Bubble Tea Industry Faces Challenges Amid Cooling Craze

The bubble tea market has experienced significant setbacks over the past year, as decreasing demand and mounting pressure to lower prices have taken a toll on major brands.

Declining Revenues for Major Brands

Recent data from market research firm Vietdata highlights a downturn in both revenues and profits for prominent bubble tea brands, including TocoToco, Koi Thé, Ding Tea, and Bobapop.

TocoToco: The brand saw a nearly 17% drop in sales last year. Its losses surged to VND112.6 billion (US$4.53 million), more than double the previous year’s figures.

Koi Thé: Positioned as a premium brand, Koi Thé experienced a 10% decline in revenue and a dramatic 52.2% decrease in profits.

Ding Tea and Bobapop: Both brands, with a presence in northern and southern regions, also reported double-digit declines in revenues.

General Downturn in F&B Sector

The food and beverage (F&B) sector as a whole has suffered. A recent report by F&B management software company iPOS revealed that 30,000 food and beverage outlets closed in the first half of this year. Consumers have scaled back their spending and visits to coffee shops, which include bubble tea establishments.

A survey of 2,360 individuals in Hanoi and Ho Chi Minh City showed that 41.7% rarely visit coffee shops, with only 32.3% visiting once or twice a week.

Industry Expert Insights

Food and beverage industry analyst Hoang Tung noted that the lack of demand growth has pushed many brands to offer promotions and discounts, leading to revenue losses.

“The bubble tea craze has significantly cooled since its peak,” Tung remarked.

Premium brands, such as Koi Thé and The Alley, have been particularly impacted by the tightening consumer budget. A representative from a milk tea brand mentioned that extensive menu overhauls to reduce prices have led to substantial losses but expressed optimism for future recovery.

Resilient and Expanding Brands

Despite the overall downturn, some brands have shown resilience.

Mixue: This Chinese bubble tea and ice cream franchise saw remarkable growth, with a 2.6-fold increase in revenues to over VND1.257 trillion and a threefold rise in pre-tax profits to VND204 billion. By the end of 2023, Mixue had expanded to 1,500 stores in Vietnam within just five years.

Phe La: A newer entrant, Phe La reported revenues of nearly VND300 billion in 2023, surpassing established brands like Gong Cha, Ding Tea, and Bobapop, and trailing only Mixue.

Franchising and Future Strategies

Tung observed that while lower-end brands have been less affected by the economic squeeze, some companies have heavily relied on franchising to grow. However, he cautioned that focusing solely on franchising without ensuring product quality could pose risks.

Vu Viet Anh, CEO of La Boong, suggested that focusing on key marketing strategies and cutting unnecessary costs could be effective for businesses.

Tung emphasized the need for sustainable growth through product upgrades and enhanced customer experiences. Investing in research and development to create popular products and offering a strong customer experience are crucial for retaining customers and ensuring long-term success.

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