Aug 27, 2024

(Yicai) Aug. 27 -- Several Chinese tea drink brands have been expanding in Southeast Asia in recent years to seize opportunities, such as low labor and rental costs and a young population. Nayuki Holdings, Binxi Time, Chagee, Walovi, Want Want China Holdings, Ganten, Yili Industrial Group, China Mengniu Dairy, and other leading Chinese food and beverage companies have been striving to expand in Southeast Asian markets in recent years, Yicai learned. Southeast Asia has a population of about 670 million people, about half the size of the Chinese market. More than 50 percent of the population is under 30 years old. With the region's recent economic development, the purchasing power of consumers has been increasing. Ke Rui, 23, opened a 160-square-meter Mixue Bingcheng franchise store in Bangkok, Thailand, with his friends at the beginning of the year for a startup cost of THB3 million (USD88,200). "We still haven’t fully recovered the startup costs, but we have stable monthly revenues of nearly THB1 million and a gross profit margin of between 25 percent and 33 percent," Ke said, adding that his store should recover the opening expenses within the year. Meanwhile, a Mixue franchisee from Jiangxi province explained to Yicai that it is almost impossible to get back startup costs in one year in China because the industry is not as profitable as in the early years. "Recovering startup costs in two years is considered good, but then after two to three years, there are additional costs, such as equipment replacement," the Chinese franchisee noted. Established in 1997, Mixue specializes in freshly made low-priced tea drinks. It owned over 36,000 stores as of last September, with about 4,000 located in 11 foreign countries and regions, including Singapore and Japan. Another tea drink brand actively expanding in Southeast Asia is Genki Forest, which sells sugar-free sparkling water and tea products. Indonesia is one of Genki Forest's main markets in Southeast Asia. There, the company partners with local convenience store chains, such as Indomaret and Alfamart, as well as major supermarket chains, including Lion Superindo and Yogya Group. "We entered Indonesia in 2022 and now have more than 30,000 retail outlets in the country," Tang Tang, head of Genki Forest's international business, told Yicai, adding that the firm now has comprehensive coverage of the Indonesian market. However, establishing a foothold in Southeast Asia also presents challenges, such as adapting to different consumers' tastes. For example, Malaysia and Singapore have relatively high proportions of Chinese residents or descendants who are more connected to the tea culture, said Feng Hu, founder of UhooGlobal, a solutions provider focused on the tea beverage market. Indonesians do not have a strong affinity for tea, so they prefer sweeter new tea beverages, Feng noted. Also Thai people prefer sweet products, as well as those with more ice, a representative from Chinese tea drink seller Nayuki told Yicai. Chinese companies in Southeast Asia also face management challenges, according to Maria Yang, the head of the overseas food, beverage, and health product business at Alibaba Group Holding's Southeast Asian e-commerce platform Lazada. "There have been employees who resigned after just a few days," said Ke. "While some left for personal reasons, others just didn't like the management style of the Chinese team. Thai people tend to separate work and life more easily." Another challenge of expanding in Southeast Asia is the supply chain. Different Southeast Asian countries have different supply chain requirements, said Jiang Huabei, founder of Binxi Time. Some countries have very strict regulations for Halal certification, while others have complex certification processes with cumbersome procedures, lengthy timelines, and high costs, Jiang added. For example, Thailand mandates that all food ingredients must be produced in the country. Editors: Xu Wei, Futura Costaglione Follow Yicai Global on