening a store takes 20 days in China but six months to a year in the U.S. By the time the store opens, market opportunities may have passed.
3. Regulatory Traps: Hidden Barriers Are More Deadly Than Costs
Going overseas is not just about selling tea drinks in a different place; each market has unique regulations that can become major obstacles:
- Compliance issues: Mixue’s Hong Kong store lost consumer trust after being cited for bacterial contamination in frozen desserts. Importing ingredients from Japan required strict quarantine, which took eight months to process.
- Policy risks: In Vietnam, the first store of Ba Wang Cha Ji was forced to close due to app mapping issues, resulting in a $20 million loss; Mo Li Na Bai lost $10.3 million because its design resembled LV’s. These seemingly minor issues reflect high standards for intellectual property and food safety, and failing to comply can be costly.
- Local protectionism: When Chinese brands grow large enough to threaten local businesses, policies often change in their favor. For example, Malaysia specifically targeted Mixue, limiting new store openings and thwarting its rapid expansion plans.
4. Can Lucky Cafe Save the Overseas Business? There’s Potential but Challenges
Mixue is betting on its sub-brand Lucky Cafe (low-priced coffee) to succeed overseas. The first overseas store opened in Malaysia in 2025 with prices ranging from HK$5–$11 (compared to HK$12–$15 for local chain cafes). This approach has three advantages:
- No need to educate the market: Southeast Asia has a strong coffee culture (e.g., white coffee and drip coffee in Malaysia, Vietnamese filter coffee), so Lucky Cafe targets an unoccupied niche. It offers affordable, high-quality coffee at street-level prices.
- Easy model replication: The franchise model allows local partners to open and operate stores, while Mixue’s headquarters sells ingredients and equipment (relying on the supply chain for profits).
- However, there are challenges: There are many established local coffee brands in Southeast Asia (e.g., ZUS Coffee with 586 stores in Malaysia). Whether Lucky Cafe can be profitable remains uncertain; if sales are low, thin margins could lead to losses and potential partner exits, affecting the supply chain.
Conclusion
Mixue’s overseas failures highlight that domestic success cannot be simply replicated. Low prices are not a universal solution, and supply chain advantages require scale, which is limited by costs, regulations, and market habits. The key for sustainable overseas expansion is to find a balance where consumers buy, partners make profits, and the headquarters remains profitable—this requires adapting strategies to each market. Whether Lucky Cafe can become the next “success story” depends on its ability to overcome these challenges.