China teahouse chain Nayuki pursues Hong Kong IPO

PAG was the major player in the most recent investment, putting in almost all of the capital raised across two tranches in December and January, according to a prospectus. However, Nayuki’s largest external shareholder is Tiantu Capital with a 13.05% stake to PAG's 6.22%. 

The consumer-focused private equity firm provided RMB70 million ($10.8 million) in Series A funding in early 2017, took part in a RMB22 million extension several months later, and then committed RMB300 million to the first tranche of a Series B in 2019. Nayuki raised RMB626 million across three Series B tranches, with Shenzhen Capital Group among the other participants.

Founded in 2015, Shenzhen-based Nayuki serves freshly made tea drinks. It has a core menu of 25 varieties of classic tea drinks - made using premium tea leaves - and offers more than 25 types of baked goods, most of which are produced in the teahouses. As of September 2020, there were 420 stores across 61 cities in mainland China, plus one each in Hong Kong and Japan.

The company claims 29.2 million registered members who accounted for nearly half of all orders in the first nine months of last year. An increasing number of these orders are being made online, with deliveries responsible for a 24% share in the first nine months of 2020, up from 12.5% in 2019 and 4.4% in 2018.

Nayuki’s latest initiative is Nayuki Pro, a new store concept. It differs from a conventional store in that pre-made baked goods are supplied from a central kitchen. This means Pro outlets are smaller in size and cheaper to maintain. Pro stores also have dedicated pick-up and delivery areas. The concept was launched last November and there are now 14 outlets.

Nayuki plans to invest approximately RMB910 million in opening 300-350 teahouses in 2021 and 2022, 70% of which will be Pro outlets. Opening a Pro store costs RMB1.25 million versus RMB1.85 million for a  regular store.

Nayuki recorded revenue of RMB909 million in 2018, RMB2.29 billion in 2019, and RMB1.98 billion for the first nine months of 2020. Over the same three periods, same-store profit margins were 24.9%, 25.3%, and 12.6%. The decline last year was blamed on the COVID-19 outbreak. For the three months ended September, the margin recovered to 18.1%.

The company posted a net loss of RMB39.6 million in 2019, down from RMB69.7 million the previous year. For the first nine months of 2020, the net loss was RMB27.5 million.

China's market for freshly-made tea drinks was worth approximately RMB113.6 billion in terms of retail consumption value in 2020. It is expected to reach RMB340 billion by 2025. There are around 340,000 outlets nationwide, with an average selling price of RMB13 for tea products.

Nayuki is one of the leading brands in the premium segment with an average selling price above RMB20. It claims a market share of 17.7%. The company's principal rival is Heytea, which reportedly recently secured funding from Hillhouse Capital and Coatue Management. This has not been confirmed by HeyTea.

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• Topics
• Greater China
• Consumer
• IPO
• China
• Tiantu Capital
• PAG