Executive Summary / Key Takeaways

• Chanson International Holding (CHSN) is strategically transforming from a traditional bakery and beverage provider into a diversified player, leveraging digital platforms and expanding into the high-growth medical nutrition sector with its "Songkang Meal" series.
• The company is actively expanding its physical footprint in China's burgeoning tourism market and enhancing online sales through "baking + same-city delivery" and "livestream + interaction" strategies, aiming to capture evolving consumer preferences.
• Despite a slight revenue decrease of 1.40% to $8.69 million in the first half of 2025 and widening net losses, CHSN maintained gross margins above 40% and bolstered its liquidity with an $8 million public offering, positioning it for future growth initiatives.
• CHSN operates as a niche player in a competitive landscape dominated by larger entities like Starbucks, Krispy Kreme, and Yum! Brands, relying on its regional expertise, product diversity, and brand portfolio to carve out market share.
• Key investment considerations include the successful integration and scaling of its new medical nutrition product, the sustained effectiveness of its digital sales strategies, and its ability to achieve profitability amidst ongoing expansion and competitive pressures.

A Niche Player's Strategic Evolution in a Dynamic Market

Chanson International Holding (NASDAQ:CHSN) operates at the intersection of traditional culinary artistry and modern market dynamics, offering a diverse array of bakery, seasonal, and beverage products across China and the United States. Since its incorporation in 2019 and subsequent rebranding in December 2020 from RON Holding Limited, Chanson has cultivated a multi-channel business model, distributing its products through a network of physical bakeries, its own digital platforms, and third-party online food ordering services. The company's brands, including George Chanson, Patisserie Chanson, and Chanson, cater to both individual and corporate customers, with a focus on providing eat-in services in its stores.

The broader bakery and food service industry, particularly in China, presents a compelling backdrop for Chanson's strategy. China's bakery sector is experiencing rapid expansion, fueled by a burgeoning middle class, the Westernization of diets, and an increasing demand for convenient food options. This market, valued at $34 billion in 2020, is projected to grow to $53 billion by 2025, making China the world's second-largest baked goods retail market. The industry's growth is further propelled by a rising demand for premium and artisan baked goods, alongside the transformative impact of e-commerce and social media on sales. Chanson's strategic initiatives are designed to capitalize on these trends, emphasizing product innovation and a strong market presence.

In this dynamic environment, Chanson positions itself as a niche player, distinguishing its offerings from global giants like Starbucks Corporation (SBUX), Krispy Kreme, Inc. (DNUT), and Yum! Brands, Inc. (YUM). While these larger competitors boast extensive global reach and operational scale, Chanson leverages its regional expertise and product diversity, particularly in culturally specific items such as mooncakes and zongzi, to foster customer loyalty in its target markets. The company's multi-brand portfolio and adaptability to local tastes are key strengths, allowing it to compete effectively by offering a more specialized and authentic experience. However, Chanson's smaller scale and potential operational inefficiencies present vulnerabilities when contending with the superior resources and established supply chains of its larger rivals.

Technological Edge and Diversification: The "Songkang Meal" and Digital Reach

Chanson's strategic narrative is increasingly defined by its embrace of technological differentiation and diversification. A significant development in May 2025 was the official registration approval in China for its self-developed "Songkang Meal" series of nasogastric nutrition formulas as a Food for Special Medical Purpose (FSMP). This innovative product line has already been adopted in several hospitals in Xinjiang, marking a pivotal expansion into the medical nutrition sector. This move represents a substantial technological differentiator, allowing Chanson to tap into a specialized, high-value market segment beyond traditional baked goods. The "Songkang Meal" series offers a tangible benefit by addressing specific medical dietary needs, potentially creating a new, resilient revenue stream and enhancing the company's brand reputation for health and nutrition.

Beyond this foray into medical nutrition, Chanson is also leveraging digital technologies to enhance its core business. The company has realized significant growth in online sales through its "baking + same-city delivery" and "livestream + interaction" strategies. These initiatives represent a modern approach to customer engagement and distribution, allowing Chanson to reach a broader audience and cater to the increasing consumer preference for online ordering and convenience. The integration of these digital platforms provides a competitive advantage by improving accessibility and responsiveness to market trends, directly impacting sales growth and customer acquisition.

Strategic Expansion and Operational Footprint

Chanson's growth strategy is underpinned by a commitment to expanding its physical and digital footprint. By December 2024, the company had grown its store count to 60 locations across China and the United States, a substantial 62% increase from the 37 stores it operated at its IPO in April 2023. This expansion significantly exceeded its previous goal of opening 3-5 new stores annually, demonstrating an accelerated growth trajectory. In July 2025, Chanson further deepened its presence in China's tourism market by opening two new stores in Xinjiang's iconic destinations: the International Grand Bazaar in Urumqi and the historic Old City of Kashgar. This strategic integration of culinary offerings with cultural tourism aims to capture high-traffic consumer segments and reinforce the brand's regional identity.

Operationally, Chanson maintains rigorous standards. Its PRC stores primarily manufacture bakery products in a central factory in Urumqi, while beverage products are prepared in-store, and seasonal items are sourced from third-party manufacturers. In the U.S., stores handle in-house baking and prepare a variety of meals and beverages. The company prioritizes product quality and safety, procuring raw materials from renowned suppliers and implementing a stringent quality control system across its operations. This operational discipline supports its brand promise of healthy, nutritious, and ready-to-eat food, delivered within a comfortable store environment.

Financial Performance and Liquidity: A Mixed Picture

Chanson International Holding's financial performance reflects a company in transition, balancing growth initiatives with profitability challenges. For the first half of 2025, the company reported revenue of $8.69 million, representing a slight decrease of 1.40% compared to the prior year period. This was attributed to increased revenue from stores in China, partially offset by a decrease in revenue from its U.S. operations, with bakery and seasonal products showing growth while beverage products declined.

Looking at the trailing twelve months (TTM) up to September 2025, Chanson generated total revenue of $19.37 million. However, the company reported a TTM net loss of $315,920. This indicates that while sales are occurring, the company is currently operating at a net loss, leading to a TTM net profit margin of -1.63%.

Despite these revenue fluctuations, Chanson successfully maintained gross margins above 40% in the first half of fiscal year 2025, a testament to its cost control measures and enhanced operating efficiency. The TTM gross profit margin stands at 40.90%, with an operating profit margin of -6.16% and an EBITDA margin of 1.45%. This suggests that while cost of goods sold is managed reasonably well, operating expenses are currently outpacing revenue, impacting overall profitability.

From a liquidity standpoint, Chanson has strengthened its position. As of June 30, 2025, the company reported an increased cash reserve, which management believes provides a solid foundation to manage market uncertainties. This improved cash position was significantly bolstered by an $8 million public offering in June 2025, with proceeds earmarked for opening new stores in both China and the U.S. This addresses prior concerns about the company's funding for expansion.

The company's TTM current ratio is 1.30 and its quick ratio is 1.25, indicating a reasonable ability to cover short-term obligations. Its debt-to-equity ratio stands at 0.71, suggesting a manageable level of leverage.

In terms of valuation, Chanson's TTM price-to-sales (P/S) ratio is 0.39, which is in a similar range to the broader U.S. Consumer Retailing industry average of 0.4x. Its price-to-book (P/B) ratio is 0.07. Due to its negative TTM earnings, a meaningful price-to-earnings (P/E) ratio is not available, as the company has experienced negative earnings over the last twelve trailing months. This valuation context suggests that while the market acknowledges its revenue base, concerns about sustained profitability may be reflected in its current multiples.

Outlook and Growth Catalysts

Chanson's leadership expresses confidence in its long-term growth strategy, emphasizing continued expansion in both the United States and China. The company aims to drive revenue by attracting new customers and fostering repeat business from existing ones. This will be achieved through strategic initiatives such as opportunistic purchasing, optimizing inventory management, maintaining strong store conditions, and effectively marketing both current and new product offerings. Management believes these efforts will help the company navigate short-term headwinds and support long-term growth.

The diversification into medical nutrition with the "Songkang Meal" series represents a significant growth catalyst, opening up a new market segment with potentially higher margins and less direct competition than its traditional bakery business. Furthermore, the continued success of its "baking + same-city delivery" and "livestream + interaction" digital strategies is crucial for expanding its customer base and adapting to modern consumer purchasing habits. The strategic placement of new stores in high-traffic tourist destinations in China also positions Chanson to benefit from the integration of culinary experiences with cultural tourism.

Risks and Challenges

Despite its strategic initiatives, Chanson International Holding faces several pertinent risks and challenges. The company operates in a highly competitive and dynamic market, where product and service demand, technological changes, economic conditions, and the impact of competition and pricing can significantly affect its performance. Its smaller scale compared to industry giants like Starbucks and Yum! Brands could lead to operational inefficiencies and limit its bargaining power with suppliers, potentially impacting profitability.

Regulatory scrutiny also poses a risk. In March 2025, Chanson received a Nasdaq notification regarding a minimum bid price deficiency, highlighting compliance challenges. Furthermore, an analyst report from January 2025 referenced an SEC trading suspension in the prior October due to "concerns regarding indicia of potential manipulation" of its securities via social media, which led to Nasdaq requesting documentation from the company. These regulatory and market integrity issues can erode investor confidence and impact stock performance. The company also carries a notable amount of deferred revenue from the sale of membership and gift cards, which, while a source of cash, represents a future liability and requires careful management.

Conclusion

Chanson International Holding is embarking on a compelling strategic transformation, moving beyond its traditional bakery and beverage roots to embrace digital innovation and a significant diversification into medical nutrition. Its regional expertise, multi-brand portfolio, and commitment to product quality provide a foundational competitive edge in a rapidly expanding Chinese bakery market. The "Songkang Meal" series and robust digital sales strategies represent potent catalysts for future growth, offering pathways to higher-value markets and broader customer reach.

While the company has demonstrated resilience in maintaining gross margins and improving its liquidity through a recent public offering, its current TTM net losses underscore the challenges of translating revenue growth into consistent profitability amidst ongoing expansion and intense competition. Investors should closely monitor Chanson's execution of its strategic initiatives, particularly the successful scaling of its medical nutrition segment and the sustained effectiveness of its digital engagement efforts. The ability to overcome operational inefficiencies, navigate regulatory pressures, and solidify its niche positioning against larger rivals will be paramount in determining whether Chanson's strategic recipe yields sustainable long-term value.