The Showdown of Chinese New Tea Drinks in Indonesia
As the largest economy in Southeast Asia, Indonesia has seen rapid economic growth in recent years. The rise of the local middle class and a relatively young population structure have made this emerging market highly favored by Chinese companies expanding overseas.
For Chinese new tea drink brands, the intensification of internal competition in the domestic market has forced many brands to explore lower-tier markets. Entering Indonesia, where the tea drink market still needs to be fully developed and is increasing, is a good choice for establishing a second growth curve.
New Tea Drinks Flock to Indonesia
As early as 2021, MIXUE entered Indonesia. Adopting a low-price strategy and franchising model, MIXUE has more than 300 stores in Indonesia.MIXUE’s winning strategy lies in capturing the market quickly with lower prices and a localized approach that caters to the local market.
In October 2023, the new Chinese tea drink brand Tianlala simultaneously opened six stores in Jakarta, Indonesia. For many consumers, Tianlala is still a relatively unknown brand in China. However, it has been a primary challenger to MIXUE.
Tianlala has built its own orchards and tea bases to ensure supply chain quality while focusing more on the lower-tier market than MIXUE, with nearly 40% of its distribution in third-tier cities and about 70% of its stores in third-tier and below cities.
At the end of 2023, WEDRINK entered Indonesia and opened 60 stores by February.
Additionally, there are reports that Shuyi Tealicious is looking for opportunities in Indonesia.
Why Indonesia?
It is not surprising that Indonesia is becoming the main battleground for new tea drinks to expand.
Indonesia’s economy is in good shape, with the highest GDP in Southeast Asia. In 2022, the Indonesian Rupiah became one of the best-performing currencies in Asia, and the stock market reached an all-time high.
The potential for new tea drink consumption is significant. Data shows that Southeast Asian consumers spend $3.66 billion on new tea drinks annually, with Indonesia accounting for $1.6 billion, 43% of the total market.
The relatively young population structure and the growing middle class are also important reasons. Indonesia’s middle class is continuously expanding, becoming the backbone of the consumer market. A survey shows that the number of middle-class individuals in Indonesia exceeds 90 million, accounting for 35%, with middle-class families spending more than 2 million Indonesian Rupiah monthly expenses.
Intensive Competition
As many new tea drink brands set their sights on the Indonesian market, a battle among local new tea drinks will erupt.
Firstly, there is intense competition among domestic brands. MIXUE gained an early advantage in the Indonesian market with its lemon tea and ice cream, becoming a famous brand. However, some industry insiders believe that MIXUE has not established brand loyalty like Starbucks.
WEDDRINK, Tianlala, and other brands also have signature products like a fruit tea and crunchy cone ice cream, similar to and different from MIXUE’s offerings. As these brands expand in Indonesia, the overseas fruit tea and ice cream will no longer be dominated solely by MIXUE Bingcheng.
Additionally, various local fruit tea brands have emerged with the development of Indonesia’s economy. For example, Esteh Indonesia, founded in 2018 with a business model similar to MIXUE, had opened 550 stores on Java Island and 310 stores on other islands. Its prices are competitive locally, with a franchise fee of about 130,000 RMB, slightly lower than MIXUE’s.
Besides competing with similar products, new tea drink brands face competition from coffee, bubble milk tea, and other beverage categories.
Coffee also holds a high position in the Indonesian beverage market. Indonesia has a vast coffee market as a traditional coffee-producing and consuming country. Having operated in Indonesia for many years, Starbucks remains the undisputed beverage giant in the local market. Additionally, several local coffee brands, such as Kopi Kenangan, Fore Coffee, and Kopi Janji Jiwa, contribute to the intense competition.
Indonesia’s geographic conditions also present a significant challenge for Chinese tea drink brands. Indonesia has more than 17,000 islands, with transportation between islands relying on airplanes and ferries. This situation places higher demands on logistics and supply chains.
However, in the face of intense competition and internal saturation in the Chinese market, new tea drink brands have little choice but to expand overseas. For brands like Shuyi, MIXUE, and Tianlala, which are rooted in the lower-tier markets and find it challenging to upscale their brand domestically, it might be easier to initiate a second growth curve in the hopeful and fertile market of Indonesia than to defend their share in China’s lower-tier markets.