Summary of Key Points
Chinese tea brands are accelerating their international expansion in search of new growth opportunities due to fierce domestic competition (excess stores and price wars that erode profits). Overseas markets, where supply is scarce, offer the advantage of higher prices and strong demand. The approach to going global has evolved from trial runs with single stores to a systematic effort that includes comprehensive capabilities such as supply chains, operational procedures (SOPs), and digital systems. However, brands also face challenges related to compliance, localization, and managing multiple markets. Ultimately, it is the underlying ability to operate on a global scale that determines success.
1. Domestic Competition Leads to Declining Profits, Making International Expansion Inevitable
The domestic milk tea industry has reached a point of extreme competition, with prices plummeting to record lows: by the end of 2025, there will be 478,000 stores, one for every 3,000 people. Some products from brands like Xicha have returned to prices seen in 2015, and profit margins have decreased. With more stores opening, profits are becoming thinner. This trend indicates that brands need to seek new growth opportunities overseas.
2. Overseas Markets Offer a "Scarcity Advantage": Higher Prices but Strong Demand
The supply of milk tea in overseas markets is far from saturated, giving brands a competitive edge due to limited choices and unexposed consumers to domestic price wars. This leads to higher prices that are still highly sought after:
- Higher Pricing: Xicha's products are 40 yuan more expensive in the US than in China, and Mixue Ice City's lemonade sells for $1.99 (three to four times the domestic price).
- Strong Demand: Customers in New York wait up to two hours to buy Xicha, and at Ba Wang Cha Ji in Seoul, orders take three hours to be delivered during peak times.
- Fast Growth: With only 345 stores overseas, Ba Wang Cha Ji's GMV has increased by over 75% for three consecutive quarters, far outpacing domestic growth. The US market for freshly made tea drinks is growing at 9.1% annually and has room for further expansion (with no single brand holding more than 5% of the market share).
3. Going Global Enters a New Era of "Systematic Competition": From Single Stores to Comprehensive Capabilities
The focus of international expansion has shifted from simply selling products to providing a complete set of operational systems:
- Comprehensive Systems: Brands now offer not only products but also supply chains, store operation procedures (SOPs), franchise management, and digital systems for payment processing, profit distribution, and currency exchange management.
- Targeted Regions: Southeast Asia is suitable for large-scale expansion due to its proximity and large Chinese population; Europe and the US are considered key markets to test international competitiveness.
- Evolution of Competition: The focus has moved from the number of stores opened to the efficiency of operational systems, such as integrating payment collection, franchise profit distribution, and supply chain payments.
4. High Barriers to International Expansion: Compliance and Localization Are Critical
Expanding overseas is not as simple as replicating domestic models:
- Compliance Risks: Franchising in the US is strictly regulated by the FDD (Foreign Direct Investment) framework, with application processes taking 1-2 years.茉莉奶白 had four stores in New York revoked due to failing to comply with regulations after opening.
- Localization Challenges: Localization requires more than just translating menus; it involves re-conducting market research (e.g., understanding local consumer preferences for new products), adapting labor laws, choosing locations, and adjusting supply chains to local conditions.
- Managing Multiple Markets: Religious and commercial differences vary significantly between countries, requiring tailored strategies.
5. The Supply Chain Is the Key: Common Goals for Stability, Quality, and Cost Efficiency
The stability of the supply chain is crucial for successful international expansion. Brands adopt different approaches but share the same goals:
- Mixue Ice City: Produces all products in-house and uses a global cold chain system, with warehouses in eight countries.
- Xicha/Nai Xue: Collaborate with local giants (e.g., Sysco) to source key ingredients locally and reduce fresh fruit losses.
- Bing Chun/Tian La La: Use a dual supply approach, transporting tea bases and syrups from China to maintain flavor while manufacturing cups locally to cut costs.
- Core Principles: Balancing quality, cost (logistics, tariffs, and losses), and stability (no inventory shortages). For example, buying fresh fruits locally reduces shipping costs, and importing key ingredients ensures consistent taste.
In the end, global success is not about how many countries a brand operates in but whether it can establish an independent operational system that functions effectively outside of the Chinese market. This is the real challenge behind the long queues customers are willing to wait for products from these brands.