Vietnam remains huge potential market for bubble tea hinh anh 1Bubble tea lovers in Vietnam spent 360 million USD on bubble tea and similar "new tea" drinks in 2021, making the nation the third largest market for bubble tea in Southeast Asia.(Photo: VNA)
Hanoi (VNS/VNA) - Vietnam is a huge potential market for the bubble tea business as it is gradually becoming a favourite and popular drink among generations Y and Z.

Bubble tea lovers in Vietnam currently spend 360 million USD a year on bubble tea and similar "new tea" drinks, making Vietnam the third largest market for bubble tea in Southeast Asia, after Indonesia and Thailand, according to a recent study jointly conducted by Singapore-headquartered venture outfit Momentum Works and digital payments solution provider qlub.

The "Bubble Tea in Southeast Asia" report revealed that Southeast Asia's bubble tea market reached 3.66 billion USD in 2021.

Indonesia was the largest market in the region, with an estimated 1.6 billion USD annual turnover. Thailand was the second-largest market with a yearly turnover of 749 million USD.

Singapore, which ranked fourth in annual turnover, had the highest spending power, with the average price of bubble tea double that of other countries in the region.

The report said that the bubble tea landscape in Southeast Asia was very competitive, adding that besides Taiwanese and homegrown brands that had long dominated the market, many Chinese brands entered the game in the region, such as Mixue, Chagee and HEYTEA.

Tran Ngoc An from bubble tea brand Gong Cha said that bubble tea was not a "soon to bloom' trend like spicy noodles or mango shakes, and it seemed to have become a familiar drink for generations Y and X.

Big companies also entered the game with massive investments in bubble tea brands.

Masan Group has invested three times in the Phuc Long tea and coffee chain in over a year and currently holds 85% of the chain.

According to the semi-annual financial report of Masan, its subsidy SHERPA Company Limited on August 1 bought 10.8 million shares of Phuc Long Heritage in a deal worth more than 3.6 trillion VND.

Masan first invested in Phuc Long in May 2021 in a deal worth 346 billion VND for a 20% stake. Masan poured another 2.49 trillion VND early this year to raise its stake at Phuc Long to 51%.

KIDO Group recently launched Chuk Tea & Coffe chain to open 300-400 shops in Vietnam by the end of this year while cooperating with strategic partners to expand in Southeast Asia, Thailand and the Republic of Korea.

"The market is fragmented, and unlike internet companies, there is enough room for larger and smaller bubble tea players to co-exist and flourish," said Jianggan Li, Founder and CEO of Momentum Works.

"The emergence of Chinese players who are good at branding, product/supply chain and cost management could pose an increasing challenge to existing local players. It's not difficult to observe and learn their play and strategy, but what's more important is to ensure positive unit economics and good return on investment."

However, the report pointed out that few bubble tea stores were profitable despite high margins.

"The bubble tea industry has a good product gross margin of 60-70%. Yet, few players have managed continuous profitability at a large scale. There is also an industry saying that nine out of ten bubble tea stores lose money," the report wrote.

According to Sik Hoe Yong, Chief Operating Officer of qlub, though there are high margins, bubble tea was a low-differentiation game with easily replicable products and a challenging supply chain.

"The pandemic was a natural selection process as many stores shut down. However, consumers' love for bubble tea won't change anytime soon, but they will vote for their favourite brands with their wallets," he said.

Pricing was not the only factor that affected purchasing decisions. The report pointed out that consumers also decided based on the product selection at stores and the ease of access which meant the number of stores a brand had.

Hoang Tung, the founder of Pizza Home and Cloud Cook, said that the bubble tea market was gradually settling after a strong boom. The market had gone through the period when weak brands with poor quality were purged, he said,

Tung added that bubble tea became a popular drink rather than a trendy drink, stressing that the bubble tea market retained huge potential.

Although bubble tea was introduced to Vietnam in 2002 with the original main ingredients of just tea, milk and topping, it was not until 2012, when Taiwanese brands entered with an established chain model with a modern design that the bubble tea market becomes robust.

A study by market research company Euromonitor showed that Vietnam's bubble tea market has been expanding at around 20% per year.

It was estimated that there were about 100 bubble tea brands in Vietnam, with around 1,500 shops across the country./.