Bubble tea market in China to reach $58 billion by 2028

 A 30 year old Chinese man becomes a billionaire thanks to a cup of tea

A 30-year-old Chinese businessman unexpectedly made the Bloomberg Billionaires List with the listing of his sprawling U.S. tea shop chain, at a time when tensions between the two countries are fueling economic decoupling and market volatility.

With the U.S. IPO market at a standstill and some analysts wondering whether Chinese stocks would be delisted, Junjie Zhang's Zhagi Holdings Ltd. began trading on the Nasdaq on Thursday. The initial public offering raised $411 million and reached the top of its price range.

Zhagi shares rose 16% to close at $32.44, bringing Zhang's net worth to $2.1 billion, according to the Bloomberg Billionaires Index, which is assessing his wealth for the first time. His entire fortune comes from his stake in Chaguy, according to Bloomberg.

Chaguy's CEO, Zhang, joins a wave of Chinese who have become extremely wealthy as fresh-brewed tea chains have grown in popularity. Among them are the two brothers who founded Mixo Group, a brand known for its bubble tea, coffee, and ice cream, and who raised a combined $8 billion after launching the company in Hong Kong earlier this year.

But this boom has also led to an increasingly crowded sector in Hong Kong, according to Shen Ming, a director at investment bank Chanson & Co. Several bubble tea IPOs have foundered shortly after going public, as investors have grown wary of pouring money into a saturated market.

"The amount of capital allocated to new tea beverages has declined, meaning that IPOs in Hong Kong will likely struggle to achieve strong results in terms of valuation and funding," Shen said. He added, "For Chagi to securitize, the US stock market is now almost the only option available."

Healthy Tea

Zhang founded Chagi in 2017 in Yunnan Province, southwest China, bordering Myanmar, Laos, and Vietnam.

Unlike bubble tea brands known for their sugary, tapioca-filled drinks, Chagi specializes in premium milk teas made with traditional Chinese blends such as green, black, and oolong teas. Its stores, designed with a lounge-like atmosphere, mimic the atmosphere of a Starbucks store. A typical drink sells for just over $2.

The brand has seen rapid growth as health-conscious consumers increasingly shun high-calorie bubble tea. Speaking at a forum in May, Zhang said the company aims to revive "900-year-old tea-making methods" using modern technology.

China's fresh tea market, in terms of gross merchandise value, is expected to reach 426 billion yuan ($58 billion) by 2028, up from 273 billion yuan last year, according to iResearch data included in the prospectus.

Chagi has a network of more than 6,440 stores, mostly located in China, with branches in Malaysia, Singapore, and Thailand. The prospectus stated that approximately 6,270 tea houses are franchised, and 169 are company-owned.

But the expansion has not been without challenges. In Malaysia, Chagi faced boycott calls from local consumers after its app displayed Beijing's disputed claim to the Nine-Dash Line in the South China Sea. In Vietnam, where the company plans to launch operations soon, officials are investigating a similar incident.

Shenyao Wang, a stock analyst who publishes on the Smart Karma platform, said that by listing in New York, Chuggie hopes to position itself alongside global brands like Starbucks. However, Wang noted that the timing is delicate, saying that the trade war is a big surprise that Chuggie did not expect.