By Waylon Cunningham and Casey Hall
NEW YORK/SHANGHAI, Dec 18 (Reuters) - Amanda Wang, co-founder of Chinese fast-growing beverage chain Ningji Lemon Tea, made four research trips to the U.S. before launching Bobobaba, designed to cater specifically to American tastes.
With colourful, Instagram-friendly drinks filled with fruit pieces, boba pearls and cute logos, Wang, whose Chinese brand is backed by Tencent and ByteDance, is among an influx of Chinese tea brand entrepreneurs betting they have what
it takes to convert young American coffee and matcha drinkers.
"The U.S. is a developing country in terms of bubble tea," Wang told Reuters, adding that the U.S.-centric brand is sweeter than what Ningji offers in China. Another concession needed to be made to the pace of doing business in America, where it's impossible to open a store within 20 days of signing a contract, as she does in China.
"Doing business here (in the U.S.) is quite different from what we imagined in our heads. It took seven months to open the store, which was quite painful," Wang said, adding that she has a ten-year plan for cautious expansion in the U.S.
Despite the challenges, companies from Chagee Tea House, Chahalo, Molly Tea and Auntea Jenny – buoyed by their success in China's modern tea-drink market and propelled by flavour innovations, fresh brands and rapid store rollouts - have within the last year opened U.S. stores or announced expansions.
Mixue, which has leveraged its $1 fruit teas to become the world's largest food and beverage chain by stores, with over 53,000 locations globally, announced a ten-year storefront lease in New York City in September.
"Everyone is looking at the U.S. as a potential market," said Felix Lin, the CEO of a Nevada-based distributor for Asian food products, HF Foods, who said he has received a growing number of calls from Chinese food and beverage chains.
ATTEMPTING TO TRANSFORM THE US BEVERAGES MARKET
Chagee, which listed on the NASDAQ in April, has over 80 personnel working full-time on the company’s “significant pipeline” for U.S. expansion, Emily Chang, the company’s top U.S. executive, told Reuters in November. It plans to open a large flagship store in the heart of Silicon Valley next year.
Chang, previously an executive at Starbucks China, said part of Chagee’s plans includes a public campaign to promote tea among U.S. consumers and to establish it as a new product category. This mirrors how Starbucks popularized coffee in tea-drinking China nearly 30 years ago. In November, Chagee launched the “evening tea service,” a bespoke experience that offers a flight of three teas and a tea sommelier, in part to show U.S. consumers that tea can be enjoyed in the evening. Demand for coffee tends to drop off in the early afternoon, Chang said.
Most of these brands have found success beyond China's highly-competitive market, where annual revenues for tea-drinks will exceed 30 billion yuan ($4.2 billion) this year, per estimates from Hongcan Research Institute. They have also already expanded to Southeast Asia, and other nearby Asian markets - such as Australia. Some also have begun building a presence in the Middle East and Europe.
Wang is in no doubt that the opportunity for tea brands in America's large, stable consumer market is vast, though she knows it won't be easy.
"Culture and brand awareness are the biggest challenges," she said. "Building trust takes time."
(Reporting by Waylon Cunningham in New York and Casey Hall in Shanghai, editing By Lisa Jucca and Aurora Ellis)
