Bubble tea, also known asmilk tea, is wildly popular in Vietnam with 100 competing brands and more than700 independents and small chain outlets earning more than $300 million in 2018.
The Vietnamese franchise owners of Ten Ren, one of the most accomplished of the international tea chains, are nonetheless pulling the plug on operations Aug. 15. The franchise operated 23 outlets at the time of the announcement with ambitions to establish 40 by the end of 2018 and 400 by 2022.
Spokesmanfor Vietnam Coffee Trading Service, the Ten Ren franchise owner, said thatafter two years seeking a foothold in the milk tea segment, the company willinstead concentrate its resources on fast-growing The Coffee House chain. TenRen’s local CEO was replaced and its locations (many adjacent to The CoffeeHouse), were sold to Toocha, a rival milk tea brand.
Seedcom,owners of The Coffee House, told InsideRetail Asia Ten Ren’s current business model does not conform to theneeds of the customer.
Retail consultant Dr. Dao Duy Khuong,explained to VietnamMoi, that milk tea is focused too much onyoung people in urban areas. “Buying behavior of this group of customersoften follows the trend, so milk tea brands are always faced with constantpressure to match promotions from competitors.” While the best shops generatedVND700-800 million ($35,000) per month Ten Ren regularly discounted tea 40% onsales by app.
He said chains that pair tea orderswith food such as Met Fresh, outsell stand-alone drink shops.
In 2018 Nielsen Vietnam found that81% of those aged 14-23 (Z generation) and 85% of their immediate elders (24-39years of age) named milk tea shops as their favorite gathering place.
Growth has since slowed from 20% peryear in 2017 to 5.7%, according to Ms. Pham Quynh Trang - Insight Director atmarket research firm Worldpanel,Kantar Vietnam,
She said the milktea market still has opportunities to develop since milk tea remains the mostpopular drink after coffee. On average, 1 in 5 Vietnamese people visit amilk tea store every 2 weeks.
TenRen, founded in 1953 by Tiān Rén Cháyè (Ray Ho Lee), has broadened itsofferings to include a greater selection of black tea blends andwestern-inspired iced teas. Packaged and prepared teas are available fordelivery. The company operates globally with 2,000 shops including locations inthe U.S. and Canada. There are 20 stores in North America, including six TenRen outlets in New York and several wholly-owned Cha for Tea outlets inSouthern California. It is the largest tea chain in the Far East with shops inAustralia, Malaysia, Japan, and Singapore.
Thedecision will not dampen Vietnam’s enthusiasm for milk tea, but it clearlysuggests “peak” saturation in the market. The Ten Ren shops were rebrandedwithin the past week as rival Toocha liquidated the Ten Ren inventory atdiscount. The buy makes Toocha the largest milk tea chain in Ho Chi Minh City.Operated by Janus Holdings, Toocha calls itself “the father of the milk teaindustry.”
The top remainingVietnamese milk tea chains include: Gong Cha (50% share), KOI Thé,Toocha, Royal Tea, Phuc Long, TocoToco and Bobapop. Most are locally based.