Teahouse chain Nayuki says regulators find no cockroaches or rotten fruits in outlets after media report triggers backlash

food safety problems, stock slumped 10.8 per cent, patronise stores

Chinese milk tea company Nayuki Holdings said mainland authorities found no food safety problems at its outlets as reported by state-run Xinhua in its first major brush with regulators since its stock listing in June.

“On-site checks by authorities at our stores in various regions showed that they all complied with rules and regulations,” the Shenzhen-based company said in a statement on Wednesday. “No cockroaches and rotten mangoes were found.”

The company has pledged to conduct self-inspections in its 603 stores across mainland cities to ensure compliance with hygiene and health conditions after market regulators in southern Guangdong province held talks with the firm on the controversy.

The teahouse chain first attracted public attention on Monday when Xinhua reported that some of its stores violated food safety and health rules, listing two stores in the capital Beijing where cockroaches and rotten fruits were discovered.

The report triggered a backlash as Nayuki suspended operations of the two stores to rectify the situation. Its stock slumped 10.8 per cent to HK$9.72 on Tuesday, and recently traded 5.4 per cent higher at HK$10.24 on Wednesday.

“Many Chinese consumers will never patronise stores that are involved in a hygiene scandal,” said Eric Han, a senior manager with Shanghai-based business advisory firm Suolei. While investigations showed hygiene was not a big problem with Nayuki, its sales could still be affected by bad press, he added.

In China, food safety is threatened by an increasingly opaque political system

Since 2008, a spate of scandals that exposed toxic materials in mainland-made food prompted a surge in demand for foreign brands, and provoked a state crackdown on negligence and intensify inspections of food-production processes.

Nayuki said on Wednesday that regulatory officials from different cities have inspected 186 of its total 603 teahouses and found they were not linked to hygiene issues. It was fined or penalised by regulators, it said, adding that an internal task force has been formed to monitor food safety issues.

Founded by couple Peng Xin and Zhao Lin in 2015, Nayuki raised US$656 million via a Hong Kong initial public offering in June, becoming the world’s first milk-tea chain to list on a stock market.

The firm ranks as the second-largest fresh handmade tea brand in China with about 19 per cent share, according to China Insights Consultancy. HeyTea, which is owned by Shenzhen Meixixi Catering Management, is the largest in a market dotted with 1 million milk and fruit-tea stores nationwide.

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