CHAGEE — From a small local tea shop in China to a global leader in beverage and lifestyle innovation — powered by AI, Tea Tech, and a Digital-First strategy.
- AI Transformation Readiness
- May 3
- 26 min read
Updated: 6 days ago
Explore the remarkable growth journey of CHAGEE, the Chinese tea brand often dubbed “The Starbucks of Tea.” What began as a small tea shop with its first location opened on November 17, 2017, in Kunming, Yunnan Province, China, has rapidly expanded into a global public company listed on the Nasdaq Stock Exchange in April 2025.
In just seven years, by the end of 2024, CHAGEE had over 6,440 outlets worldwide, with approximately 6,284 stores located in China. The brand has expanded into several Southeast Asian countries, including Malaysia, Singapore, and Thailand. In 2025, CHAGEE launched its first U.S. store at Westfield Century City Mall in Los Angeles. With an average of over 1,000 cups sold per store per day, a customer base exceeding 177 million, and a market cap of USD 6.54 Billion (As of 2nd May 2025), CHAGEE has firmly established itself as a global powerhouse.
This success has been driven by a comprehensive AI and digital transformation strategy, particularly through its “Tea Tech” approach—revolutionizing traditional production and service operations into a fully automated system. CHAGEE has integrated digital systems including ERP, TMS, CRM, and advanced data analytics platforms to enable strategic decision-making, enhance operational efficiency, elevate customer experience, and scale the brand internationally. It serves as a compelling case study for businesses aiming for exponential growth in the digital age.
Business Overview
Challenges
Goals and Outcomes
Part 1: AI TRANSFORMATION READINESS
CHAGEE demonstrates a remarkable transformation from a regionally recognized tea brand utilizing basic digital tools to becoming an AI-driven global enterprise—achieving significant progress across nearly all dimensions of AI Transformation Readiness within just 2–3 years. This leap was made possible through strategic investments in digital infrastructure, data systems, and organizational culture shifts to embrace the AI era.
CHAGEE stands out in key dimensions such as Data Readiness, AI Project Delivery Efficiency, Technology & Tools Readiness, and Business Alignment & Impact. The company exemplifies how AI can be more than just a tool for operational efficiency—it serves as the core engine for strategic decision-making, innovation, and real-time management. CHAGEE’s transformation reflects a clear vision and high readiness to scale sustainably on a global stage.
AI Transformation Readiness Assessment: Before and After 2024
The assessment of AI Transformation Readiness before and after the transformation highlights the following progress:
Before 2022, CHAGEE was at Level 2: Experimenting, with initial digital adoption limited to basic tools such as WeChat mini-programs and a rudimentary loyalty system. AI had not yet been integrated into the core business processes, and there was a lack of structured data systems or AI infrastructure. After 2024, CHAGEE advanced to Level 5: Transforming, having fully embedded AI and digital systems across all operational dimensions. This included implementing ERP, TMS, automated tea brewing systems, and an AI-driven CRM platform. These initiatives significantly enhanced operational efficiency, enabled rapid sales growth, and supported the scalable management of thousands of franchise locations. CHAGEE has now laid a solid foundation for long-term, sustainable global expansion.
> The Journey to AI and Digital Transformation: Leveraging AI Transformation Readiness to Drive Successful Digital Transformation within the Organization
Part 2: NEW GROWTH ENGINE
Future Growth Strategy of Changi Airport
Despite facing intense and rapidly evolving competition, as well as the challenges of global expansion, CHAGEE possesses key strengths in branding, technology, and a large digital customer base. The company’s next New Growth Engine lies in leveraging AI and big data to unlock new value through:
AI-Powered Personalization & Wellness: Creating a personalized and health-focused tea experience platform using customer data and AI.
Global Digital Franchise Ecosystem: Strengthening and optimizing its end-to-end digital franchise system to scale with efficiency and consistency.
Premium RTD & DTC Expansion: Entering the premium ready-to-drink tea market and expanding direct-to-consumer (DTC) channels to reach new customer segments.
Together, these strategic initiatives aim to drive sustainable growth and elevate CHAGEE into a truly global tea innovation brand.
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Part 3: TRANSFORMER MAP
CHAGEE’s Business Transformation Map
CHAGEE has transformed to proactively design transformation strategies and prepare for future disruption. These disruptions may arise from startups, tech firms, or cross-industry competitors leveraging digital technologies to enter and reshape the beverage market. This allows CHAGEE to respond proactively and build long-term competitiveness in an evolving global market.
CHAGEE illustrates its commitment to sustainable growth and transformation. Rather than only protecting its current business (Box 1), CHAGEE aggressively expands to new markets (Box 2), innovates within its current customer base (Box 3), and pioneers new global markets and platforms (Box 4). Fueled by AI and digital transformation, CHAGEE is positioning itself as a long-term leader in the tea industry, ready to compete on a global scale.
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Part 4: BUSINESS MODEL CANVAS
CHAGEE's New Business Model
CHAGEE’s redesigned Business Model reflects a comprehensive integration of AI, digital transformation, and international growth strategies capturing how CHAGEE delivers new value to both traditional and emerging customer segments, harnesses technology for efficiency and personalization, and diversifies revenue streams. The model positions CHAGEE as not just a premium tea brand, but a global leader in lifestyle and digital-first food & beverage innovation.
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1. Customer Segments
General Consumers (End Users):
Over 177 million loyal global members who appreciate premium tea and Eastern cultural aesthetics.
Consumers in China familiar with the brand and its signature product (Original Leaf Fresh Milk Tea).
Consumers seeking convenience through online ordering with in-store pickup or home delivery.
New Customer Segments (from New Growth Engine & Transformer Map):
International consumers in new markets: e.g., the United States, Southeast Asia (Indonesia, etc.), and the Middle East.
Health-conscious consumers: Target group for the “AI-Powered Personalization & Wellness Platform,” who seek tailored wellness beverages.
Convenience-seeking consumers: Target audience for Ready-To-Drink (RTD) premium tea products.
Home and office users: Ideal for the Smart Tea Maker.
Online shoppers: Direct-to-consumer (DTC) customers purchasing via e-commerce channels.
Corporate clients: Organizations ordering bulk tea products for events or employee benefits.
Franchise partners: Entrepreneurs interested in opening CHAGEE franchises (key for the Global Digital Franchise Ecosystem B2B platform).
Other B2B clients: Companies that may adopt CHAGEE’s franchise system as a service.
2. Value Propositions
CHAGEE delivers a premium tea experience by combining freshly brewed high-quality teas with Eastern cultural aesthetics and modern convenience.
For end consumers, CHAGEE offers seamless digital ordering via mobile apps, personalized recommendations through AI-powered wellness platforms, rapid and consistent service enabled by Tea Tech, ready-to-drink (RTD) products, smart tea makers for home and office use, and an engaging lifestyle ecosystem.
For franchisees, CHAGEE provides a proven, profitable business model backed by a strong brand and a comprehensive digital franchise platform that supports operations, supply chain, marketing, and training, along with global brand and marketing support to ensure consistent success across markets.
3. Customer Relationships
Membership System: Tiered loyalty program with points and perks.
Personalized Communication: AI-powered CRM delivering tailored offers to over 177 million members.
Customer Service: Multichannel support using AI chatbots and human assistance.
Community Engagement: Tea Clubs, online/offline activities, cultural campaigns.
Direct Franchisee Support: Through the digital franchise platform and support teams.
Cultural Storytelling: Reinforcing the “Oriental Starbucks” identity to strengthen emotional connections.
4. Channels
Retail Stores: Flagship locations and high-traffic Chagee Express stores.
Mobile App: For online orders, loyalty management, and personalized experiences.
Food Delivery Platforms: Partnerships to extend reach.
Retail Channels (for RTD): Supermarkets, convenience stores.
E-Commerce Channels: Global websites selling RTD tea, Smart Tea Maker, tea leaves, and merchandise.
Global Franchise Portal: B2B platform for franchisees.
Social Media & Tea Club Platforms: Community engagement.
Mini Programs: For WeChat and other regional platforms.
5. Revenue Streams
Primary Revenue Sources:
Tea Beverage Sales: In-store retail (corporate-owned and franchise).
Franchise Fees: Licensing and royalty revenue from franchisees.
Merchandise Sales: Branded items, accessories, tea leaves via e-commerce.
New Revenue Streams (from New Growth Engine):
RTD Tea Sales: Via retail and direct-to-consumer (DTC) channels.
Smart Tea Maker Sales: Including accessories and consumables.
(Optional) Subscriptions: Monthly personalized tea boxes.
(Future) B2B Platform Services: Offering the digital franchise system to other businesses.
Partnership Income: Co-branded products and ecosystem collaborations.
6. Key Activities
Tea Production & Sales: Beverage operations across various sales channels.
Technology Development: Apps, AI systems, digital platforms (B2C and B2B).
Marketing & Localization: Global branding, local campaign execution.
R&D: Innovation in wellness beverages, RTD products, and Smart Tea Makers.
AI/Data Analytics: For personalization, demand forecasting, and process optimization.
Global Supply Chain Management: Raw material sourcing, manufacturing, logistics.
Franchise Management: Training, quality assurance, operational guidance.
Retail Operations: Management of company-owned stores.
Business Development: Expanding the Tea Lifestyle Ecosystem.
7. Key Resources
AI & Digital Technologies: Platforms for data analytics, personalization, and operational automation (e.g., Tea Tech).
Human Capital: Experts in operations, customer service, R&D, data science, software engineering, international marketing, and franchise support.
Supply Chain Network: Efficient sourcing, manufacturing, and logistics systems.
Brand & IP Assets: CHAGEE branding, signature product recipes, and the “Oriental Starbucks” concept.
Customer Data & CRM System: Over 177 million user profiles.
Franchise Network: Global expansion infrastructure.
Financial Capital: Funding from operations and Nasdaq IPO.
8. Key Partnerships
Raw Material Suppliers: Premium tea leaf and ingredient vendors.
Digital Platforms: Food delivery, payment, cloud, and data service providers.
Franchise Partners: For store expansion and localized operations.
Technology Providers: AI, ERP, CRM, IoT, and digital infrastructure specialists.
Logistics Partners: For domestic and international supply chain fulfillment.
Retail Distributors: Especially for RTD products.
E-commerce Platforms: For direct-to-consumer sales.
Marketing Agencies: Supporting global and local campaigns.
Lifestyle & Wellness Brands: For ecosystem collaborations.
(Future) OEM/ODM Partners: For producing RTD and Smart Tea Makers.
9. Cost Structure
Cost of Goods Sold (COGS): Tea, ingredients, packaging for RTD, hardware.
Technology Costs: AI development, app maintenance, and platform infrastructure.
Operational Expenses: Rent, staff wages, utilities, and store overhead.
R&D Costs: Innovation in products and technology.
Marketing & Sales Costs: Global branding, customer acquisition.
Logistics & Supply Chain Costs: RTD manufacturing and distribution.
Franchise Support Costs: Quality control, training, franchisee engagement.
E-commerce & Fulfillment Costs: Order processing, warehousing, delivery.
Talent Costs: Especially for technical and strategic hires.
Part 5: DIGITAL TRANSFORMATION CANVAS
Decoding CHAGEE's Business Transformation to Success with DIGITAL TRANSFORMATION CANVAS
CHAGEE has undergone a bold business transformation, redefining its core identity as a modern Eastern-style premium tea brand. The company has accelerated service development and operational efficiency by building digital capabilities through its “Five Things Online” strategy and “Tea Tech” innovations. CHAGEE enhanced its value proposition with the launch of the AI-Powered Personalization & Wellness Platform, and developed new digital strengths such as Advanced Analytics and a Global Digital Franchise Ecosystem. Organizational transformation was also prioritized, with the adoption of an Agile culture and digital upskilling for employees. In parallel, CHAGEE has cultivated a global ecosystem of technology, supply chain, and franchise partners. As a result, the company has rapidly expanded to over 6,400 outlets with a customer base exceeding 177 million members, achieved superior operational performance (e.g., an average serving time of 40 seconds), and successfully listed on the Nasdaq, reflecting its strong potential for global growth.
Part 1: Laying the Foundation for Transformation
01. Define New Core Business
CHAGEE has developed a New Core Business by evolving from a small local tea shop in Kunming, China, into a global leader in beverage and lifestyle innovation. Driven by a Digital-First strategy, advanced Tea Tech for automated drink preparation, and the integration of AI to enable personalized customer experiences and data-driven strategic decision-making, CHAGEE has transformed its business model. The company introduced the AI-Powered Personalization & Wellness Platform, built a Global Digital Franchise Ecosystem, and expanded into the Premium Ready-to-Drink (RTD) and Direct-to-Consumer (DTC) markets. These initiatives have allowed CHAGEE to strengthen its customer base in China while creating new growth engines globally—setting a new standard for the tea industry in the digital era.
02. Define New Value Proposition
Personalized Experience: Leverages AI to analyze customer behavior and deliver tailored promotions and product recommendations. The system personalizes tea and wellness experiences by suggesting beverages, ingredients, and health programs aligned with individual preferences.
Convenience & Seamless Global Tea Lifestyle: Offers on-demand access to premium tea anytime, anywhere through a unified experience across all channels—physical stores, mobile apps, RTD products, DTC platforms, and smart tea makers.
Quality Assurance: Utilizes technology to maintain consistency and quality in every cup, enabled by digital management systems and Tea Tech.
Empowered Franchise Partnership: Provides franchisees with a fully integrated global digital platform (Global Digital Franchise Ecosystem) that ensures efficient operations, strong support, and scalable growth alongside the CHAGEE brand.
Cultural Connection & Community: Builds a community for tea enthusiasts through a lifestyle platform that goes beyond beverages—fostering meaningful cultural engagement and connection.
03. Define New Business Model
Digital Channels Expansion: Expands sales through online platforms and mobile apps, including premium RTD products, smart tea makers, tea leaves, and branded merchandise—all delivered directly to consumers (DTC) via global e-commerce.
Subscription Model: Enhances the loyalty program with tiered benefits and explores AI-curated monthly subscription boxes for personalized wellness tea experiences.
Franchise Expansion: Grows the business through a robust, centrally supported franchise model that ensures quality and operational consistency.
Platform-as-a-Service (PaaS - Future Potential): In the long term, CHAGEE may offer its Global Digital Franchise Ecosystem as a B2B platform service to other brands in adjacent industries.
Data Monetization (Ethical & Consensual): Considers leveraging anonymized and consent-based insights to create partnerships in the health and lifestyle ecosystem, enhancing value for both CHAGEE and its stakeholders.
Part 2: Building New Digital Capabilities
04. Identify Existing Digital Capabilities
Assessment of Existing Digital Capabilities (Before 2022):
CRM System (Basic): Basic customer relationship management focused on point collection and promotions
WeChat Mini Program: Primary online ordering channel used in the Chinese market
Basic Data Analytics: Basic customer data analytics used for marketing
Digital Payment Integration (Early Stage): Initial integration of digital payments via major Chinese platforms
Social Media Presence: Using social media for brand awareness and customer communication
05. Develop New Digital Capabilities
Definition of New Digital Capabilities (Post-2022):
Tea Tech Automation & Enhancement: Wide-scale adoption of automated tea machines, enhanced with IoT for quality control and speed
Integrated Operational Systems: Full implementation of ERP (Oracle NetSuite) and TMS (FLUX) to integrate finance, supply chain, and global store operations
Advanced Analytics & AI/Machine Learning: AI/ML for deep customer analytics (Personalization Engine, Predictive Analytics), AI-driven quality control, and NLP for chatbots and voice assistants
Enhanced BI Platform: Real-time global analytics dashboard for management and franchisees
Global E-commerce & DTC Platform: Robust platform for multi-category product sales, order management, logistics, and international payments
Global Digital Franchise Ecosystem: Comprehensive B2B platform with training, ordering, automated marketing, communication, and data analytics for global franchisees
IoT Integration: For Smart Stores, advanced supply chain tracking, and future Smart Tea Maker connectivity
Cybersecurity & Data Privacy Infrastructure: Systems that meet international standards like GDPR and CCPA
Cloud-Native Architecture: To ensure flexibility, scalability, and reliability of global systems
Enhanced Customer-Facing Digital Channels: Development of mobile applications with expanded functions and localization for international markets
06. Digital Initiatives & Roadmap
Building Digital Capabilities: 2022–2025 Roadmap
2022
Full deployment of ERP (Oracle NetSuite) and TMS (FLUX) following Series A/B funding in 2021
Expanded Tea Tech installations in both new and existing stores to enhance efficiency and quality
Improvements to customer-facing app and mini-program with more loyalty functions
Internal team formation for digital and data analytics
2023
Rapid rollout of Tea Tech to match the aggressive expansion (2,300+ new stores)
Upgrade CRM with early AI/ML features for basic customer segmentation and basket analysis
Laid foundation for overseas store operations (e.g., procurement, basic internal communication)
Integration of ERP/TMS/POS data into a unified BI Dashboard for executives
2024
Prepare systems and data for IPO readiness (financial system alignment, cybersecurity enhancement)
Expand AI/ML usage for advanced analytics (sales forecasting, trend analysis)
Begin design and foundational development of the Global Digital Franchise Ecosystem
Pilot e-commerce or RTD products in selected markets
Strengthen cloud and data privacy infrastructure
2025
Launch AI-Powered Personalization & Wellness Platform (MVP) for members
Officially launch Global E-commerce & DTC Platform in key markets (e.g., U.S., Southeast Asia)
Accelerate launch of Global Digital Franchise Ecosystem for franchisees
Scale up use of Advanced Analytics and BI across all departments
Expand AI/ML adoption in operations (e.g., Dynamic Pricing, AI-driven Supply Chain Optimization)
Launch Smart Tea Maker integrated with IoT
Broaden IoT integration in stores (Smart Stores) and supply chain
Develop new tech innovations like AR/VR for training and customer experience, Blockchain for supply chain transparency
Monetize data via new business models (e.g., advanced Subscription Models, Data Monetization)
Part 3: Transformation in Action
CHAGEE’s success demonstrates that Digital Transformation is not merely a strategy for operational efficiency but a powerful catalyst for retail and beverage businesses to drive new growth, rapidly expand globally, and build sustainable competitive advantage in today’s dynamic landscape. By integrating AI, developing robust digital platforms, and transforming organizational culture, CHAGEE has become a global case study in business transformation within the beverage and lifestyle sector—showcasing how digital innovation can generate both business growth and a positive impact on contemporary tea culture.
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