Chinese New-style Tea CHAGEE Renames All Singapore Stores Amidst Franchisee Allegations

Consumer Staples Author: Muriel Meng Editor: Yiru Qian Jan 22, 2024 06:48 PM (GMT+8)

Chinese beverage brands may confront franchising problems in the international market.

Southeast Asia

CHAGEE, the popular bubble tea brand, has closed its last store in Singapore located in Funan Mall on January 13. This closure marks the end of CHAGEE's presence in Singapore, with the Funan Mall store being its first and only location that opened in August 2020. Despite the challenges posed by the pandemic, the store managed to sell 450 drinks on its opening day and consistently maintained a daily sales volume of 600-700 drinks.

Following a week of controversy surrounding the brand, all local CHAGEE stores have been rebranded as "Amps Tea & Tea" (hereinafter referred to as "Amps Tea"). The official Amps Tea account announced the rebranding on the original CHAGEE community platform, stating, "We have decided to embark on a new development stage by introducing the Amps Tea brand, dedicated to providing more advanced and innovative services. All ingredients such as tea and milk have been upgraded to superior quality and healthiness."

According to local customers, the store locations, store managers, and staff remain unchanged, but the signage and product menus have been replaced, and the online community previously used for promoting CHAGEE has also been renamed.

Media reports suggest that CHAGEE was likely betrayed by its local franchisees, and there is a possibility that the brand owner will reopen directly operated stores in Singapore. In fact, such incidents are not uncommon in Singapore's food and beverage industry, as seen with previous rebranding cases like "Gong Cha" changing to "Liho" and "llaollao" transforming into "Yole."

CHAGEE has been actively expanding internationally since its establishment in 2017 and is considered one of the "most diligent tea brands" in terms of overseas expansion. Co-founder of CHAGEE, Xiang Xiangmin, has introduced the brand's overseas strategies and plans multiple times, stating, "Expanding overseas was a decision made when CHAGEE had less than 100 stores. Since the birth of CHAGEE, we have always believed that its biggest competition in the future would come from the global market."

Regarding its overseas market strategy, CHAGEE positions itself as a high-end brand in Southeast Asia and typically selects locations for its overseas stores with Starbucks as a benchmark, favoring stores with an area of over 100 square meters. As a result, the overall revenue per store in overseas markets is more than 1.5 times that of domestic stores.

Looking at its international expansion progress, CHAGEE established its overseas division in 2018, opened its first overseas store in Malaysia in August 2019, entered Singapore in August 2020, and Thailand in February 2021. An October 2023 report by Singapore's Lianhe Zaobao stated that CHAGEE currently has 12 stores in Singapore, and public data shows over 80 stores in Malaysia and 2 stores in Thailand.

In Malaysia, for example, CHAGEE sold over 1,000 cups on the first day of its opening. By the end of 2020, CHAGEE gradually developed a trend of selling large single items in Malaysia, establishing a more stable profit model. With the easing of pandemic restrictions, store openings accelerated, with improved site selection expanding from West Malaysia to East Malaysia, and the brand invited Lee Chong Wei as its spokesperson. Currently, CHAGEE ranks among the top four tea beverage brands in Malaysia, ranking second in total performance and first in average store gross merchandise value (GMV). According to official data, CHAGEE's average monthly sales per store in Malaysia is around 12,000 cups, with monthly sales exceeding CNY 9 million.

It is worth noting that CHAGEE adopts a joint venture model in these three countries to attract local partners. On one hand, this approach considers the need for localized operations to avoid insufficient understanding of local resources and culture by the domestic team. On the other hand, it leverages the advantages of local franchisees in site development, operational management, and brand marketing.

Regarding future international expansion, Zhuang Kailiang, the Southeast Asia market manager of CHAGEE, stated, "In 2023, we will accelerate our international expansion strategy, aiming to open 100 stores overseas and expand our presence in Singapore and Thailand. The next plan is to enter North America and Europe, countries where coffee has a presence, and we believe our tea can also be successful there."

However, overall, CHAGEE's international expansion has slowed in recent years, with the focus still primarily on large-scale domestic store expansion. As of January 12, 2024, the official WeChat public account announced a global store count of over 3,470, with an average of approximately 13 new store openings per day in the past month.

In the first half of 2023, CHAGEE announced the completion of a combined Series A and Series B financing totaling over CNY 300 million. XVC and FosunGroup participated in the financing, and the funds were mainly used for store expansion, technology research and development, and brand promotion. On January 19th of this year, CHAGEE announced that its Global Business Center has officially signed a contract to settle in Changning District, Shanghai. Zhang Junjie, the founder and CEO of CHAGEE, announced that the Global Business Center will be located in the Hongqiao United Building. Its main functions include comprehensive management of the group, global product promotion, and bringing together global business operations.