New tea beverage brands flock to go overseas – what makes CHAGEE stand out?

CHAGEE, which has been rapidly expanding domestically, has now pressed the accelerator for opening stores overseas.

In April, Chagee opened its first store in Indonesia; in May, it expanded into North America with its first U.S. store and simultaneously opened three new locations in Thailand; in June, it launched eight stores at once in Malaysia...

In April, CHAGEE opened its first store in Indonesia. In May, it entered North America, opening its first US store, and also opened three new stores in Thailand. In June, it simultaneously opened eight stores in Malaysia...

Last week, CHAGEE released its Q2 financial report. The data shows that in Q2 of this year, the total number of CHAGEE's overseas stores reached 208, with a net increase of 43 stores in the quarter. As of June, CHAGEE's overseas stores cover Malaysia (178 stores), Singapore (16 stores), Indonesia (8 stores), Thailand (5 stores), and the United States (1 store).

The performance of overseas stores is also impressive. This quarter, the total GMV of overseas stores reached 235 million yuan, a year-on-year increase of 77.4%.

Overseas expansion for new tea beverage brands is nothing new. How is CHAGEE's approach different? What brand strategies are reflected behind the impressive performance? DT Business Observation has compiled the following analysis based on the financial report.

From Product to Brand: The Expression of "Localization"

New tea beverage brands often face a problem when expanding overseas: the perception and consumption habits of tea drinks among foreign consumers are quite different from those in China. When CHAGEE first expanded overseas, it found that Malaysian preferences were still centered on "bubble tea" series. In the US, the more habitual and frequent beverage choice is "coffee".

How to get foreign consumers to accept a relatively unfamiliar Chinese tea?

By comparing CHAGEE's menus in China, Malaysia, and the US, we found that CHAGEE differentiates its products across different regions.

Just as some Chinese people "can't sleep after drinking tea," prompting CHAGEE to launch a "low-caffeine section," the menu in Malaysia also has some "region-exclusive" items. For example, "Cereal Roasted Tea" sold out in major Malaysian cities within two weeks of its launch and became a phenomenal hit in Southeast Asia. "Mountain Print Matcha" was a special product launched by CHAGEE to celebrate its sixth anniversary in Malaysia.

The current menu in the US market is relatively streamlined, with only three main categories: Tea Latte (i.e., the original leaf fresh milk tea in China), Pure Tea, and Other Teas, totaling 14 SKUs.

Currently, CHAGEE has established product R&D teams in the Asia-Pacific market to develop new products suitable for different countries based on local conditions.

Of course, food and beverage are often tied to a country's culture. Therefore, when a food and beverage brand expands overseas, it needs to not only bring its products but also integrate tea culture with local culture.

Take CHAGEE's bestseller, "Boyajuexian," as an example. Its essence is jasmine green tea + fresh milk. To help overseas markets understand "what is original leaf fresh milk tea, what is Boyajuexian," CHAGEE has also put effort into the naming of the product.

In Malaysia, "Boyajuexian" is categorized under the "Milk Tea" (fresh milk tea) series, with the English name "BO·YA JASMINE GREEN MILK TEA," directly translated as "Bo Ya Jasmine Green Milk Tea," retaining "Bo Ya" while straightforwardly telling consumers the ingredients.

However, on the US menu, Boyajuexian's product series is "Tea Latte," and the product name is "BO·YA Tea Latte."This translation method allows US consumers to understand from the analogy of latte (coffee + milk) that Boyajuexian is a tea + milk product.

To better promote Boyajuexian, in May this year, CHAGEE also integrated the production process of its star product "Boyajuexian" with the Malaysian intangible cultural heritage "Songket" weaving technique to interpret the inclusiveness of "tea" as a cultural communication medium.

From small details in product naming to various marketing activities, these actions have not only made CHAGEE's products sell well but also conveyed Eastern "tea culture" overseas. A piece of data is that in the US, over half of consumers choose low-sugar or sugar-free tea drinks. Additionally, pure tea products are also very popular in the US, with many local consumers viewing pure tea as a substitute for coffee.

From Employees to Partners: "Localized" Operations

In addition to product development and marketing methods needing to "adapt to local conditions," food and beverage companies face tests of "internal strength" when expanding overseas: building supply chains, establishing local teams, introducing international talent...

DT Business Observation found that when entering a new overseas market, CHAGEE's operational strategy has similarities to the international expansion of two giants: Starbucks and McDonald's.

Let's first look at how the veteran giants did it.

When Starbucks first entered China, Chinese people neither drank coffee nor had heard of "Starbucks." Therefore, Starbucks adopted a "regional licensing" model, establishing joint ventures with leading local companies in North China, East China, and South China. These leading companies had a better understanding of the Chinese market and could provide more resources for Starbucks, while Starbucks mainly focused on exporting its brand and standards. Once Starbucks gradually gained a foothold in China, it slowly bought back equity and transitioned to full direct operation.

When McDonald's first entered China, it partnered with Sanyuan. After briefly operating solely on its own and finding the development slow, it reached a strategic cooperation with CITIC Limited, CITIC Capital, and The Carlyle Group in 2017, ushering in the "Golden Arches Era."

Now, CHAGEE is doing the same by "leveraging local giants" to achieve a "powerful alliance."

In Malaysia, CHAGEE has formed a strategic partnership with the hotel industry giant Landmark Group, planning to open 300 stores in Malaysia over the next three years. In Indonesia, CHAGEE established a joint venture with PT Era Boga Nusantara, a subsidiary of the local retailer Erajaya, which also partners with companies like Xiaomi, Huawei, and Xpeng. In Thailand, President Beverage (Thailand) Co., Ltd. has invested in CHAGEE (Thailand) Co., Ltd.

Although it has already partnered with local giants, CHAGEE is actually very "cautious" in expanding its stores overseas.

Unlike some F&B companies that use supply chain export + franchising to rapidly "carve out territory" and pursue scale in a short time, when CHAGEE enters a new market, it first opens company-owned stores to test product acceptance and the single-store model. Then it opens several joint venture stores. Only after these stores are validated by the market will it further accept more franchisees.

It is precisely because of this that overseas stores can improve their profitability compared to the previous quarter while growing in scale. Even in the fiercely competitive overseas tea beverage market, CHAGEE has managed to implement a slight price increase.

The introduction of senior international talent is also a highlight of CHAGEE's overseas endeavors.

In the analyst conference call, CHAGEE also announced the core management lineup for the North American market: Emily Chang (Chief Commercial Officer, North America), Aaron Harris (Chief Development Officer, North America).

The former served as CEO of McCann Worldgroup China, Chief Marketing Officer of Starbucks China, and Chief Commercial Officer of InterContinental Hotels Group. The latter served as Senior Vice President of Development at Dutch Bros Coffee.

In May of this year, CHAGEE's first North American store opened in Los Angeles, USA, setting a single-day sales record of 5,000 cups. It still maintains an average daily sales level of 1,000 cups. In August, the second US store began trial operations.

What Does Overseas Expansion Mean for CHAGEE?

From the perspective of industry development trends, going overseas is an "inevitable" path for tea beverage brands to seek growth.

Domestically, whether it's tea beverage brands, category development, flavor innovation, or price ranges, it can be described as a "blooming of a hundred flowers." According to iMedia Consulting, after a period of rapid growth, the new tea beverage market size is now gradually slowing down. The year-on-year growth in 2023 was 13.5%, dropping to 6.4% in 2024, and future growth will be even slower. Overseas, there is a broader market.

Overseas expansion for new tea beverages is not a recent phenomenon. Before 2017, brands represented by CoCo, Gong Cha, and Tiger Sugar ventured overseas, which was regarded by the industry as the first wave of new tea beverage expansion abroad.

After 2018, the second wave of overseas expansion began, with brands like Heytea, Nayuki, Mixue Ice City, and CHAGEE flocking to go abroad.

In the second wave of overseas expansion, Southeast Asia was the "first stop" for most brands. The reasons are easy to understand: Southeast Asia not only has a hot climate with a high demand for cold drinks but also has a culture relatively close to China's. iMedia Consulting predicts that from 2023 to 2028, the compound annual growth rate (CAGR) for freshly made beverages in Southeast Asia will be as high as 19.8%, far exceeding the global average of 7.2%.

After 2024, more tea beverage brands have set their sights on economically developed regions in Europe and America. Heytea entered France, CHAGEE entered the United States, CHABAIDAO entered Spain, and Jasmine Milk White entered the UK.

Although there are greater differences in culture and consumption habits in Europe and America, the market is relatively untapped, consumer purchasing power is high, and there is broad potential.

From the perspective of brand positioning and long-term development strategy, CHAGEE's overseas expansion is also inevitable.

CHAGEE actually targeted the international market very early on—the brand was founded in 2017, and it established an overseas division in 2018. In 2019, it opened its first overseas store in Southeast Asia. During the same period, domestically, CHAGEE was still mainly opening stores in the Yunnan, Guizhou, and Sichuan regions, not yet expanding nationwide.

Another argument is: Chagee's stores in various overseas countries are not located in Chinatowns with high concentrations of Chinese residents, nor do they follow the "value-for-money route". Instead, they open stores in the core business districts of major cities, with some locations adjacent to international brands like Starbucks and McDonald's, adopting a premium strategy.

In Malaysia, a cup of Boya Juexian (large cup) is priced at 13.9 Malaysian Ringgit, which is approximately 23.4 Chinese Yuan; the price in the United States is 5.75 US Dollars, which is approximately 41 Chinese Yuan.

This means Chagee needs to have sufficient product quality and brand strength to convince overseas consumers to pay for a cup of not-so-cheap "Chinese tea".

Now, Chagee is gradually finding its path to leap from a "Chinese brand" to a "global brand": not through simple store expansion, but through the integration of product, supply chain, marketing methods, and local culture, turning the brand into a cultural symbol of "modern tea".