Name: Why Chinese Bubble Tea Chains Are Brewing Billions
Uploaded: 2025-08-16T18:14:33.000Z
Duration: 11 min 56 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

It's sweet, it's chewy, and it's bubbling up into billion-dollar empires.

We have now three bubble tea IPOs that have come to the Hong Kong market.

Adverbs of manner

A standard cup of bubble tea retails for roughly $5.

But once you subtract the cost of ingredients, labour, advertising and fixed overheads like rent and utilities, the profits shrink fast.

Take into account the industry's average profit margin of about 20%, and business owners are making about $1 in earnings per $5 cup.

So how do all these tiny transactions add up into a billion-dollar business?

From humble tea stalls to initial public offerings raising hundreds of millions, Chinese bubble tea brands are stirring up serious money, turning founders into overnight billionaires and flooding Hong Kong's stock market.

Gu Ming there, making its debut on the Hong Kong market.

Mi Xue, meaning honey snow, making its debut in the Hong Kong market.

Auntie Jenny, debuting in Hong Kong market.

But beneath the foam lies a tougher question.

How can these brands stand out in a crowded and competitive space?

And with everyone racing to go global, is the bubble about to burst?

This story's origins began in Taiwan in the 1980s.

Bubble tea, or boba, is a blend of milk tea and chewy tapioca pearls.

The drink was playful, refreshing and quickly became a local hit.

As Taiwan's economy grew, so did its cafe culture.

But it was mainland China that turned bubble tea into a modern-day gold rush.

By the turn of the century, rising middle-class incomes and urbanisation filled demand for lifestyle beverages.

The drink became a beloved symbol of Taiwanese culture and national identity, even inspiring a national bubble tea day.

The bubble burst onto global shores like Southeast Asia, the US and even the Middle East.

If we are talking about the market size back in 2023, we are talking about $779 billion market size.

And it's expected to grow to 7.2% CAGR per year by 2028.

Over the course of just four months in 2025, three bubble tea chains stirred up Hong Kong's IPO market.

In February, Gooming fizzled, raising $232 million but closing 6.4% below its listing price on day one.

Micheux scooped up $444 million and rocketed 47% at the bell.

Auntie Jenny sought 75% above its listing price and raised about $35 million intraday in May.

I think this is the right place at the right time.

A lot of global investors, they are trying to invest in the sector less sensitive to the US tariff.

So domestic consumption, younger generation consumption, tea is more stable or less vulnerable sector.

In terms of the stock price performance, they are up around 20% to 150%.

So most of them actually outperform the relevant indices in the region.

The key difference is the expectation of growth.

So who's currently sipping the biggest share?

Micheux now runs over 46,000 stores globally, exceeding American-grown fast food chains, McDonald's, Starbucks and Subway.

Once considered the gold standard of cafe culture in China, Starbucks is now steadily losing ground.

It's interesting that Starbucks isn't just facing competition from homegrown Chinese coffee chains, but also bubble tea chains that are now selling coffee or coffee-style drinks.

So people like to say that in China, the line between bubble tea and coffee is often blurred.

As coffee and tea brands compete for the same consumers, the real battleground boils down to scale, pricing and franchising.

And that's where Chinese bubble tea chains are rewriting the playbook.

Micheux is the most aggressive one in terms of store opening up.

In 2024, they are growing at around 22% in new store growth, and almost 100% of their store is franchising.

Micheux is also targeting, I would say, the budget or price cautious clientele.

It has taken that low-cost model across the borders.

Its biggest overseas markets include Vietnam and Indonesia, and it has managed to undercut some rivals there and grab market share by pricing below their rivals.

Auntie Jenny, I think their business model is targeting Tier 3 and Tier 4 cities.

The new store growth, we are talking about 56% plus.

In terms of pricing, they're slightly higher than Micheux.

Gu Ming, I would say, is on the mid-tier size.

We are talking about $1.5 to $2 per drink.

Among the three, they are growing the slowest.

Most of these brands don't run the stores themselves.

Instead, nearly every outlet is franchised.

A franchisee pays an initial set-up fee, often ranging from $30,000 to $80,000, depending on the country.

They buy ingredients through the brand's central supply system and pay ongoing royalties.

This could be a fixed monthly fee or a percentage of revenue.

So how do you scale that across countries, cultures, and consumers?

To find out why franchising has become the dominant model, we spoke to Gong Cha, a Taiwanese-born bubble tea brand with over 2,000 stores across 28 markets globally.

We map the world quite carefully in terms of the potential upside for our franchise.

Number one is, is the consumer ready for it?

People are moving away from coffee into tea, particularly the younger generation.

Our core audience is smart young women under 30, and that growing base of consumers, high-frequency users of the category, mean that we can land in countries and have a great business day one.

Second, we look at how complexities of the supply chain, and can we land and make sure we have a profitable business for our franchise partners.

If you've got those two things together, consumer and a profitable model, then we're ready to go.

But franchising isn't always a straight shot to success.

While the parent company collects royalties, franchisees often bear the brunt of rising rents, intense competition, and small margins.

And when too many outlets pop up, maintaining a consistent customer experience across regions becomes increasingly difficult.

The normal playback period for the business owner for the franchisee is between 18 to 24 months.

At the same time, the market close rate for the franchisee is around 20% in general.

Some operators are squeezed even further when new outlets open just metres away.

In some areas, multiple nicheware stores are located on the same street, just 200 metres apart.

Online complaints are growing louder, with critics accusing the company of prioritising expansion over franchisee profitability, shifting risks onto small business owners.

An operator or the business owner, they face competition that there is another franchisee opening up next door to you because product differentiation is no difference.

So if you have to differentiate it by service, the quality, maybe, you know, your smile.

Their success increasingly depends on the strength of their supply chains.

It's built more like a supply chain business than a tea brand.

The company's revenue actually mostly comes from selling raw materials, ingredients, packaging materials, and equipment to its franchisees.

MISUE says it produces 60 to 100% of its ingredients in-house.

And it also has a huge procurement network buying from 38 countries.

And that allows it to source things like lemons and milk powders at rates that are lower than rivals.

It also has its own delivery and warehouse system.

So all this supply chain model has really allowed the company to drive down costs and also to keep profit margins healthy.

We have built this dedicated tea plantation in Vietnam.

And that way we control end-to-end supply chain.

That helps us work with our suppliers to leverage that scale to ensure our commodity costs can be low.

In some cases, we've had those savings and able to pass it on to our franchise partners.

We try not to own anything because we have a capital light model.

But at the same time, our supply partners are really on the front foot to ensure that as we enter new markets, they have the capacity to deliver the volume.

And they've figured out a way to get it to market as low cost as possible without compromising quality.

While franchising builds reach, virality and taste build obsession.