The Mixue Story: From shaved ice to sugar empire

Zhang Hongchao failed spectacularly at motorcycle repair. His fish farming venture flopped even harder. When authorities demolished his ice cart for the fourth time, most rational people would have updated their CVs and found proper employment.

Zhang kept selling ice cream for one yuan.

Twenty-seven years later, his company Mixue operates 36,000 stores across 35 countries, generating over RMB15 billion (USD 2.08 billion) in annual revenue—all while keeping prices so low that most drinks cost less than a bus ticket. To put this in perspective: Mixue operates more outlets than McDonald’s, and significantly more than KFC, Pizza Hut, or Burger King individually.

This is the story of how radical cheapness conquered the world’s largest beverage market.

Persistence of spectacular failure

Zhang Hongchao wasn’t destined for entrepreneurial greatness. A finance student at Henan University of Economics and Law, he first tried motorcycle repair—an endeavour that ended roughly. Fish farming followed, with similarly disappointing results. But failure, it seems, teaches valuable lessons about persistence.

In 1997, inspired by the popularity of Korean culture sweeping China, Zhang launched a shaved ice cart near his university. What followed was a masterclass in perseverance through adversity: three business closures and four demolitions by city authorities. Each setback could have ended the story there. Instead, each became fuel for the next attempt.

The breakthrough came in 2003 when Zhang secured a permanent location adjacent to his alma mater. His menu was hardly revolutionary: shaved ice, RMB 3 (USD 0.4) hamburgers, and RMB 2.5 (USD 0.35) fried rice. But it served a crucial market—hungry students operating on instant noodle budgets.

RMB 1 revolution that changed everything

In 2006, Zhang made a decision that would reshape China’s beverage industry: the RMB 1 ice cream cone. While competitors priced similar products at RMB 20 (USD 2.78), Zhang positioned his at one yuan—not as a budget option, but as an everyday essential.

This wasn’t temporary promotional pricing. This was permanent market disruption.

The response was explosive. Students who previously treated ice cream as an occasional luxury suddenly consumed it daily. Zhang had transformed a discretionary purchase into a habitual one, and the mathematics were staggering.

But here’s where Zhang’s genius becomes apparent: the RMB1 ice cream wasn’t just a product—it was a customer acquisition tool. Each cone created a loyal customer who would purchase other items and, crucially, spread word-of-mouth marketing.

That ice cream, now priced at RMB 2-3, remains Mixue’s flagship product nearly two decades later. Some strategies age poorly. Great strategies become institutions.

The supply chain revelation

In 2013, Zhang launched another product that would define Mixue’s future: RMB3 fresh lemonade. This wasn’t just another menu item—it was proof of concept for vertical integration.

While competitors struggled with inconsistent quality from multiple suppliers, Zhang began building his own supply chain. He established Snow King Agriculture in Sichuan province, controlling lemon farms in China’s primary growing region. Not content with domestic sourcing, he extended operations globally—New Zealand dairy, Vietnamese passion fruit, Brazilian coffee.

The RMB3 lemonade (now RMB4) achieved something remarkable: annual sales exceeding one billion cups. This means roughly one in four Chinese citizens drinks Mixue lemonade annually. That’s not just market penetration—that’s cultural integration.

Consider this statistic: 98% of Mixue’s revenue comes from selling ingredients and equipment to franchisees. They’ve essentially created a business model where they profit from every transaction—first when franchisees purchase supplies, then when those franchisees sell to customers.

The strategic beauty of franchise control

Zhang pioneered a revolutionary franchise model that eliminates many traditional risks. Instead of relying on percentage-based royalties from franchisee sales, Mixue generates revenue through direct supply sales. This creates several advantages:

1. Predictable revenue: Whether a franchise thrives or struggles, they still need supplies
2. Quality control: Standardised ingredients ensure consistent product quality
3. Reduced risk: Mixue profits regardless of individual store performance
4. Expansion support: Free shipping to franchisees reduces their barriers to growth

The model resembles what economists call the “shovel seller strategy”—during gold rushes, the most reliable profits came from selling tools to miners, not from mining gold itself.

Snow King’s cultural conquest

In 2018, Mixue introduced Snow King (雪王), their mascot designed to embody affordability, approachability, and universal appeal. No scandal potential, no celebrity risks—just a cheerful, rotund character that could represent the brand anywhere in the world.

The genius stroke came in 2019 with the theme song. “Mixue Bingcheng Tianmimi” (roughly translated as “Mixue Ice City, Sweet as Honey”) achieved viral status before viral marketing became routine. The catchy jingle made Mixue top-of-mind for millions of potential customers across China.

Zhang didn’t stop at music. In 2018, he established Snow King Animation Company, producing “Snow King Arrives” (雪王驾到), an animated series that scored an impressive 9.9 rating on Bilibili (China’s equivalent to YouTube). Each season reportedly costs over RMB10 million to produce, representing one of history’s most expensive promotional campaigns disguised as entertainment.

This investment reveals Zhang’s broader vision: transforming Mixue from a beverage company into a cultural property. Think Disney, but with lemonade.

The global experiment

Mixue currently operates 4,000+ international stores, primarily throughout Southeast Asia—countries like Vietnam, Indonesia, Malaysia, and Thailand. This represents a fascinating experiment: Can radical affordability travel across cultures and economic conditions?

Early evidence suggests yes. Southeast Asian customers embrace affordable indulgence similarly to Chinese consumers. The key insight: while taste preferences vary culturally, the appeal of daily affordable luxury appears universal.

However, expansion into wealthier markets like Europe or North America presents untested challenges. Can RMB4 beverages compete in countries where similar products cost RMB15-20? The answer will determine whether Mixue becomes a regional phenomenon or global empire.

Strategic precision in simplicity

Zhang’s approach defies conventional business wisdom in several ways:

1. Extreme price focus: While competitors chase premium positioning, Mixue doubles down on affordability
2. Simple menu strategy: Instead of constantly introducing new products, they perfect existing ones
3. Supply chain priority: Investment goes to infrastructure rather than marketing
4. Cultural investment: Building entertainment properties while selling beverages

The results speak clearly. While premium brands like Heytea and Nayuki fight over affluent urban customers willing to pay RMB 25-30 for specialty drinks, Mixue captured the much larger mass market with offerings under RMB10.

The Future Uncertainties

Despite remarkable success, Mixue faces several challenges:

1. Scale management: Maintaining quality across 36,000 stores requires exceptional systems
2. International adaptation: Wealthier markets may resist ultra-low pricing
3. Cultural investment returns: The long-term financial return on animation investments remains unproven
4. Competitive Rresponse: How will established global players react to Mixue’s expansion?

Industry lessons

Mixue’s success offers several insights for modern business:

1. Mass market power: Serving many customers small profits often beats serving few customers large profits
2. Supply chain as defense: Controlling your input costs creates sustainable competitive advantages
3. Price leadership: In commodity markets, the lowest-cost provider with acceptable quality often wins
4. Culture building: Brand building through entertainment can create deeper customer connections

The bigger question

Zhang Hongchao transformed a RMB1 ice cream cone into a RMB15 billion empire by understanding a simple truth: small, frequent pleasures often create more value than large, occasional ones.

His question for the next decade: Can Mixue become China’s answer to Coca-Cola or Disney—brands that transcend product categories to become cultural institutions?

The answer will determine whether Zhang’s improbable journey ends as a business school case study or continues as an ongoing conquest of global consumer culture.

My thoughts

Looking back, Zhang’s greatest insight wasn’t about beverages or business models. It was recognising that in a world where everything grows more expensive, radical affordability becomes a luxury itself.

Sometimes the most disruptive business strategy is simply charging less than anyone thinks possible while still making money. Zhang proved this with one yuan of ice cream at a time.