Summary of Key Points
Chinese tea beverage brands' international expansion has shifted from an initial period of enthusiastic "pioneering attempts" to a more cautious phase of focused and detailed development. The early approach, which relied on a low-cost model of "getting on the train first and buying tickets later" (such as using licensing agreements or joint ventures to quickly open stores), exposed critical issues related to control and compliance as the business expanded (for example, the conflict with the partner in New York regarding the Jasmine Milk White brand). Compliance and supply chain management have become significant barriers to entering new markets. Different countries' certification requirements and material compatibility pose challenges for smaller brands. Southeast Asia, once a promising "blue ocean," has now turned into a highly competitive market, with local brands emerging and squeezing out Chinese competitors. Leading brands are beginning to shift towards a more capital-intensive strategy, including direct operations, building supply chains, and deploying teams, adopting a long-term approach rather than short-term profit-making tactics. This international expansion has become a marathon that only a few players can afford.
I. The Pitfalls of the "Get on the Train First, Buy Tickets Later" Approach: The Jasmine Milk White Case Highlights Early Issues
Many brands signed temporary contracts (such as technical service agreements) with local partners to quickly test the market and open stores, planning to formalize franchise or joint venture agreements later on. However, the Jasmine Milk White brand's experience serves as a cautionary tale:
- Source of Conflict: Initially, Jasmine Milk White only had an licensing agreement with its New York partner. When it aimed to expand to 100 stores in North America and sought greater control, differences over equity and licensing terms led to legal disputes.
- Reasons for the Pitfalls: Brands were eager to avoid missing the competitive window (as other companies were also entering the market) and lacked experience, thinking they could handle issues later on. However, temporary contracts effectively shifted the risks to a later stage. Without registered trademarks or compliant contracts, brands had little leverage in case of disputes, and previous investments (such as legal and auditing expenses) could be lost.
II. International Expansion Is More Than Just Opening Stores: Compliance and Supply Chain Are Major Challenges
The barriers to entering foreign markets are far more substantial than simply selling tea drinks overseas:
- Compliance Issues: Funds must be legally transferred abroad (e.g., through ODI filings); trademarks must be registered locally; contracts must comply with local laws (for example, franchise agreements in the U.S. require FDD documents).
- Supply Chain Challenges: The ingredients for a cup of tea (tea leaves, milk bases, additives) must meet various country-specific requirements. For instance, the U.S. requires food facility registration, Southeast Asia requires halal certification, and Central Asia requires EAC certification. These certifications are costly (e.g., EAC certification for one item can cost several hundred dollars, and the entire supply chain may cost up to 100,000 RMB), and product formulas may need to be modified (e.g., halal certification prohibits the use of pig collagen, and production lines must be specially designed).
- How Leading Brands Overcome These Challenges: Larger brands like Tianlala leverage their domestic scale to negotiate better terms with suppliers. Mixue Ice City plans to build a factory in Brazil, while Xicha is establishing a warehousing center in North America and localizing some of its ingredients. Without significant scale, these issues are nearly insurmountable for smaller brands.
III. Southeast Asia Is No Longer an Easy Market: Intense Competition Limits Expansion
Southeast Asia was once seen as a prime market for tea beverage expansion, but competition has intensified:
- Rise of Local Brands: Local brands like ChaPoyom in Thailand and Momoyo in Indonesia have grown to 1,500 stores each, narrowing the gap with Mixue Ice City (which has over 4,000 stores in Southeast Asia). Local brands understand local tastes better and offer lower prices.
- Internal Struggles Among Chinese Brands: Mixue Ice City saw its first reduction in overseas store openings in 2025 (428 closures), and Shanghai Aunty originally planned to open 300 stores in Southeast Asia but only managed to open 45. Tianlala is targeting 1,000 new stores but faces market heterogeneity issues—business practices vary significantly between countries like Indonesia and Laos, making a one-size-fits-all strategy ineffective.
- Consequences of Competition: Focusing on competition rather than growth leads to cannibalization of existing markets rather than gaining new customers.
IV. From Light to Heavy: Leading Brands Invest Heavily
The low-cost, short-term profit model is no longer viable, and leading brands are shifting towards more substantial investments:
- Strengthening Control: Brands like Ba Wang Cha Ji have transitioned to direct operations in all APAC markets except Malaysia. Mixue Ice City has expanded its operations in Central Asia from 5 to 40 staff members, strengthening control over materials and operations.
- Capital-intensive Strategies: Xicha is building a warehousing network in North America and invested millions of dollars in its New York Times Square store. Mixue Ice City plans to build a factory in Brazil.
- Long-term Costs: These efforts include not only investing in supply chains but also in consumer education (e.g., explaining the benefits of fresh tea drinks to overseas consumers) and local product adaptation (e.g., adding coffee in the Philippines or selling pearl milk tea in Uzbekistan).
- Conclusion: This is a long-term endeavor that requires significant investment and time. Only brands with sufficient scale and capital can sustain their international efforts. The initial notion of rapid expansion at low cost has been shattered by reality.
In conclusion, expanding into foreign markets is not a shortcut but a challenging task that requires building solid systems in compliance, supply chain management, and local operations. Only those brands willing to make long-term investments and truly establish themselves locally will survive in this competitive environment.