CHAGEE Product Strategy: The Secret Behind Its Growth

Today, we’re diving into one of the most extraordinary business stories in China’s beverage world — Baang Chaji, also known as Changee. Through its smart CHAGEE product strategy, this brand transformed from a small tea shop in 2017 into a multi-billion-yuan empire, and now it may soon become the first Chinese consumer brand in four years to IPO in the United States.

As of March 25th, Changee officially submitted its IPO prospectus, and the numbers are staggering. In just three years, Changee scaled its revenue by 24 times, reached $350 million in profit, and opened over 6,000 stores in China’s highly competitive milk tea market.

Let’s break down how this incredible rise happened.

1. CHAGEE Product Strategy

The primary reason behind Changee’s explosive growth is its bold CHANGEE product strategy. From 2022 to 2024, Changee made a significant bet on one product – the original leaf milk tea, essentially a tea latte, believing it would define the future of tea in China. And it worked.

• In 2022, original leaf milk tea accounted for 79% of Changee’s total sales.
• By 2023, this number grew to 87%.
• By 2024, a staggering 91% of their business was driven by this single product category.

Three core products alone made up 61% of their total revenue, with their breakout drink, Boya Dwexen (a jasmine milk tea), becoming a national sensation. In 2023, Changee sold 300 million cups of this tea, and over 600 million cups have been sold to date.

What makes Boya Dwexen so powerful? It’s simple, standardized, and scalable. The drink consists of just three ingredients – tea, milk, and syrup – making it cost-effective, consistent, and easy to produce year-round without relying on seasonal fruits or complex logistics. This simplicity reduces refrigeration and logistics costs, giving Changee a huge advantage.

2. Franchise Model: The Managed Franchise Revolution

Changee has turned the traditional franchise model upside down. While over 90% of Changee’s stores are franchised, they operate under a “managed franchise model” that ensures strict quality control and consistency across locations.

Key elements of this model include:

• Standardization at every level: Changee has a comprehensive set of standard operating procedures for everything – from how ingredients are sourced to how drinks are prepared, ensuring consistency across all locations.
• Stringent franchisee selection: Changee’s entry requirements for franchises are strict. They carefully select franchise locations, ensuring financial stability, and they require franchisees to have relevant experience in food and beverage operations.
• Performance grading and oversight: Regular inspections ensure that each store meets Changee’s high standards. Stores are graded into four tiers, and underperforming locations are closely supervised, with the company holding the power to shut them down if necessary.
• Tight contracts: Changee maintains full control over its franchises through tight contracts. Franchisees are held personally liable for any issues that affect the brand.

The result? CHAGEE product strategy achieved impressive revenue numbers per store and kept store closure rates low—just 0.5% in 2023.

3. Marketing Strategy: Building a Premium Brand

Changee’s branding strategy has been critical to its rise. Positioned as a high-end tea brand, it capitalized on China’s growing demand for premium tea in an increasingly health-conscious market.

Key elements of Changee’s marketing strategy:

• Targeting premium customers: Changee operates primarily in the premium segment of the tea market, which is growing rapidly. In 2024, premium tea accounted for 25.9% of the market, and this number is expected to keep rising.
• Health-conscious positioning: They promote their drinks as clean, healthy, and made with whole ingredients, such as whole leaf milk tea with zero trans fats and no non-dairy creamers. They also emphasize nutritional transparency and health-focused options like low-caffeine teas.
• Mass-market premium appeal: While the brand looks upscale, its marketing approach is similar to that of FMCG brands. They invests heavily in brand awareness, not just pushing discounts but creating a national premium brand accessible to the masses.

Changee’s marketing spend in 2024 reached nearly 154 million USD, almost 9% of its revenue, showing its commitment to building brand equity.

4. The Challenges Ahead: Slowing Growth and Rising Competition

While Changee’s growth has been impressive, there are some cracks beginning to show:

• Slower same-store growth: As store density increases, sales growth per store is slowing down. In major cities like Beijing and Shanghai, some franchises have seen significant drops in monthly sales.
• Over-reliance on hero products: With three products accounting for 61% of total revenue, Changee is vulnerable if customer preferences shift or competitors replicate their successful formula.
• Rising competition: New challengers, like Jasmine Milk White and Grandpa Dozen Brew Tea, are emerging with aggressive expansion plans.

5. The Future

To stay ahead of the competition, Changee has outlined a bold multi-channel vision:

• The Starbucks Model: Premium tea cafes, like their new Cheyi Now stores.
• The Nestlé Model: Automated tea machines and capsule systems for home or office use.
• The Coca-Cola Model: Ready-to-drink bottled teas for retail distribution.

Changee aims to revolutionize the entire tea experience – from in-store to at-home consumption. With new products like Tea Latte, Tea Espresso, and Teapuccino, the brand is pushing to dominate all areas of the tea market.

Conclusion: Will Changee Stay on Top?

Changee’s rise is nothing short of a business case study. From a viral product to automated production and now a potential global IPO, the brand has executed its strategy flawlessly. However, the real challenge now is to keep innovating quickly enough to avoid getting overtaken in the fast-moving Chinese milk tea market.

In a world where no drink stays hot forever, will Changee become the Starbucks of tea, or is this just a fleeting trend? The next few years will tell.