CMSC: Mee Snow Ice City (02097) leverages domestic supply chain advantages to expand into new overseas markets

According to a research report released by CMSC, HEYTEA (02097) has successfully established its foothold in the Southeast Asian market with its strong supply chain management, low-price strategy, and efficient franchise model, and is gradually expanding to East Asia, Central Asia, North America, South America, and other regions. The global ready-to-drink beverage market, especially the Southeast Asian market, has enormous growth potential. HEYTEA has met the needs of different markets through flexible pricing strategies and localized product adjustments, further consolidating its competitive advantage in the international market. In the future, with the continued development of the Southeast Asian economy and the popularity of tea consumption, HEYTEA is expected to further expand its market share and become a leading brand in the global tea beverage industry. CMSC's main points are as follows: Current situation of going abroad: Focusing on the Southeast Asian region with low entry barriers Since 2018, HEYTEA has rapidly expanded into the Southeast Asian market and expanded to Japan, South Korea, Australia and other places in 2022. As of September 2024, HEYTEA has a total of 4800 overseas stores, mainly concentrated in Indonesia and Vietnam. HEYTEA adopts a franchise model with low entry barriers, short approval periods, and franchisees can quickly open stores through simple processes. HEYTEA's wide variety of products and low prices are loved by overseas consumers, especially the ice cream and fruit tea series performing exceptionally well in the Southeast Asian market. Overseas market: Continued expansion of the ready-to-drink beverage market, focusing on exploring potential opportunities The tea beverage industry possesses characteristics that are universal in taste, controllable supply chains, standardized operations, high cost performance, and other elements of global chain restaurant enterprises. By 2023, the global ready-to-drink beverage market size will reach $77.19 billion, with the Asia-Pacific region being the main market for ready-to-drink tea beverages, particularly the Southeast Asian market showing rapid growth, with a forecasted compound annual growth rate of 19.8% in the next five years. The Southeast Asian market has advantages such as a young population, hot climate, and profound tea drinking culture, making it an ideal market for tea beverage brands, with a competitive landscape of both local and international brands. In addition, there are potential opportunities in markets such as Europe, America, Japan, South Korea, and the Middle East, but entering these markets requires a stronger localization strategy. Advantages of HEYTEA going abroad: Perfect supply chain, cost-effectiveness seizing the overseas market With its perfect supply chain and low-cost strategy, HEYTEA has successfully gained a foothold in overseas markets. HEYTEA's supply chain management is efficient, with low raw material costs, and a high overseas business gross profit margin of up to 40%. In the future, HEYTEA will expand production bases in Hainan, establish supply chain centers in Southeast Asia, further reducing costs. HEYTEA's pricing strategy in the Southeast Asian market is similar to that in domestic market, focusing on high cost-effective products which are highly favored by consumers. Through digital operations and an efficient franchise management system, HEYTEA has quickly expanded its store network, with operational efficiency higher than its peers. It is expected that the number of stores in the Southeast Asian market will continue to grow in the future. Investment advice The investment payback period for mature overseas markets such as Indonesia and Vietnam is 18 months, comparable to that of domestic stores, while Thailand and Malaysia are still in the early stages of store expansion, with average sales exceeding 100,000 yuan and a payback period of less than 1 year, becoming the main force for HEYTEA's opening in Southeast Asia in the future. Currently, the total number of HEYTEA stores in China is 36,500, with 25.9 stores per million people. Based on GDP and temperature adjustments, there is theoretically space for 16-24 HEYTEA stores per million people in Southeast Asia, with an estimated opening space of 10,000-15,000 stores. Southeast Asia is located in tropical and subtropical regions, with longer high temperatures throughout the year, leading to higher actual consumption penetration rates and frequencies among residents. In the future, with the development of the Southeast Asian economy, the penetration of tea beverage consumption, and the substitution of chain brands for street-side standalone stores, there is even more long-term development space in the tea beverage market. Risk warning Macroeconomic consumption risk; geopolitical risk; exchange rate risk; intensified competition risk in overseas markets; food safety risk.