Bubble tea is loved across Southeast Asia, if not the globe. In our Southeast Asia investment opportunities – a fresh perspective report last year, we compared consumer preferences in six major countries in the region – the love for bubble tea is the most common factor: 

bubble tea southeast asia

There are established local, regional and Taiwanese brands which have been operating in the region for a number of years – by one account that in Singapore alone there are more than 60 different bubble tea chains operating. 

This is a reflection of the attractiveness of the market, but also the diversity of consumer tastes. Amongst the new entrants into the market are Chinese brands such as Heytea (present in high end malls) and more recently, Chagee (called Bawangchaji in Chinese). 

Jun Jie Zhang, Founder and CEO of Chagee, the popular Chinese tea brand, spoke alongside Jianggan Li, Founder and CEO of Momentum Works at the Gourmet Panel CAN+ on 6 July 2022 about the challenges and difficulties Chinese F&B brands face when expanding overseas. The panel, moderated by Wen Xian of mass consumption focused VC firm Charisma,  also saw Yi Yin, President of Liuyishou Hotpot, Yuan Gao, investor of Bingz Crispy burger share their perspectives. 

bubble tea singapore

While the panel covered multiple categories of F&B, bubble tea is undoubtedly a major one. In China alone there are estimated 500,000 outlets by thousands of brands, generating more than CNY 100 billion (US$15 billion) of annual turnover. 

Expanding overseas from China

One of the most important things for a company expanding overseas, based on Zhang’s experience, is localisation of not just the product but also the operations. When Chagee first started this expedition, many people asked him why he was expanding overseas when competition in China was extremely fierce. “The battle in China is not over yet, isn’t it a distraction to open in other markets?”

His answer was, “Resource allocation and management are important, especially in F&B, but being a startup, we don’t have enough resources to do everything. This expansion can help us understand which products can scale efficiently and globally so that we can be more agile in the future. For example, we don’t do fruit teas because we can’t control the supply quality and reliability. However, I don’t want to focus too much on other markets such that I overlook China.” 

In a way, Zhang is testing globally markets (“using the MVP approach” – in his own words) while not forgetting that the key battlefield is still China. 

Chagee currently operates 6 stores in Singapore and more than a dozen in the pipeline. The brand also operates 20 outlets in Malaysia and is poised to open in Thailand soon. 

Li concurred, explaining the recent new breed of Chinese F&B chains are very advanced in operations, marketing and product. They can be globally competitive if they manage to localize effectively. It makes sense to start experimenting with expansion early before the competition in China reaches equilibrium. If you lose in the competition, you still have markets you have tried and tested globally to survive; if you win the competition, you will not risk the organisational issues facing successful firms while expanding into different markets. 

Such issues are captured and discussed in our new book “Seeing the unseen – behind Chinese tech giants’ global venturing”, which will be published by Wiley in the United States in September – you can pre-order on Amazon here (ebook coming soon):

chinese tech companies

What’s the best way to expand?

However, expanding overseas is a mammoth task, and the big question is ‘what’s the best way to expand?’ There are quite a few ways – like having local franchises, operating your own stores, joint ventures or licensing. There is no right answer as it depends on each organisation’s capacity. 

Zhang revealed that Chagee eventually settled with joint ventures. “Local franchises tend not to have sufficient resources to scale at the speed we would like; operating our own stores is risky without a strong local partner whose interest is aligned with ours; while licensing to others risks losing control.”

In China, there have been instances where licensees, which control the distribution and marketing channels, went off to create their own competing brands when the category was proven to be lucrative. 

However, that does not mean joint venture is the best approach for everyone – we have seen plenty of challenges and even failures with this approach. 

Zhang also revealed the 3 most important things when expanding to global markets – selection of store locations, operation and management of stores, as well as product and marketing. “The key is making sure that each store makes sense from a unit economics and sustainability point of view – only then you have the good MVP, and can start to expand in the market.”

Yin of Liuyishou mentioned that Chinese brands successful in China can’t afford to be complacent, as many of the practices (including labour, supply chain etc.) common in China might not be accepted or even legal in other markets. Liuyishou has had setbacks in some global markets because of this – and as such, she needs to make sure that such issues are well taken care of by professionals before opening any new market. 

The food entrepreneurs at the panel spoke with a lot of passion, commitment and also determination to further grow their business internationally. And this is just a snapshot of many such entrepreneurs who have global ambitions – we will keep track of these and share best practices on TLD. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].