Chinese tea chain Chagee to keep premium prices despite rising competition from affordable brands

"We haven’t been fully engaged in the price wars," Chagee co-founder Shang Xiangmin said in an interview with Bloomberg earlier this week.

"Price wars may be a way to compete but we want to stick to our long-term strategy to build a premium brand."

A Chagee tea storefront is seen in Shanghai, China, on April 20, 2025. Photo by NurPhoto via AFP

The fresh-brewed tea chain has kept its pricing strategy unchanged while domestic competitors like Luckin Coffee and bubble tea operator Mixue Group teamed up with China’s tech giants to hand out subsidies for deeply discounted beverages, selling drinks for a third of Chagee’s price tag.

Chagee’s Hong Kong flagship store is piloting a selection of drinks crafted from China’s premium tea leaves, brewed and served by in-store specialists.

These are sold at prices matching single-origin coffee at Starbucks Reserve outlets in the city, from HKD40 to HKD50 (US$5.2-6.4).

Chagee’s second-quarter sales growth eased to 10% from 35% in the prior period, with adjusted operating income falling 10% versus double-digit increases in the first quarter.

The weak performance has erased nearly a quarter of its market value. Citigroup analysts have trimmed their full-year Chagee outlook, citing ongoing pressure through the rest of the year.

Chagee, however, seems unfazed by the drop in its competitiveness as the company chooses to pursue the same development path as American giant Starbucks.

"Starbucks has brought coffee to the world through decades of development," Shang said. "We’ve always wanted to go down the same path to take tea further."

The chain opened its first U.S. store in Los Angeles in May, after debuting its shares on the Nasdaq, according to CNBC.

Chagee operates more than 200 international outlets within its 7,000-store network. Overseas sales jumped 70% in the second quarter, with Southeast Asia being a key target for expansion.