China Bubble & Brew: 1H26 Preview: Tea brands hit the brakes, Luckin hits the gas

Research evidence excerpt

China Bubble & Brew: 1H26 Preview: Tea brands hit the brakes, Luckin hits the gas

GumingandMixuemighttrendslowerorweakerinto2H26). To but unloved – stay selective while waiting

meet our FY26 estimates, Guming needs to net add another 1.2k stores in 2H26 for the earnings floor; top picks Nongfu,

(vs. +800 in 1H26), and SSS needs to stop getting worse in 3Q (JPMe: MSD Anta, Guming (link)

deline) and stabilize in 4Q (JPMe: flat).

• What’s changed in consumer habits and franchisee mindset? Even as 2026 May 29th, Chagee - 1Q26 Signals a

Alibaba and Meituan have cut subsidies sharply YTD, consumers are Gradual Recovery; Maintain Overweight

seemingly habituated to ordering via delivery apps. To steer orders to their own (link)

channels, brands are pulling multiple levers, including WeChat mini-program

discounts, BOGO deals and “dine-in only” offerings. Don’t forget the

2026 Apr 30th, Luckin Coffee: 1Q26 a

franchisees - the real canaries in the coal mine - the topline pressure typically

solid start to the year: margin recovery on

matters far more than any margin lift from a healthier order mix. We got the

track; $300mn repurchase a positive

impression that existing franchisees are less willing to open a second store and

surprise (link)

refurbishing older stores feels less urgent - and this might explain the

aggressive guidance cut from Guming, in our view.

• Luckin stands out while the industry feels the pain. In this tug-of-war,

franchise-heavy brands are being squeezed from both sides: weakening foot

traffic and rising marketing spend. They face a familiar trade-off—step up

support (including subsidies and marketing) to keep franchisees motivated, or

accept a slower expansion path, or both. If franchisees remain reluctant to open