Naixue’s Brand Struggles and the U.S. Section 301 Tariff Extension Reflect Ongoing Challenges in Global Markets

Naixue (Naixue Tea, 02150.HK), once a leader in the new-style tea beverage sector, has recently undergone a series of changes amid increasing competition and shifting consumer preferences. Originally gaining attention for its "tea + bakery" dual-category model and dedication to in-store experiences, Naixue has gradually lost its industry spotlight. Recently, the brand initiated a comprehensive upgrade plan on its 10th anniversary, including a new snowflake-inspired logo and rebranding efforts. While the new design has begun appearing on packaging and storefronts, customer service has stated that the brand name remains “Naixue Tea” on platforms such as food delivery apps.

Simultaneously, Naixue raised breakfast prices in Guangzhou and Shenzhen from the prior 9.9 yuan to 15.9 yuan and above, while other cities like Beijing and Shanghai maintained original pricing. The company explained the change as part of a breakfast product upgrade, including new bagel offerings. However, many consumers expressed dissatisfaction online, criticizing the price hikes.

Strategically, Naixue has struggled with inconsistency—initially favoring a high-end positioning and resisting franchising, it eventually allowed franchise models in 2023. Yet management later admitted that aggressive expansion conflicted with the company’s commitment to high quality, reaffirming a slower, more measured growth strategy. In contrast, Chagee (霸王茶姬), often referred to as a fellow “Starbucks follower,” has surged ahead. Its founder, Zhang Junjie, publicly set a 2024 target to surpass Starbucks China in total annual sales. Chagee has grown rapidly from 1,087 global stores in 2022 to 6,440 in 2024, leveraging a franchise model focused on “modern oriental tea” with middle-market pricing.

Naixue, on the other hand, reported only 1,798 stores in 2024, including 1,453 self-operated locations. Despite its original upscale direction, sustaining a 30-yuan average transaction proved challenging. The company’s preference for direct operation over franchising also constrained scalability in a market driven by volume and accessibility. On the capital side, Naixue has lost investor favor. After a lackluster IPO debut and sustained stock decline, the company now lags behind peers who have seen strong listing performances, such as Mixue Bingcheng and Chagee.

Financial results further underscore these concerns. In 2024, Naixue posted revenue of 4.921 billion yuan, a 4.7% year-on-year decline, and shifted from a net profit of 20.912 million yuan in 2023 to a net loss of 919 million yuan—becoming the only one among the top five tea chains on the Hong Kong Stock Exchange to report a loss.

Nevertheless, Naixue continues to explore transformation. Under its philosophy of “not only selling milk tea,” the company has expanded into healthier offerings. In March 2024, it launched the “Naixue Green” concept store in Shenzhen, promoting light meals and nutritious drinks, including a new “energy bowl” menu. Simultaneously, 30 such stores have opened in Beijing, Shanghai, Guangzhou, and Shenzhen. Other innovations include “BlaBlaBar,” a tea and alcohol hybrid concept, as Naixue diversifies its portfolio in search of renewed relevance.

Meanwhile, global trade dynamics have also evolved. On May 31, 2025 (local time), the United States Trade Representative (USTR) announced an extension of tariff exemptions under Section 301 targeting Chinese goods. Initially set to expire on May 31, 2025, the exemptions have now been prolonged until August 31, 2025. These include 164 existing exemptions from May 2024 and 14 newly added ones from September 2024, extended by an additional three months.

This decision followed public feedback from a December 29, 2023 notice, and ongoing reviews. The USTR considered input from advisory bodies and the interagency 301 committee. According to Yuekai Securities, four rounds of tariffs were imposed during the Trump administration: the first three at 25%, and the fourth at 7.5%. As per the Peterson Institute for International Economics (PIIE), the average U.S. tariff on Chinese goods reached 19.3% in early 2020, and though projected to fall to 10.7% by the end of 2024, issues remain unresolved.

China has consistently objected to the Section 301 tariffs, deeming them a breach of World Trade Organization (WTO) rules and an example of unilateral protectionism. Chinese authorities argue that these measures undermine global supply chain stability and have failed to resolve the U.S. trade deficit or competitiveness issues—while ultimately burdening American companies and consumers with higher costs.

Together, the strategic struggles of Naixue and the extended U.S. tariff measures reflect broader pressures faced by Chinese brands, both domestically and globally, as they navigate evolving markets, regulatory environments, and consumer expectations.