Mixue surpasses McDonald's as world's largest food-and-beverage chain

Both chains retreated from upmarket pushes after weaker results

To understand how Mixue passed McDonald’s in store count, skip Beijing or Shanghai. Instead, look at a Dollar General in Dayton, Ohio, or Lubbock, Texas. Over seven decades, the American discount chain built a 21,000-store U.S. chain on a simple formula: go where Walmart won’t, keep stores bare-bones and sell cheap staples to people stretching their paychecks. Halfway across the world, the Zhang brothers independently saw the same opportunity in China’s unglamorous interior. Where Dollar General sold $1 paper towels, they sold 45-cent soft-serve cones and cheap drinks.

Mixue operated more than 47,000 locations last year, making it the world’s biggest food-and-beverage chain by store count, according to research firm Technomic, and the company has added thousands more stores this year. That puts Mixue ahead of McDonald’s in physical footprint, though McDonald’s remains far more valuable by market capitalization — about $180 billion, compared with Mixue’s roughly $10 billion. Mixue’s Hong Kong-listed stock has roughly halved since its debut. Analysts at Macquarie, an Australian bank, said competition has pressured Mixue’s profits. A sluggish Chinese economy has led to Chinese price wars.

In America, Dollar General’s then-chief executive David Perdue, now the U.S. ambassador to China, articulated the formula when Walmart was expanding past 3,000 stores in the 2000s: “We went where they ain’t.” Perdue saw the opportunity in rural areas 40 miles from the nearest Walmart. The company also flooded cities such as Dayton, where drivers can pass three Dollar Generals before reaching a Walmart superstore. Today, the company says about 75% of Americans live within 5 miles of a Dollar General.

Across the Pacific, Zhang Hongchao ran a similar play. In 1997, he opened a shaved-ice stall in Henan, a Chinese province that might be compared with Ohio. A decade later, his younger brother Zhang Hongfu joined the business and eventually became its chief executive. Inheriting what Hongfu later described as a “low-price gene” from poverty, the brothers ignored the middle-class customers that Starbucks and Chinese brands chased in Shanghai. They opened stands in workers’ dormitories, village markets, and universities, chasing cheap rent and foot traffic. Today, three-quarters of Mixue’s shops in China sit in second- and third-tier cities, where the company says it faces fewer competitors.

Both companies tested going upmarket and pulled back after weaker commercial results. In 2020, Dollar General launched Popshelf to chase higher-income suburbanites with party supplies, cosmetics, and other discretionary items under $5. The goal was 1,000 stores. By 2025, citing weakening discretionary spending, the company dialed back the plan and closed 45 locations. Popshelf operates 180 stores today.

In China, Zhang Hongfu ran a similar experiment. Envious of the stylish customers at a local Dairy Queen, he lamented his chain’s shabby student clientele. In 2009, he opened an upmarket rival with fresh ingredients and premium decor. Sales dropped as competition arrived, and after 2½ years he closed the store after generating just $900 in profit. Selling pricier products, he reflected, meant higher-maintenance customers expected better decor and staff. “I should have just stuck to selling at the prices I’m best at,” he said. “Do not put on airs.”

The two chains also share a stripped-down retail blueprint. Dollar General mostly leases bare-bones, company-operated stores, with plain concrete floors, exposed LEDs, and little backroom storage; deliveries go from trucks to shelves, often still in shipping boxes. The company said last year that opening one costs about $500,000, a fraction of a big-box store’s price tag.

Mixue compressed the same model into franchised stalls as small as 45 square feet, the size of a walk-in closet. An early Mixue store cost $950 to open: $740 for a secondhand ice-cream machine, $120 for rent, and $90 for electrical wiring and decor, Zhang Hongfu wrote in a company document. It shared space with a steamed-bun seller who, Hongfu recalled, was jealous of the simplicity: “No need to prepare fillings, no need to knead dough.”

The menu is equally spartan. Every drink, Zhang Hongfu wrote, relies on five basics — water, sugar, tea, milk, and toppings — which the company says streamlines supply chains and simplifies training. In a Mixue in suburban Hanoi, employee Quan Thuy Hien said she arrives 15 minutes before opening to mix drink bases with water, and that staffers learn new recipes every few months in a couple of days. “There wouldn’t be any skills involved,” she said.

The chain has expanded across Asia and Australia, and last year set its sights on America. In Singapore, the company assembled managers and franchisees and signaled the next move, according to people familiar with the gathering. Co-chairman Zhang Hongfu told the crowd in Chinese that Mixue was going global. Then, for emphasis, he switched to English. “The world is big,” he said, “so we have to give a f—.”

The U.S. push has so far departed from the playbook by opening in expensive Manhattan and Hollywood ZIP codes. The prices, however, remain constant: a soft-serve cone costs $1.19.