China: Milk tea brands quick to win customers in Southeast Asian market

China Daily via Asia News Network

11:37 JST, August 22, 2022

To cool off during hot summer days in Beijing, Noppawan Sereesuntiwong often visited a Coco milk tea store near Dongdaqiao subway station in Chaoyang district.

The 41-year-old Thai is a die-hard fan of the sweet, cool beverage, also known as bubble tea, which is popular among young people in her home country and many other nations in Southeast Asia.

When she studied in the Chinese capital, Sereesuntiwong, who now lives in the United States, tried numerous Chinese milk tea brands before finding her favorite.

“The weather in Thailand is hot and people are fond of sweet, cool drinks. We love colas, juices and bubble tea. In China, I liked Coco’s mango-flavored tea, which is fresh and not too sweet,” she said.

Sereesuntiwong studied Chinese at Capital University of Economics and Business for two years starting in 2017, before moving on to study the subject at Beijing Language and Culture University.

Milk tea stores have mushroomed not only in China but also in Malaysia, Singapore, Vietnam and Thailand, with Chinese brands enjoying a boom in the region.

On Nov. 11 — Singles Day — domestic milk tea brand CHAGEE learned that its products were selling surprisingly fast in Malaysia.

Peng Xianggui, head of the company’s overseas business, said: “At each of our outlets in Malaysia, dozens of motorcycle riders waited to make deliveries. We offered no discount, but our 26 stores sold more than 30,000 cups of takeout milk tea. Local people cannot get enough of Chinese milk tea brands.”

In 2018, CHAGEE launched its “going global” plan, just a year after gaining a firm foothold in its home province of Yunnan. In October 2018, it set up an overseas business department, focusing firmly on the Southeast Asian market.

In August 2019, the brand opened its first overseas outlet in Kuala Lumpur, the Malaysian capital. With its stylish design concepts and milk tea flavors, the brand grew rapidly, and it now has more than 30 stores in Malaysia.

Peng said: “Cold drinks are a must in Southeast Asia. The annual average temperature in the region is close to 30 C and there is huge demand for such beverages throughout the year.”

Many CHAGEE outlets in Malaysia are located in shopping malls near major brands such as Starbucks and McDonald’s. On July 22, CHAGEE opened its 37th Malaysian outlet, while last year, the highest single-day turnover of an outlet reached more than 38,000 yuan ($5,635).

The company said, “This year, our sales in Malaysia are up by 100% compared to last year, with monthly revenue reaching 500,000 to 600,000 yuan.”

CHAGEE is just one of the Chinese milk tea brands to gain widespread popularity in Southeast Asia in recent years. In November 2018, a long line formed as Heytea launched sales of its product at the ION Orchard shopping complex in Singapore. Local media reports described the crowds that gathered as “unbelievable.”

According to Heytea, the store sold 2,000 to 3,000 cups of milk tea on average each day during its first week of business, recording a daily net profit of up to 60,000 yuan.

Growing influence

Other milk tea brands in Southeast Asia have also turned in eye-catching performances.

Mixue Bingcheng Co., which has more than 10,000 outlets in China, has opened many stores in Hanoi, the Vietnamese capital — unexpectedly triggering a Chinese tea boom. Nayuki, whose popular fresh-fruit teas include beverages topped with cheese-flavored foam, has adopted a “social + marketing” model — attracting a large number of Southeast Asian fans on its social media accounts.

The growing influence of Chinese tea culture is likely key to the success of the nation’s milk tea brands.

Tea is mentioned in a poem written by Su Shi, a renowned poet and statesman during the Song Dynasty (960-1279) — indicating that the beverage has a long history.

Lines from the poem include:

Wine-drowsy when the road is long,

I yearn for bed; Throat parched when the sun is high,

I long for tea.

Liang Haoguang, director of the China Center for Modernization Research at the Chinese Academy of Sciences, said: “Nomadic people in China first created the concept of milk tea.

“Through the ancient Silk Road, the drink was brought to India and also to Western countries. During the colonial era, milk tea was brought back to places such as Taiwan and Hong Kong. The development of milk tea is evidence of the trade globalization process that originated from the Silk Road.”

Liang added that many viewers have been drawn to the popular television series Meng Hua Lu, which features dian cha, a tea-making technique from the Song Dynasty. During this dynasty, most tea existed in the form of semi-fermented tea cakes. The dian cha process involved first grinding tea leaves into powder, before sieving the powder finely and placing it in a teacup.

“The cultural heritage showcased by tea culture is a bridge connecting countries involved in the Belt and Road Initiative. It shows that historical cities along the Silk Road had two main functions — trade and cultural exchanges,” Liang said.

With its burgeoning demand for bubble tea, Southeast Asia shares close cultural bonds with China through trade and people-to-people exchanges, resulting in the region becoming an initial destination for Chinese brands venturing overseas.

Peng of CHAGEE said: “We use fresh Chinese tea leaves and we have our own organic tea farm in Lincang, Yunnan. Chinese tea culture is symbolic, attracting increasing numbers of locals, especially youngsters. The reasons for its success are China’s growing economy and the increased confidence in cultural communications.”

CHAGEE uses many traditional domestic features in its stores, where customers can find items such as stylish Chinese teapots.

The company’s name is also linked to Chinese history. It takes its name from the ancient Chinese drama Ba Wang Bie Ji, also known as Farewell My Concubine.

Henry Chong, a Malaysian milk tea lover, said he enjoys the flavor of CHAGEE milk tea and its stylish packaging.

“Not many milk tea shops have this kind of product and background. The brand really attracts people who love Chinese history and Chinese tea,” Chong said.

Peng said CHAGEE has many fans whose ages range from 18 to 35. They are enthusiastic about new trends, especially when they are linked to Chinese culture.

Liang believes that milk tea’s popularity in Southeast Asia also reflects the globalization of trade that began along the Silk Road.

Market expands

According to the consulting services company Fortune Business Insights, the global market for bubble tea was $2.02 billion in 2019, and it is projected to reach $3.39 billion by the end of 2027, with a compound annual growth rate of 7.2% during the forecast period.

However, the COVID-19 pandemic had a negative impact on growth of the bubble tea market. Authorities enforced strict lockdowns and closed restaurants, cafes, farms and factories. The production of bubble tea was also affected by restrictions imposed on imports and exports, and a shortage of labor.

Peng said: “COVID-19 has had a significant impact on the food and beverage industry. We experienced labor shortages and had to temporarily close some outlets to comply with health regulations. Dining and shopping habits changed to a large degree, with more people ordering food and drink online. As a result, we decided to join the online market, where we worked well with delivery service companies.”

More bubble tea drinkers are now looking for better value, and young people in China view drinking the beverage as a social activity, during which they sit and chat with friends in spacious outlets where the drinks are sold.

Peng added: “Milk tea has slowly evolved from being a thirst-quencher to a social requirement. For example, people used to go to outlets such as Starbucks to chat with friends while drinking coffee, but now milk tea shops are providing another option.”

Leonard Lee, a professor of marketing at the National University of Singapore, who studies customer psychology, said consumption has symbolic value.

Drinking bubble tea is not just a satisfying experience, but also an expression of status, a sign of taste and a willingness to embrace new things.

Local innovation is also key to the success of milk tea. For example, Heytea launched a promotion in Singapore to sell durian — and salted yolk-flavored ice cream in July and August every summer. These tropical flavors are well-suited to local tastes.

Unlike sweet milk tea products, Chinese brands focus on the aroma of the drink, which has a lighter taste. The higher polyphenol content in the tea also makes it more refreshing, with the drink becoming particularly popular among professionals in Southeast Asia.

Peng said: “Young people in the region are demanding healthier drinks, and we are promoting the transition to a healthy diet. For our products, we use fresh tea leaves and milk, sometimes together with fresh fruit.”

Countries in North America and Europe are also gradually increasing their consumption of modified tea products, according to a Fortune Business Insights report in 2020.

Moreover, the number of bubble tea stores has risen in the U.S. and the United Kingdom, as consumers switch to non-alcoholic or low-alcohol drinks, including tea-flavored beverages, the report said.

CHAGEE said it plans to open more stores in Thailand and Singapore, as well as in Europe and North America.

Peng said, “Starbucks brought coffee culture to the world. We are from Yunnan, birthplace of the Ancient Tea Horse Road (a trade route mainly connecting present-day Shaanxi, Gansu, Sichuan and Yunnan provinces and the Tibet Autonomous Region). We want to bring our tea culture to more places and make it shine on the global stage.”