CHA Q2 2025: Overseas GMV Jumps 77% as Premium Brand Strategy Outpaces Subsidy War
CHA’s Q2 revealed a decisive pivot to international expansion, with overseas GMV up 77% and new leadership hires targeting North America. Management doubled down on premium positioning, resisting China’s delivery subsidy war, even as domestic same-store sales softened. Strategic investments in talent, product quality, and global infrastructure signal a long-game approach, prioritizing sustainable brand value over short-term volume.
Summary
- Global Expansion Accelerates: Overseas store count and GMV surged, now a core growth pillar.
- Premium Brand Discipline: CHA refused to join China’s price war, preserving margin and positioning.
- Margin Focus Endures: Investments in talent and automation set up long-term efficiency gains.
Performance Analysis
CHA delivered 10% revenue growth and maintained profitability, despite intensified competition in China’s delivery market and rising costs tied to global expansion. Gross margin expanded to 53.9%, up from 48.4% last year, reflecting scale and procurement gains, even as non-GAAP net margin narrowed to 18.9% due to stepped-up overseas investment and share-based compensation (SBC) tied to IPO triggers.
The core China franchise network contributed 91% of revenue, but company-owned stores grew 77% YoY, signaling a shift toward operational control in key new markets. Overseas GMV climbed 77% YoY and 32% sequentially, led by Southeast Asia and a high-profile US launch. Same-store sales in Greater China declined, pressured by aggressive delivery platform subsidies and a tough YoY compare, but management held firm on premium pricing, betting on brand equity over fleeting volume gains.
- Overseas Store Growth: 52 net new overseas stores added in H1, now 208 total, with further acceleration planned.
- Operational Leverage: Overseas stores in Singapore and Malaysia are approaching or exceeding break-even, validating the model.
- Cost Structure Shift: G&A and sales/marketing expenses rose sharply, reflecting IPO-related SBC and global buildout, but underlying store-level efficiency improved.
Cash reserves nearly doubled to RMB 8.9B, providing ample runway for continued global investment and margin protection, even as near-term headwinds persist in China.
Executive Commentary
"We will not fight the price war, and we will not reduce the quality and service quality of our products. This is our first point. The second point is that since a long time ago, the positioning of high-end brands has been closely related to the image of our price and brand. Tea machines have not always been able to win customers by discounting and sending coupons. We have always used higher quality products and higher-quality services, as well as more visual and experiential stores and offline experiences to gain customers' trust."
Junjie Zhang, CEO
"Our overseas markets have gained a significant detraction, with GMV increasing 77.4% year over year and 31.8% quarter over quarter. This growth is mainly driven by strategic store expansion and our growing brand awareness. Positioning the overseas market as a key pillar of our future growth."
Aaron Huang, CFO
Strategic Positioning
1. Relentless Premium Brand Focus
CHA’s refusal to join the delivery subsidy war in China is a clear bet on long-term brand equity. Management sees price wars as unsustainable and damaging to both partner profitability and brand perception. Instead, the company is doubling down on product quality, customer experience, and high-value positioning, with a forthcoming upgrade to core ingredients and a new automation platform (4.0) to further differentiate the offering.
2. Global Expansion as a Growth Engine
International markets are now the central growth lever, with rapid store rollout (208 overseas locations, up 52 in H1) and strong early traction in Southeast Asia and the US. Singapore and Malaysia stores are approaching break-even, and the US debut generated significant local buzz. Localized product innovation and experiential marketing events have driven strong member growth and brand resonance, validating the “premium Chinese lifestyle brand” thesis abroad.
3. Talent and Infrastructure Investments
Strategic hiring in North America and investment in global operating systems show CHA is building the foundation for scale, not just chasing near-term sales. Recent leadership hires bring deep brand and QSR (quick service restaurant) expertise, and the company is investing in technology and process upgrades to improve efficiency and support global ambitions.
4. Store Model Evolution
Shift toward company-owned stores in key new markets allows for tighter control of brand and customer experience. This is a departure from the China-heavy franchise model, reflecting the need to seed premium positioning and operational standards as the brand globalizes.
Key Considerations
CHA’s Q2 was defined by a strategic fork in the road: defend margin and brand in China, while pushing aggressively into new international markets.
Key Considerations:
- China Margin Defense: Refusing to join the subsidy war protected brand equity but pressured same-store sales and near-term growth.
- Global Store Ramp: Overseas store count and GMV are growing rapidly, but require continued investment and operational discipline to reach scale profitability.
- Cost Investment Cycle: Elevated G&A and sales/marketing reflect a deliberate investment phase, not just inflation or inefficiency.
- Member Ecosystem Strength: Registered member growth (+42.7% YoY) signals healthy engagement and supports the lifetime value thesis.
Risks
Intensifying delivery platform subsidies in China could prolong same-store sales pressure and test franchisee patience. Overseas expansion risks include execution missteps, local consumer adoption, and operational drag as new markets scale. Elevated share-based compensation and ongoing investment could weigh on margins if top-line growth falters.
Forward Outlook
For Q3 and the remainder of 2025, CHA will:
- Continue rapid overseas expansion, targeting >200 new international stores for the full year.
- Launch upgraded raw material sourcing and automation (4.0) to drive efficiency and product differentiation.
Management did not provide formal full-year financial guidance, citing market volatility and investment phase, but reiterated confidence in the long-term global growth strategy.
- Focus remains on margin protection, premium brand positioning, and operational leverage in new markets.
- Expect continued pressure in China SSSG (same-store sales growth) but gradual normalization as subsidy impact fades.
Takeaways
CHA is making a deliberate trade-off: sacrificing near-term volume in China to protect premium positioning, while betting heavily on global expansion as the next growth engine.
- International Momentum: Overseas GMV and store count are scaling quickly, with early proof points in Southeast Asia and the US supporting the global premium tea thesis.
- Brand Over Subsidies: Refusal to join China’s price war signals discipline, but places pressure on domestic comp sales and partner economics in the near term.
- Efficiency Investments: Automation and talent upgrades aim to drive future margin expansion, but will take time to flow through to the bottom line.
Conclusion
CHA’s Q2 underscores a company at an inflection: doubling down on premium brand integrity and global scale, even as domestic headwinds persist. Investors should watch for continued overseas execution, member engagement, and signs that international profitability can offset China’s competitive drag.
Industry Read-Through
CHA’s results highlight a broader shift in China’s beverage sector: the era of margin-destructive price wars may be peaking, with leading brands increasingly prioritizing premiumization and customer experience. Global expansion is emerging as a critical lever for growth and diversification, especially for brands with authentic heritage and product innovation. For QSR and beverage peers, CHA’s disciplined approach to pricing and margin protection offers a potential playbook for navigating subsidy-driven volatility, while its international playbook signals rising competition—and opportunity—in global tea and lifestyle retail.