Analysis of the Caffeine Controversy Involving CHAGEE and Its Impact on US Stock Valuation

Based on collected data and market information, I now provide you with a professional analysis report.

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In late December 2025, CHAGEE (NASDAQ: CHA) was caught in a public opinion maelstrom due to a caffeine-related controversy. On December 26, a self-media outlet released a video claiming that the caffeine content in some of its drinks “far exceeds safety standards,” even linking it to the concept of “quasi-drugs.” The related topic quickly trended on major platforms. On the same day, the company’s stock price plummeted by over 14% intraday, hitting an all-time low of $11.90, marking the largest single-day drop since its listing in April 2025[1][2].

In response to public doubts, CHAGEE’s brand side quickly responded that night, stating that the caffeine in its drinks all comes from natural tea leaves and is not artificially added. On December 27, the Shanghai Narcotics Control Office released a science popularization article through official channels, clarifying that the caffeine content of the relevant products meets national food safety standards and there is no “drug-related” risk; on December 30, regulators further clarified that the self-media’s remarks are misleading[1][2].

, CHAGEE listed on NASDAQ on April 17, 2025, with an offering price of $28 per share. It performed strongly on its first day of trading, opening at $33.75, representing an over 20% increase from the offering price, and closed up about 16% to $32.44, with its market value once exceeding $7.5 billion. However, the stock price has continued to decline since then. As of the close on January 10, 2026, it was trading at $13.17 per share, down 53% from the offering price and 68.5% from the all-time high of $41.80, with a current market value of approximately $2.45 billion[0][3].

is mainly reflected in short-term emotional fluctuations. On December 26, the stock price once dropped by over 14% from its pre-controversy level, but the closing decline narrowed to about 2.5%. From a longer-term perspective, the direct impact of this incident on the stock price is relatively limited; after the controversy, the stock price has rebounded by about 10.7% from the low of $11.90[0][3].

According to the Q3 2025 financial report, the company’s net revenue was RMB 3.208 billion, down 9.4% year-over-year, marking the first year-over-year decline in quarterly revenue in recent years. Net profit was RMB 398 million, a sharp 38.5% year-over-year decline; adjusted net profit was RMB 503 million, down about 22% year-over-year. Operating profit margin narrowed significantly from 22.4% in the same period last year to 14.2%, and net profit margin dropped from 18.3% to 12.4%[2][4].

The average monthly GMV per store in Greater China has fallen below the RMB 400,000 mark to RMB 378,500, a 28.3% year-over-year plummet. Over a longer timeline, since the high of RMB 574,000 in Q4 2023, single-store GMV has declined for 7 consecutive quarters, shrinking by a full one-third. This indicates that the company’s aggressive store expansion strategy over the past 18 months (increasing the number of stores from less than 5,000 to 7,338) is backfiring, as overly dense store layout has caused severe internal competition and customer diversion[2][4].

In the made-to-order tea beverage industry, where new products generally drive traffic, CHAGEE did not launch any new products for more than half a year after its IPO. It only launched the Floral Version of “Bo Ya Jue Xian” in November 2025, and the “Return to Yunnan Ripe Pu’er” series in December 2025. This reflects, to a certain extent, that the company is facing bottlenecks in product innovation[2].

Compared with peer companies listed on the Hong Kong Stock Exchange, CHAGEE’s valuation has an obvious discount. The company’s current P/E ratio is 22.3x, while Mixue Group’s is 37.5x, Guming’s is 25.3x, and Auntie Shang’s is 18.7x. The company’s P/S ratio is approximately 1.9x, while the industry average is around 2.5-3.0x, representing a relative discount of about 35-40%[3][5].

This valuation discount mainly reflects the market’s concerns about the company’s performance decline trend, store expansion quality, and new product development capabilities, rather than the impact of the caffeine controversy alone.

, the caffeine controversy has gradually subsided, and regulators’ clarification has helped ease market concerns. However, this incident exposed the company’s shortcomings in crisis public relations and consumer communication, and the recovery of consumer trust needs continuous attention.

, the key to valuation recovery lies in whether the company can address the following core issues:

1. Stop the decline and drive growth in same-store GMV
   : Optimize store layout, improve single-store operational efficiency, and avoid excessive internal competition
2. New product development and market response
   : Restore product innovation capabilities and create new hit products
3. Stabilize and rebound profit margins
   : Optimize cost structure to address profit pressure from food delivery subsidy wars
4. Overseas market expansion
   : Leverage the brand effect of US stock listing to seek growth opportunities in overseas markets

, as the first Chinese new tea beverage brand to list on the US stock market, CHAGEE has a unique position in the capital market. However, whether it can achieve valuation recovery depends on whether the company can prove that its business model is still sustainable in an increasingly competitive environment, and whether it can restore the growth momentum of revenue and profits.

The impact of the caffeine controversy on CHAGEE’s valuation is

, rather than a fundamental negative factor. The real factors affecting the company’s valuation recovery are underlying issues such as . Regulators have clearly clarified the compliance of its products, and the impact of this factor is fading in the short term.

To achieve valuation recovery, the company needs to

to rebuild market confidence, rather than relying solely on the subsidence of the controversy. If it can achieve inflection points in key indicators such as same-store sales, new product development, and profit margins, coupled with its unique US stock listing status and international brand effect, the valuation recovery space can reach over 40% (recouping the current valuation discount relative to Mixue Group). Conversely, if performance continues to deteriorate, the marginal effect of any short-term positive news will diminish.

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[1] Jin Yang Wang - “Behind the Caffeine Controversy of CHAGEE: How Pseudo-Science Creates Food Safety Anxiety?” (https://news.ycwb.com/ikimvkjtkm/content_53894135.htm)

[2] Sina Finance - “The Problem with CHAGEE Is Not Caffeine” (https://finance.sina.com.cn/jjxw/2026-01-05/doc-inhffsfv6638092.shtml)

[3] Southcn.com - “Shanghai Narcotics Control Office Responds to CHAGEE’s Caffeine Controversy” (https://news.southcn.com/node_179d29f1ce/db743c7aad.shtml)

[4] Yiou.com - “Capital Retreat in New Tea Beverage Industry? CHAGEE Denies Hong Kong Listing Plan, US Stock Price Halved” (https://www.iyiou.com/news/202601081119266)

[5] CNfol.com - “RMB 20 Billion Evaporated in 200 Days! CHAGEE’s High Valuation Bubble Bursts” (http://mp.cnfol.com/10804/article/1765440007-142162060.html)