Detailed narrative
Strategic Focus Amidst Market Volatility
Chagee emphasized returning to fundamentals and high-quality growth in a volatile and competitive market. The company completed an organizational review in Q1 and began exploring new product categories and user experience upgrades in Q2, aiming to build a stronger foundation for sustainable growth rather than rapid expansion. Management views 2026 as a year of adjustment and stabilization, with H2 focusing on executing learnings from H1.
Industry Dynamics and Response
The fresh milk tea category faces structural changes with increased competition and shifting consumer values, moving from shared growth to competition over a fixed base. Chagee is responding by strengthening core capabilities, broadening product mix beyond fresh milk tea, enhancing consumer reach through diverse marketing, and evolving its brand value proposition to resonate emotionally with individuals, connecting through sincerity and care.
Product Innovation and Category Expansion
The company launched 17 new products in Q2, the highest in its history, expanding into special deals and gelato. Successful relaunches like Malino tea (110 cups/teahouse/day, 20% cup share) and Long Jing tea latte (25% sequential GMV increase during launch period) drove engagement. Gelato, piloted in 190+ teahouses, increased average offline channel GMV by over 20% and demonstrated a strong ability to attract new customers and increase in-store traffic.
Brand Building and Consumer Engagement
Chagee focused on cultural resonance through strategic partnerships, such as with the [indiscernible] Theater Festival and Hubei Provincial Museum, to position tea as a meaningful cultural medium. This strategy strengthened emotional connections with consumers, leading to 257 million registered members, a repurchase rate above 43% among active members, and members making 2+ purchases accounting for over 78% of total orders.
Operational Efficiency and Cost Management
The company achieved significant improvements in efficiency, with non-GAAP G&A expense ratio declining to 9.1% from 13.2% YoY and non-GAAP sales and marketing expense ratio narrowing to 8.8% from 10.6% YoY. These gains are attributed to a more disciplined approach to resource allocation, streamlined teams, and improved advertising efficiency, demonstrating durable cost structure and organizational efficiency.
Teahouse Network Expansion and Overseas Growth
Chagee's global network reached 7,639 teahouses (net increase of 108 QoQ, 8.5% YoY growth), including 7,240 in Greater China and 399 overseas across 8 markets. The first entry into South Korea saw strong initial performance, with 3 teahouses selling over 16,000 cups in 3 days and preopening app downloads exceeding 46,000. Overseas markets remain a clear growth engine, with GMV up 114.3% YoY.
Outlook for H2 and Shareholder Returns
Management expects continued focus on product pipelines, membership enhancements, and disciplined teahouse expansion in H2. They are confident in steady development, with positive signs of same-store sales recovery in Q3 (July low single-digit decline, August expected positive YoY). The Board is actively reviewing options for a more regular and sustainable shareholder return mechanism, including regular dividends, building on healthy free cash flow and a prior special dividend of USD 177 million.