Summary of Key Points
The tea industry has been facing overall downturn recently, with most brands closing down and scaling back. However, Bama Tea Company is taking the opposite approach, planning to open 1,500 new stores in the next three years. It primarily relies on franchisees for expansion (franchisees account for 93.8% of its stores), but it faces several challenges: Will franchisees be able to make a profit? Is there enough demand in new markets? Could chaotic online pricing impact offline sales? Although its short-term performance looks promising (with revenue expected to increase by more than 30% and profits by more than 60% in the first half of 2026), whether it can sustain such rapid expansion in the long term remains uncertain.
Detailed Analysis
1. Why Expand Against the Trend When the Industry is Shrinking?
The tea industry is currently in a tough period: In the past year, the number of specialized tea businesses has decreased by more than 200, with companies like Tianfu and Lancang Ancient Tea also closing stores and experiencing declining performance (Tianfu’s revenue dropped by 15%, and Lancang Ancient Tea’s by 39%). Bama sees this as an opportunity:
- Industry Consolidation: The closure of smaller brands will free up valuable locations and distribution channels, which Bama can acquire at a lower cost.
- The Need for Offline Experiences: Tea requires tasting and explanation before purchase, making physical stores indispensable.
- Gaining a Competitive Edge: By expanding while its competitors are contracting, Bama can quickly become a leader in the industry and strengthen its position.
In short, Bama aims to “run while others rest” and capture a larger market share.
2. Relying on Franchisees for Rapid Expansion, but with Potential Risks
Bama’s growth is heavily dependent on franchisees. As of the end of 2025, it had 3,773 stores, of which 3,538 were franchised (a 93.8% increase), with 269 new franchises added that year (while its direct-operated stores decreased by 14). However, there are concerns:
- Efficiency Issues: Although the number of stores increased by 7.7%, revenue only rose by 2.5%, indicating that each store’s sales may not have increased or even decreased.
- Profitability for Franchisees: If franchisees cannot make a profit, they will be less likely to continue participating in the expansion.
3. How to Motivate Franchisees to Invest?
Bama has implemented several strategies to ensure franchisee satisfaction:
- Strengthening Relationships with Existing Franchisees: Out of 1,250 franchisees, 791 have been partners for over three years, with an average of three stores per franchisee. There are also top-performing franchisees generating annual sales in the hundreds of millions—this shows that some franchisees are profitable.
- Training New Franchisees: Bama has hired 20 experienced franchisees to guide new ones in site selection, display, and service, helping them avoid common mistakes.
- Controlling Online Prices: In 2025, Bama eliminated uncontrolled online sellers, sacrificing tens of millions in revenue to focus on building its brand. This is crucial for maintaining the success of its physical stores.
4. Can New Stores Succeed?
Bama is opening new stores in two main areas: less traditionally advantageous regions (North China, Northwest China, Northeast China) and mature markets (South China, East China). However, these approaches carry risks:
- Market Demand: Will there be enough demand for new stores in these areas? Bama opened 116 stores in North China alone in 2025; how loyal are consumers to its brand there? Can sales continue?
- Competitive Pressure: With more stores in mature markets, will customers be divided between different locations?
- Increasing Costs: As Bama’s stores become larger and add amenities like tea rooms and meeting spaces, costs rise. More tea sales are needed to cover these expenses, putting pressure on each store’s profitability.
5. Good Short-Term Performance, but Long-Term Risks Remain
Bama’s performance for the first half of 2026 is promising, but long-term issues persist:
- Low Frequency of Tea Consumption: Unlike coffee drinks, tea is consumed less frequently, so opening too many stores may not attract enough customers.
- Potential Overinvestment in Supply Chain: Bama is investing in large-scale organic tea plantations and distribution centers. If sales are slow, this investment could be wasted.
- Unaddressed Core Issues: Its efforts (channel management, focusing on key product categories) are routine practices; it has not found ways to encourage more frequent tea purchases by consumers.
If demand does not keep up, these new stores could become a burden, leading to another round of contraction rather than sustained growth.
Conclusion
Bama’s expansion during the industry’s downturn is a gamble on becoming even stronger. The success depends on whether franchisees can make a profit and whether new markets can support its growth. After all, opening stores is easy; keeping them profitable is the real challenge.