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
- 3 พ.ค.
- ยาว 26 นาที
อัปเดตเมื่อ 1 มิ.ย.
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
CHAGEE debuted its first tea shop in Kunming, Yunnan Province, China, in November 2017, founded by Junjie Zhang. It was established with the vision to elevate Eastern tea culture into a modern experience comparable to global coffee chains like Starbucks, and the mission to "Connect the world through tea." The company is committed to exploring millennia-old tea cultures worldwide to create a new tea lifestyle unique to CHAGEE, positioning itself as a premium tea brand focusing on technology and digital innovation as core operational elements. It focused on selecting high-traffic locations, often opening near competitors. The store design aimed to create a "Third Space" experience similar to Starbucks, but at a more accessible price point.
During the initial phase (2017-2021), CHAGEE's key strategies were:
Differentiation through clearly presenting unique Chinese cultural identity.
Developing a franchise business model conducive to rapid expansion.
Focusing on core products like "Tea Latte" or "Original Leaf Fresh Milk Tea" (原叶鲜奶茶), especially the popular "Boya Juexian" (伯牙绝弦), which became crucial for strengthening the brand and massively driving operational efficiency.
Building a strong digital system foundation.
Continuous and serious investment in digital transformation was another pillar of success. CHAGEE applied technology across all dimensions, from developing Enterprise Resource Planning (ERP) and Transportation Management Systems (TMS) to support global expansion, to using automated tea-making machines ("Tea Tech") for quality control and efficiency in stores, including creating digital platforms for customers via applications and loyalty programs to build engagement and gather insights. These technological investments not only increased efficiency but were also key factors enabling the franchise model to scale rapidly while maintaining quality control.
Establishing an International Business Department as early as 2018 to prepare for global expansion, enabling successful international store openings within the first two years (Malaysia and Singapore in August 2019, Thailand in October 2019).
Despite being a new brand, by the end of 2020, CHAGEE had grown to over 240 stores across Asia with monthly sales exceeding 2 million cups, rapidly becoming one of the leading tea beverage brands in the region. In 2021, the company successfully raised over 320 million RMB in Series A and B funding rounds to develop technology, expand stores, and strengthen the brand. Additionally, there was a brand image refresh and the launch of the "Fresh Milk Tea" product line, which later became a signature offering that differentiated the brand and became a key strength.
Challenges
CHAGEE's Store Count (2021 - 2024)
From 240 stores at the end of 2021
Increased to 1,087 stores at the end of 2022
Increased to 3,511 stores at the end of 2023
And increased to 6,440 stores at the end of 2024
This rapid growth also brought significant challenges. CHAGEE faced major challenges:
1. Intense Competition in Both Chinese and Global Markets
The freshly made tea market in China is highly competitive, with major players like HEYTEA and Nayuki, who were established earlier and have strong customer bases, rapidly growing mid-tier brands (Guming, Chabaidao, Mixue), and even competitors from adjacent markets like Luckin Coffee entering the tea market. In international markets, CHAGEE competes directly with global giants like Starbucks, as well as Chinese rivals who are also expanding internationally. Making the CHAGEE brand known and stand out is therefore a significant challenge.
2. Dependence on Core Products
High reliance on the "Tea Latte" category (91% of GMV in 2024) makes the brand vulnerable if consumer preferences shift.
3. Maintaining International Quality Amidst Expansion
Rapid store expansion complicates the management of a complex supply chain involving fresh ingredients (milk, tea leaves) across a larger and more dispersed global network, timely delivery, and ensuring consistent product and service quality standards in all stores to deliver a consistently good customer experience.
4. Complexity in Managing a Large Franchise Network
Although franchising allows CHAGEE to scale quickly with less capital, it faces difficulties in maintaining consistent standards, training, and brand culture among thousands of independent operators. Rapid growth intensifies these challenges and can lead to poor customer experiences, negatively impacting the overall brand reputation. The "managed franchise" model and digital tools are therefore crucial in mitigating these risks.
5. Impact of COVID-19
The COVID-19 pandemic in 2020 directly impacted the beverage store business. Lockdowns and social distancing measures forced CHAGEE to adapt quickly by developing digital channels, such as online ordering, delivery services, and membership systems via applications or social media, to retain customers and sales. This initial digital strategy became an important foundation for future growth.
6. Adapting to International Markets with Diverse Cultures and Consumer Behaviors
Pricing: Finding the right price point in markets with different income levels (e.g., Indonesia vs. Singapore).
Tastes: Adapting to local preferences that may differ from China (e.g., popularity of fruit teas/toppings in Southeast Asia compared to CHAGEE's core milk teas).
Regulations: Complying with different franchise laws, labor laws, food safety standards, and data privacy regulations worldwide (e.g., Chinese oversight, cybersecurity).
Cultural Marketing: Avoiding missteps, such as the nine-dash line map incident in Vietnam; marketing with cultural sensitivity.
7. Signs of Slowing Same-Store Growth (SSG)
Rapid overall growth contrasts with significantly slowing same-store GMV growth. There were signs of slowing same-store GMV growth in late 2024, potentially indicating market saturation and cannibalization in some areas. This could be due to rapid new store openings cannibalizing sales from existing stores in dense areas. Maintaining growth levels requires careful location selection and potentially new strategies.
Although total GMV increases, average per-store efficiency might decrease, putting pressure on franchisee profitability and indicating diminishing returns from adding stores in existing markets. This incentivizes international expansion and product diversification (e.g., the 'Chagee freshly brewed' sub-brand) to find new growth avenues. CHAGEE is facing a crucial strategic inflection point where future growth likely depends more on international expansion and diversification than repeating the same strategy in China.
CHAGEE faced challenges that evolved with its growth starting with high competition and brand building in China, shifting to managing a large franchise network and maintaining standards during rapid expansion, and currently dealing with the complexity of adapting to global markets, managing international supply chains, international competition, and maintaining innovation for sustainable growth. Therefore, CHAGEE had to adapt quickly by rapidly developing its digital systems, which became a crucial foundation for business expansion and global growth.
Goals and Outcomes
CHAGEE fully embraced digital transformation and AI technology, enabling the brand to rapidly scale its business, efficiently control costs, and create excellent customer experiences. All of this reflects the power of technology in driving growth and creating a competitive advantage, resulting in exponential business growth and the potential for global expansion in the near future.
The "Five Things Online" concept was implemented, connecting five key areas: Online Drinks Preparation, Online Customer & Franchisee Relationship Management, Online Supply Chain, Online Store Lifecycle, and Online Payment Systems. This helped increase operational speed, enable efficient store expansion, reduce logistics costs, and enhance customer satisfaction.
The Tea Tech system and a comprehensive digital strategy supported rapid store expansion while maintaining the highest quality standards, using technology to control costs and optimize the supply chain. It also enhanced the customer experience through efficient digital platforms and created a centralized data system for making business decisions based on deep insights.
Key Outcomes:
Gross Merchandise Volume (GMV) grew rapidly from 1.29 billion RMB in 2022 to 29.5 billion RMB in 2024.
Store count increased from approximately 1,000 stores to 6,440 stores globally in 2024, achieving the leading position in China's premium tea shop market.
Net profit increased by 213.3% in 2024, driven by the implementation of automation in the production process.
Average tea brewing and serving time decreased to approximately 40 seconds per cup due to automated tea-making technology.
Membership base grew to 177 million people, supported by a CRM system analyzing customer behavior in real-time.
Successfully launched intelligent, AI-controlled tea-making machines.
Raised capital through an IPO on the Nasdaq market, strongly positioning the business for global expansion into the United States, ASEAN, and the Middle East.
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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1. Disruption: Riding the Wave of Change in the Beverage Industry
Traditional Competitors: CHAGEE competes with major milk tea chains such as HEYTEA, Nayuki, and fast-growing mid-tier brands like Mixue, Guming, and Chabaidao, which focus on aggressive pricing and rapid store expansion. It also faces competition from a growing number of new tea brands.
Non-traditional Competitors: Challenges come from all directions — coffee chains like Luckin expanding into tea, health beverage startups, FoodTech companies, traditional tea brands pivoting into RTD and D2C channels, and e-commerce platforms that could launch their own private-label brands. Even tech companies entering the beverage market through digital platforms, such as food delivery and on-demand apps, are shifting consumer behavior and reshaping customer access channels.
Differentiation Strategy: CHAGEE emphasizes its signature “Chalatte” (Original Leaf Fresh Milk Tea), which uses real tea leaves and fresh milk — a healthier image compared to traditional creamer-based milk teas — while positioning itself as an “Oriental Starbucks” blending Eastern culture with modern style.
Rapid Expansion: CHAGEE adopted an aggressive franchising model to scale quickly and establish market presence, outpacing early-stage competitors who relied on company-owned stores.
Efficiency Focus: Heavy investment in Tea Tech (operational automation) and a simplified menu allowed faster service, cost reduction, and tight quality control.
2. Disruptive Innovation: Game-Changing Customer Experience
Creating Experience: CHAGEE focuses on offering a “Third Space” — a seamless lifestyle experience beyond just the product — with added digital convenience such as mobile pre-ordering.
Premium RTD & DTC Expansion: CHAGEE expanded into wellness beverages and the Ready-to-Drink (RTD) tea market to meet demands for convenience and health. It also embraced Direct-to-Consumer (DTC) strategies, entering new retail channels such as supermarket shelves and e-commerce platforms — an entirely different competitive environment from traditional tea shops.
Global Market Expansion: The company expanded internationally, localizing its products and services to suit the culture and preferences of each market.
3. Disruptive Technology: Empowering Operations with AI and IoT
"Tea Tech": Online Drinks PreparationCHAGEE deployed automated tea machines across its network to ensure consistency and reduce labor reliance — a major differentiator in both quality and efficiency, allowing rapid store expansion and reshaping market competition.
Investment in Digital Infrastructure:A robust digital backend supports scalability, giving CHAGEE faster and more agile store operations than competitors. This includes Supply Chain Online and Store Lifecycle Online systems that manage complex operations seamlessly.
Customer Digital Channels:CHAGEE developed its own WeChat Mini-Program for ordering and payment, along with a proprietary app and loyalty program (“霸王江湖”), to maintain direct relationships with customers and gather behavioral data — an innovation that transforms both production and service delivery to meet customer needs quickly and efficiently.
AI-Powered Personalization & Wellness Platform:AI is used to analyze customer data, personalize offers, forecast demand, develop beverages, and optimize the supply chain — enabling CHAGEE to respond to market changes with agility.
4. Platform Business: Expanding Through Digital Ecosystems
CRM & Franchise Online:CHAGEE built a digital ecosystem that connects multiple stakeholders (company–franchisees–customers) through CRM systems, data analytics, and an integrated app for ordering, payments, and loyalty management — ensuring a seamless experience and stronger customer loyalty.
Global Digital Franchise Ecosystem:The company has elevated and integrated its digital technologies (ERP, TMS, Tea Tech) into a full-featured B2B business platform tailored for franchisees — a sophisticated and comprehensive solution supporting sustainable global growth.
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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Strategic Transformation with 4 Impact Zones
1. Core Business + Current Market: Optimizing Operations in Existing Markets
Strategy: Refocus + Operational Excellence
Refocus & Maintain Stronghold
Reinforce product differentiation: CHAGEE continues to focus on its signature “Original Leaf Fresh Milk Tea,” particularly the flagship “Boyajuexian,” to retain loyal customers.
Strengthen customer loyalty: Leverage its 177 M-member base via mobile apps and CRM to personalize rewards and deepen engagement.
Maintain brand identity: Continue to position itself as the “Oriental Starbucks,” blending Eastern culture with modern aesthetics.
Lean Strategies & AI-Driven Efficiency
“Five Things Online” core digital strategy:
Tea Tech: Automated tea brewing using AI for consistency, speed, and reduced errors.
Supply Chain Online: Digital ERP and TMS systems optimize logistics and reduce costs.
Store Lifecycle Online: Digital tools streamline operations from setup to shutdown.
Payments Online: Digital payments improve transaction speed and reduce friction.
CRM & Franchise Online: Enables efficient cost, workforce, and CX management.
Streamlined Menu: Simplified operations, lower inventory risk, faster staff training.
Branch Optimization: Close underperforming stores and adapt formats to local needs.
Goal: Strengthen brand presence in China and defend share in a competitive market.
Outcomes: Lower cost-per-cup, 40-second average brewing time, increased loyalty with 177M members.
2. Core Business + New Market: Expanding Core Services to New Regions
Strategy: Market Expansion + Digital Platform
Geographic Expansion:
Launching Chagee Express in new markets such as the US, Indonesia, and the Middle East, using digital-first management systems to scale rapidly.
Digital Franchise Platform Development:
Global Digital Franchise Ecosystem: Offers franchisees operational and marketing support to scale with consistency across global markets.
Tech Transfer: Extending China-proven systems (Tea Tech, ERP, TMS, CRM) to global branches.
Localized Marketing: Adapts digital campaigns and menus to local culture while maintaining brand essence.
Goal: Pre-empt disruptors and build global market share.
Outcomes: Positioning as a global Oriental tea brand; Nasdaq IPO funded further expansion.
3. New Core Business + Current Market: Creating New Digital Services in Existing Markets
Strategy: Core Re-Design + Vertical Integration
AI-Powered Personalization & Wellness Platform:
Leverages AI to recommend personalized tea based on customer health profiles, preferences, or goals.
Offers new products such as functional drinks or personalized subscription boxes.
Launch of "Chagee Freshly Brewed":
A premium pure tea sub-brand catering to existing customers seeking a differentiated experience.
New Product Development:
Smart tea machines for homes/offices.
Ready-to-drink (RTD) bottled teas.
E-commerce and supermarket distribution for RTD and appliances.
Goal: Generate new revenue from existing customers outside the in-store model.
Expected Results: Higher margins, reduced retail saturation risk.
4. New Core Business + New Market: Launching New Business Models Globally
Strategy: Strategic Reinvention + Ecosystem Platform
Premium RTD & DTC Expansion:
New model: Entering premium RTD and direct-to-consumer (DTC) via e-commerce and retail shelves—new channels with unique consumer behavior and competition.
New market: Global reach to non-retail-based customers.
Global Rollout of Personalization Platform:
If successful in China, the AI-powered personalization platform will be expanded globally to add a competitive advantage in new markets.
Potential B2B Services:
Monetize the Global Digital Franchise Ecosystem by offering it as a service to other food & beverage businesses seeking efficient franchise operations.
Build a Tea Lifestyle Ecosystem:
Launch a wellness & tea app, tea club communities, and cross-industry partnerships (e.g., fitness, wellness brands) to embed tea into daily routines.
Goal: Transition from “tea retailer” to “health & lifestyle platform.”
Expected Results: Generate recurring revenue, diversify global customer base, and strengthen brand loyalty.
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
07. Organizational Transformation
Redesigning the organization for the digital age
Structure: CHAGEE established dedicated Digital Transformation and AI teams empowered to make cross-functional decisions. Product Management teams were created to drive new digital solutions, while the Marketing team was restructured to focus on Digital Marketing, Data-Driven Marketing, and Global Campaign Management.
Culture: A culture of openness to change, innovation, experimentation, and customer-centricity is actively promoted. Senior leaders champion transformation by modeling "Change Leadership" and fostering a growth mindset.
Training & Human Resources: The company invests in training its workforce in digital skills and emerging technologies. Talent acquisition focuses on experts in AI, Data Science, E-commerce, Digital Product Management, and Cybersecurity. Upskilling and reskilling initiatives are implemented to develop internal talent, alongside career path planning for technology-focused roles.
Work Processes: Agile methodology is embedded in digital product and project development. CHAGEE promotes Data-Driven Decision Making and collaboration across technology, business, and marketing teams.
Indicators & Tools: Clear KPIs are set for every digital transformation initiative, supported by the use of modern Project Management tools, Collaboration Platforms, and Data Visualization solutions.
Technological Infrastructure: CHAGEE invests in flexible Cloud Infrastructure, centralized Data Lakes/Warehouses, and standardized technology architectures to enable scalable, secure global operations.
08. Agile Strategy & Planning
Transforming Strategy and Execution Through Agile Thinking
“CHAGEE TOGETHER!” & Cross-Functional Teams: CHAGEE adopted a squad/tribe structure with diverse, empowered teams working toward shared goals, promoting teamwork and shared vision under the motto "CHAGEE TOGETHER!"
PEER Values: Teams are encouraged to operate with Proactiveness, Enthusiasm, Equality, and Respect—aligning with agile values of collaboration and open communication.
Sincerity: Transparency, honest communication, and constructive feedback loops are emphasized as foundational to agile workflows.
Integrity: Decision-making is grounded in facts and data, emphasizing honesty and doing the right thing, even when difficult.
Entrepreneurship: Teams are empowered to take ownership, take calculated risks, and learn from failures, fostering a startup mindset within the organization.
Iterative Development & Feedback Loops: Work is delivered in short sprints with regular feedback from customers, employees, and franchisees to support continuous improvement.
Data-Driven Prioritization & Pilot Testing: Resources are allocated based on pilot outcomes and data insights to ensure maximum value creation.
Adaptability & Scenario Planning: CHAGEE remains responsive to unexpected changes and can rapidly adjust strategies and plans as needed.
Continuous Learning & Improvement: The company fosters a learning culture through knowledge sharing and ongoing process improvement to stay agile and innovative.
09. Building Collaborative Ecosystem
Creating Synergistic Partnerships Inside and Outside the Organization
Partnerships & Franchise Network: CHAGEE collaborates with food delivery platforms and tech companies to expand sales channels and supports franchisees through centralized systems, seeing them as key partners in delivering value and capturing customer insights.
Community Engagement: The company engages with health-conscious consumers, tea enthusiasts, and local communities in co-creating new offerings and experiences.
Business Value Chain Partnerships:
Suppliers: Work closely with suppliers to source high-quality and sustainable ingredients, leveraging traceability technologies.
Distributors/Logistics Providers: Build strategic partnerships with global logistics providers to support RTD and DTC expansion.
Technology Partners: Collaborate with leading firms in AI, Cloud, IoT, and Cybersecurity to access cutting-edge innovations.
Startups: Explore partnerships or investments in startups with aligned technologies or business models.
Competitors (Co-opetition): Partner with industry peers on non-competitive fronts like standard-setting or promoting tea culture.
Educational Institutions: Partner with universities and research institutes for talent development, tea research, and food technology innovation.
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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