The encyclopedia · Finance & Accounting · Strategic decision · 2025
Chagee refused the ¥9.9 delivery war — profit fell 24%, Q4 made an operating loss
Chagee stayed premium in the 2025 delivery subsidy war, lost 30%+ of delivery orders, then cut its own revenue — CY2025 adjusted profit fell 24%.
霸王茶姬 · Chagee · 2026-03
What happened
Chagee (霸王茶姬) is the Chinese tea chain that grew faster than almost anything in the industry — revenue up 843% in 2023 and 167% in 2024 — on the strength of one hero drink, 伯牙绝弦. In 2025 that curve bent. Full-year revenue still rose, to ¥12.91 billion, but only 4%; adjusted net profit fell 24% to ¥1.91 billion, and attributable net profit dropped 52% to ¥1.14 billion, the worst result since the company listed on Nasdaq in April 2025.
The turning point was a pricing war Chagee chose not to fight. In 2025 the delivery platforms ran a ¥9.9 subsidy war, and 蜜雪冰城, 古茗 and 瑞幸 joined. Chagee stayed premium and refused to subsidise, arguing the price cuts were unsustainable and would hurt franchisees' margins — and that once 伯牙绝弦's price came down it would never go back up. Rivals pulled the channel's demand to them instead: 瑞幸's 轻轻茉莉 at ¥9.9 was openly marketed as a 伯牙绝弦 substitute. Chagee's delivery orders fell more than 30%, at a time when delivery made up over 40% of domestic revenue.
Management then cut its own revenue to repair the damage. In late 2025 Chagee switched to a GMV-share franchise model — taking a cut of each store's turnover instead of charging markups on ingredients — so that franchisees would earn more. The reform slashed headquarters revenue just as the delivery war was already hurting it, and Q4 2025 swung to a ¥35.5 million operating loss, its first quarterly loss since going public. Operating margin nearly halved, from 23.3% in 2024 to 10.4%.
CEO 张俊杰 conceded the miss: 'We underestimated how badly the delivery-platform price war would hit offline traffic; 2025 basically cost us half a year.' The stock fell more than 75% from its peak, wiping out roughly US$5 billion in market value.
Why it happened
- Chagee's model rested on premium pricing and one hero drink, 伯牙绝弦, over 40% of sales — structurally unable to cut prices without destroying its own brand value.
- Not joining the delivery subsidy war pushed the channel's demand to subsidised rivals, and Chagee's delivery orders — over 40% of domestic revenue — fell more than 30%.
- The GMV-share franchise reform, meant to restore franchisee margins, cut the company's own revenue just as the delivery war was already hurting it, producing Q4 2025's operating loss.
The lesson
Staying premium only works if customers can still reach you. Chagee skipped the delivery price war, lost 30% of delivery orders, then cut its own revenue — hypergrowth became a quarterly loss.
Aftermath
Chagee ended 2025 with 7,453 stores worldwide, up 15.7%, but the engine had stalled: Q4 added just 115 stores, and the company guided 2026 to roughly flat revenue and profit with only about 300 new domestic stores planned. Management admitted it had overspent — sales, admin and other operating costs jumped 60% to ¥4.56 billion, with share-based incentive pay rising from ¥5.5 million to ¥644 million — and spent the second half of 2025 consolidating middle-office functions it said had slowed its response to the market. The stock, which peaked above US$41, has fallen more than 75%.
Sources
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