Can Haidilao Learn From A Busboy-Turned-Bubble Tea Magnate?

Key Takeaways:

• Haidilao has appointed Zhang Junjie, founder of the fast-growing Chagee bubble tea chain, as an independent with annual pay of 1.2 million yuan
• Zhang could bring new views about the latest dining trends as Haidilao attempts to revive its fortunes after expanding too quickly and falling out of favor

By Lau Chi Hang 

What were you doing when you were 29? Perhaps holed up at home playing computer games? 

That’s the current age of Zhang Junjie, who was just appointed as an independent director of Haidilao International Holding Ltd.(6862.HK). But Zhang hardly spends his time these days playing computer games. Despite never attending college or working at a major multinational, Zhang has earned a place in the boardroom of one of China’s top restaurant operators, which is worth over HK$70 billion ($9 billion) and is also a component of the benchmark Hang Seng Index. Based on his last name, you might think he’s the son of Zhang Yong, Haidilao’s founder and a major shareholder of the company.

But you would be wrong. In fact, this pair of Zhangs has no family relationship other than a surname that’s quite common in China. Zhang Junjie came from modest origins, without a super-rich family or especially impressive network of connections to bankroll his business. Still, Zhang Junjie is the brains behind Chagee, which he created from scratch and has gone on to become the hottest flavor of the day in China’s hotly contested bubble tea market.

Rapid rise 

Haidilao is hoping to receive some of Zhang Junjie’s magic as it works through an overhaul after its own rapid rise and more recent decline. Concurrent with its announcement of Zhang Junjie’s appointment, Haidilao released its latest financial report that showed its revenue rose 13.7% year-on-year to 21.5 billion yuan ($3 billion) in the first half of 2024. But its net profit for the period fell by 9.7% to about 2 billion yuan due to the end of a preferential policy involving the value-added tax in China last year. 

As a member of its board, Haidilao said Zhang Junjie would receive annual compensation of 1.2 million yuan. Haidilao added that Zhang has 13 years of operating and management experience in the catering industry and is currently the Chairman and CEO of Chagee. 

Zhang Junjie’s rag-to-riches story is quickly becoming the stuff of legends in China’s ever-evolving business world. Zhang was on his own and trying to make his way in life from a very early age. Without any academic credentials, he worked at a Taiwanese bubble tea chain, making tea drinks and mopping the floor every day. But he was smart, resourceful and extremely hard-working, and was promoted from entry-level employee to store manager, then to regional supervisor and even regional managing director, all in three years. Later he became a partner in a franchisee.

He took a high-tech turn and left the tea business in 2015 to join Shanghai Muye Robotics as deputy director of its partnerships division for two years. But he returned to his tea roots in 2017, just as the sector was kicking into higher gear, and founded Chagee in Southwest China’s scenic Yunnan province. 

Copycat accusations

Chagee has achieved meteoric success in just a few years. But copycat allegations, which are a hallmark of such hot industries, have been also flying thick and fast against the company. First, some accused it of stealing from another company, Chayanyuese, by taking that company’s strategy of playing up traditional Chinese themes using products made with fresh milk to replace overused fruit flavors. 

Then there’s Chagee’s packaging, which has been criticized as imitating the pomp of foreign luxury brands such as Dior and LV on its fashionably designed paper teacups. 

Its trademarks are equally controversial. It began using the image of a classic beauty from Yunnan and was accused of emulating the images of a similarly beautiful classic women used by Chayanyuese. When it switched its trademark to Consort Yu, a famous figure in Peking Opera, some pointed out that the logo resembled Starbucks’ use of the Siren in its green-and-white logo drawing on Greek mythology. 

230 million cups sold

Despite the controversy, there’s no question that Chagee has taken China’s premium tea market by storm, building up a network that now boasts 4,500 stores worldwide. According to Zhang, Chagee’s gross merchandise value (GMV) in 2023 reached 10.8 billion yuan. It averaged monthly sales of 24,000 cups per store, and its one-day sales for a single store once reached 8,687 cups. The company’s best-selling product is its Jasmine Green Milk Tea, which sold 230 million cups last year – averaging one cup for every six Chinese people.

In the first quarter of the year, Chagee’s GMV had already reached 5.8 billion yuan, or more than half the total for all of 2023. The chain’s rapid growth has given Zhang the chutzpah to publicly proclaim that his company’s sales would beat Starbucks in China this year, even though Starbucks has been in China far longer. Notably, Chagee’s executive suite includes Li Tao, a former vice president of Starbucks China, who was reportedly lured from the U.S. giant a while ago with a hefty compensation package.

Chagee has completed several financing rounds, with Fosun, XVC and Hong Kong-based Rothsfortune among its investors. Its valuation hit 3 billion yuan last year after a funding from American tech investor Coatue. And the company has also reportedly hired Morgan Stanley and Citi as co-sponsors of plans for a U.S. IPO this year that could raise about $300 million.

Zhang Junjie’s amazing success at Chagee has clearly piqued the interest of Haidilao’s Chairman Zhang Yong. As successful as it once was, Haidilao needs such new thinking and ideas in a new dining age filled with technology and growing use of AI to cater to people’s latest culinary habits. 

Zhang Junjie’s appointment to Haidilao’s board has raised expectations that he can help in the company’s turnaround. Haidilao is no doubt looking forward to his attendance at its future board meetings, hoping he can bring his unique market perspective and sensibilities as well as his understanding of China’s younger generation to reinvigorate Haidilao’s stodgier, more established brand. 

Huang Tieying, a former managing director of state-owned conglomerate China Resources, once wrote a best-seller singing the praises of Haidilao, titled “The Success of Haidilao Cannot be Learned.” His story speaks to earlier days not long ago when huge lines formed outside Haidilao’s stores and the company obtained cult-like status throughout China. But now that former catering legend is turning to the latest flavor of the day for tips, showing just how quickly preferences change in the brave new world of Chinese dining. 

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.