This is an English adaptation of a FoodBud historical article originally published on June 15, 2022.
China's recurring COVID disruptions in 2022 hit offline foodservice hard. FoodBud had previously tracked 85°C's mainland China revenue for January-April, which declined year on year in each month versus 2021; in April, mainland China revenue fell 44% year on year.
Wang Steak Group saw an even sharper impact. Its brands include Wang Steak, Tasty Steak and Tokiya, with a heavier full-service dining mix. From January to May 2022, mainland China revenue declined year on year in every month; from March to May, the year-on-year drops were all above 40%.
As mobility weakened and consumption softened, chain restaurant brands looked for new growth engines: new retail channels, new categories, investments using existing cash flow, and overseas expansion. For groups with international teams, morale may have diverged from domestic teams because overseas markets were recovering faster.
Among Chinese tea-drink brands expanding abroad, Chagee and Mixue Bingcheng appear to have started finding workable playbooks.
A FoodBud contact in Kota Kinabalu, Malaysia, said Chagee's new store there was already under renovation. Chagee's first overseas market was Malaysia. It started in Kuala Lumpur in West Malaysia, developed a more mature model there, and then expanded to East Malaysia markets such as Sarawak and Kota Kinabalu.
Beyond Malaysia, Chagee had entered Singapore and Thailand. It also planned to evaluate North America and consider whether to expand there.
Chagee's Southeast Asia strategy has leaned toward larger stores and more spatially driven locations, using bigger footprints to build brand energy. Mixue Bingcheng, by contrast, has continued its small-store, low-price strategy in Southeast Asia, expanding quickly to secure territory.
Mixue's pace has been fast. It opened its first Vietnam store in 2018, and by the time of the article its overseas store count had surpassed 1,000.
At home, Mixue's store base was still growing. Its mainland China store count had reached 20,777, with 1,745 openings and 368 closures over the previous three months.
Mixue's first overseas market was Vietnam. It started in Hanoi in the north and moved south. In 2020, FoodBud contacts in central Vietnam cities such as Nha Trang and Da Nang said they had not seen many Mixue stores on the street; by 2022, they had.
A FoodBud contact in Ho Chi Minh City, Vietnam's southern economic center, said they had not yet seen Mixue stores in the city center. Given Mixue's 2022 expansion speed, FoodBud expected Ho Chi Minh City to follow soon.
Across Southeast Asia, Indonesia is the largest market. According to Indonesian local media cited by FoodBud, Mixue already had more than 300 stores across Java, Bali and Sumatra, and FoodBud estimated its Indonesia store count at around 600.
One Mixue franchisee in Indonesia said average monthly store sales were RMB 100,000-250,000, operating profit margin was about 40%, and investment payback was 10-18 months.
In Vietnam, Mixue officially surpassed 200 stores in December 2021.
In 2022, Mixue entered Singapore and Malaysia, and had also opened stores in a small market such as Laos. A FoodBud contact living in Vientiane said Laos's tea-drink and coffee markets were difficult because consumer spending power was limited.
Based on Mixue's expansion momentum, FoodBud expected Japan, South Korea, Australia, New Zealand and North America to come soon.
An earlier Chinese tea-drink group to internationalize was Hangzhou-based Boduo Holdings. Founded in 2000, Boduo built a full foodservice industry-chain platform, benefited from the early growth of the tea-drink market, and began internationalization relatively early.
Although Boduo is primarily known for tea-drink supply chain operations, it has many tea-drink brands. MYGIRL, under Boduo subsidiary Qiyiniao, had more than 4,000 stores globally at its peak, spanning China, the United States, Canada, the Philippines and Malaysia.
Boduo also built extensive tea-drink supply chain capabilities. In 2018, the group's sales exceeded RMB 6 billion.
In 2018, Boduo accelerated globalization. In August, it launched a training base in Canada. It then cooperated with Tealive, Malaysia's largest tea-drink chain at the time, which had more than 200 directly operated stores locally. According to industry sources cited by FoodBud, Boduo was still a shareholder of Tealive at the time of writing.
Also in 2018, Boduo announced that nearly 20 brands would enter the Canadian market.
Boduo expanded not only restaurant brands but also supply chain operations abroad. In 2019, it formed a joint venture in South Korea with Hanmirae Food, with Boduo holding 70%, to build a tapioca starch production plant. At the time of writing, Boduo sold tea-drink ingredients in more than 30 countries.
FoodBud had previously reviewed regional revenue patterns from Lian Fa International, the parent company of Sharetea, when it listed on the Taiwan Stock Exchange. The broader point: each restaurant brand may find a different international route.
For mainland Chinese restaurant brands, Hong Kong was once a natural first stop. It was a major global tourism destination, visited by travelers from Southeast Asia, Europe and the United States. A standout Hong Kong store could help build awareness for global expansion.
But political uncertainty and the pandemic reduced Hong Kong's position as a once-dominant Asia-Pacific tourism hub. Singapore therefore became a stronger first-market option for mainland Chinese restaurant brands.
Heytea had stores in Singapore, though FoodBud suggested Mixue might perform better there. Mainland Chinese immigrants in Singapore told FoodBud they thought Heytea's business was strong, while Malaysian residents in Singapore told FoodBud Heytea was less suited to their tastes and they preferred milk tea.
Fresh fruit tea still needed consumer education overseas, and the length of that education cycle remained uncertain.
In Southeast Asia, Mixue's core products remained ice cream, lemonade and milk tea, paired with its familiar low-price strategy. FoodBud said that strategy was highly disruptive, and that Mixue's Singapore monthly store sales were said to possibly exceed Heytea's Singapore stores.
Singapore was described as a high-quality first stop because it has the strongest economy among Southeast Asian countries, many global companies place Asia-Pacific headquarters there, and capital access and transportation convenience are strong.
Still, each brand needs its own opening. Mixue chose Vietnam first; Chagee chose Malaysia first; Sharetea entered Malaysia only through East Malaysia locations such as Kota Kinabalu and Sarawak.
Milk tea is no longer new in Southeast Asia, Japan, South Korea or North America. Taiwan-origin tea brands had already educated many of these markets.
In Southeast Asia, brands such as CoCo, Gong Cha and 50 Lan had been developing the category for years. In North America, especially the United States, there were already many tea-drink brands. The largest chain cited by FoodBud was Kung Fu Tea, founded in 2010.
According to Lian Fa International's 2021 prospectus, Kung Fu Tea had 258 stores in the United States. According to Kung Fu Tea's website at the time of the article, it had 375 U.S. stores.
Investors often refer to a "time machine" theory: using uneven industry development across countries and regions to profit from timing gaps.
China's tea-drink market is clearly among the most competitive. The domestic market evolved from classic pearl milk tea toward newer fresh-fruit tea formats. Whether that same industry evolution would happen internationally, and whether Chinese tea chains' product development and supply chain control represented the most advanced production capability, still needed time to prove.
A FoodBud contact in Ho Chi Minh City said that many internet and education companies expanding into Vietnam in 2022 had learned they could no longer manage overseas business remotely from China as before. Local teams had to be rooted in the market.
The same applies to restaurant brands. Building professional overseas operations management is the first priority. Using domestic store scale and brand awareness to collect franchise fees overseas can only produce short-term gains.
Note: forward-looking expansion expectations, IPO/prospectus figures, shareholder references and investment payback figures are historical as of the June 15, 2022 source article.