Chinese tea brand Chagee released its unaudited financial results for the first quarter of 2025, which ended on March 31.

The company reported a 35.4% increase in net revenue, reaching 3.39 billion yuan (around US$471 million) compared to the same period in 2024.

As of March 31, 2025, Chagee operated 6,681 teahouses across Greater China and overseas, reflecting a 63.6% year-on-year expansion.

Gross merchandise value (GMV) for the quarter rose by 38% to 8.23 billion yuan (around US$1.1 billion).

Net income grew by 13.8% to 677.3 million yuan (around US$94 million), but its net income margin declined to 20% from 23.7% in the previous year.

Operating income reached 820.8 million yuan (around US$114 million), with an operating margin of 24.2%.

Revenue from franchised teahouses, which accounted for 92.8% of total revenue, increased by 31.8% to 3.15 billion yuan (around US$437.2 million).

Additionally, revenue from company-owned teahouses more than doubled to 242.8 million yuan (around US$33.7 million), attributed to the opening of 133 new outlets.

Operating expenses rose by 42.8% to 2.57 billion yuan (around US$356.7 million), driven by increased costs related to materials, logistics, sales, and administrative functions.

Chagee ended the quarter with 5.39 billion yuan (around US$748.2 million) in cash, restricted cash, and time deposits, up from 4.87 billion yuan (around US$676 million) at the close of 2024.

🔗 Source: Chagee

🧠 Food for thought

1️⃣ Premium positioning with declining unit economics reflects market saturation challenges

Chagee’s earnings reveal a critical tension in its growth strategy: while the company has achieved impressive expansion with a 63.6% year-over-year increase in teahouse count, its average monthly GMV per teahouse in Greater China has declined significantly from RMB549,432 to RMB431,973 1.

This pattern mirrors challenges faced by other rapidly expanding food and beverage chains like Starbucks during certain growth phases, where aggressive store expansion can lead to cannibalization of existing location sales.

The declining unit economics come despite Chagee’s positioning as a premium brand with high profit margins (20.0% net income margin), indicating that market saturation may be occurring in key Chinese markets even as the broader bubble tea category is projected to grow at 9.16% CAGR through 2032 2.