Businesses take a hit as bubble tea craze cools down

Data from market research firm Vietdata shows revenues and profits of major brands like TocoToco, Koi Thé, Ding Tea, and Bobapop have been declining since 2022.

TocoToco saw a nearly 17% decrease in sales last year while its losses more than doubled to VND112.6 billion (US$4.53 million).

Koi Thé, positioned as a premium brand in the market, suffered declines of 10% and 52.2% in revenues and profits.

Ding Tea and Bobapop, primarily located in the north and south, also saw double-digit declines in revenues last year.

Demand for F&B services generally dipped last year. A recent report by F&B management software company iPOS said 30,000 food and beverage outlets shuttered in the first half of this year.

It said consumers have reduced their spending and cut down on visits to coffee shops, which include bubble tea and other beverage stores.

A survey of 2,360 people, primarily in Hanoi and HCMC, found that 41.7% visit coffee shops infrequently and only 32.3% go once or twice a week.

Food and beverage industry analyst Hoang Tung said as demand did not grow, many brands have had to offer promotions and discounts to attract customers, thus losing revenue.

"The bubble tea craze has cooled down significantly from its boom period."

Premium brands, such as Koi Thé and The Alley, were especially hit by consumers' belt-tightening.

A representative of a milk tea brand said the company incurred huge losses because it had to overhaul its menu to lower prices. But it is certain to do better in future, they said.

Tung noted that lower-end brands have been less affected by consumers' budget squeeze and some firms have been heavily utilizing franchising to expand.

Among the firms that reported a better performance last year is Chinese bubble tea and ice cream franchise Mixue, which reported a 2.6-fold increase in revenues to over VND1.257 trillion and a tripling of pre-tax profits to VND204 billion.

It had 1,500 stores at the end of 2023, just five years after its launch in Vietnam.

Phe La, a newer brand that only began reporting its results in 2023, had revenues of nearly VND300 billion, higher than those of established brands like Gong Cha, Ding Tea and Bobapop and trailing only Mixue.

Tung said many brands focus solely on franchising without paying enough attention to product quality and the business model is risky for franchisees.

Vu Viet Anh, CEO of milk tea brand La Boong, said at a recent seminar that identifying a marketing touchpoint to focus on and cutting other unnecessary costs could be an effective strategy for businesses.

Tung emphasized that, for sustainable growth, brands need to focus on upgrading their products and the experiences they offer customers.

The key is to create popular products, which requires bubble tea firms to invest in research and development, he said.

They also need to offer a good enough experience to customers to retain them, he added.