Indonesia, the place where new tea drinks go to sea

Author | Danmu

Edit | Maji

In Indonesia, Southeast Asia's largest new tea consumption market, new Chinese tea brands are joining the melee.

During November this year, Tianlala, a new Chinese tea brand, opened 6 stores in Indonesia at the same time, becoming its first overseas stores. Previously, Sweet La La had announced that it planned to fully develop the Southeast Asian market in November and open 60 stores in Indonesia by the end of this year.

As the largest economy in Southeast Asia, Indonesia's rapid economic growth in recent years, the rise of the local middle class and relatively young population structure have made this emerging market favored by Chinese overseas enterprises.

Although the overall consumption level in Indonesia is still low and many local brands are competing with each other, China's low-end new tea brands represented by Michelle Ice City have gained opportunities in the Indonesian market: with lower pricing, relatively beautiful stores and a good dining environment, Chinese fresh fruit tea has gradually become a new option for local consumers in addition to coffee and bubble tea.

For China's new tea brands, the intensification of the domestic market has forced many brands to develop the sinking market, and entering Indonesia, which has not yet been fully developed and is growing rapidly, may be a good choice to establish a second growth curve.

Source: Weibo @Sweet La TLL

New tea drinks "piled up" to go to the sea in Indonesia

During the Golden Week of November this year, China's new tea brand "Sweet Lala" opened six stores in Jakarta, Indonesia.

Wang Wei, founder and chairman of Sweet Lala, said at the ribbon-cutting ceremony: "We believe that Sweet La La products will definitely bring new taste enjoyment to Indonesian consumers. ”

In China, for many consumers, Sweet La La is still a little-known brand. However, it is already a well-deserved dark horse in the new tea sinking market, and is also regarded as the main challenger of Michelle Ice City: the main product is also fresh fruit tea of about 10 yuan, and ice cream starting from 2 yuan, and the ace product "a barrel of fruit tea" is only sold for 10 yuan, and the cumulative sales volume has exceeded 100 million.

Sweet La La has adopted the same franchise model as Michelle in China, absorbing a large number of franchisees who are difficult to join Michelle due to substandard conditions.

Sweet La La has also built its own orchard and tea base to ensure the quality of the supply chain, while focusing more on the sinking market than Michelle - Michelle Ice City's stores in third-tier cities and below account for less than half of the total, while Tianlala has a distribution of nearly 40% in third-tier cities, and stores in third-tier cities and below account for about 70%.

Now, Tian La La has "chased" the footsteps of Michelle Ice City to Indonesia. In fact, since last year, many new Chinese tea brands have entered the Indonesian market.

At the end of last year, Tea Advocate entered Indonesia with a new brand WEDRINK, which has opened 60 stores in February this year; In February this year, Henan Zhengzhou tea brand Momoyo entered Indonesia; In March this year, Heytea announced that it would open overseas city franchise applications to include the Indonesian market. In addition, it is reported that the book is also looking for opportunities in Indonesia.

Earlier than these brands, it entered Indonesia in 2021. As of March 2022, when Michelle Bingcheng submitted its prospectus, it had opened 317 stores in Indonesia, with revenue of 25.4108 million yuan and net profit of 2.2355 million yuan.

As the world's fourth largest coffee bean producer, Indonesia has a deep coffee consumption culture and is the seventh largest coffee market in the world. Starbucks has been in Indonesia for more than a decade and has opened more than 400 stores. Since 2017, a number of local Indonesian coffee brands have emerged. However, with the rise of Michelle Ice City, fruit tea has become a more fashionable daily drink in Indonesia.

Previously, Indonesia was not a key area for new tea brands to go overseas.

When most tea brands enter the Southeast Asian market, they will choose Singapore, Malaysia and other countries to focus on layout. In 2018, when the new tea brand had just gone overseas, the two leading brands of Heytea and Nai Xue's tea chose Singapore. Since then, when the Chinese milk tea brand Bawang Chaji, which emerged from Kunming, laid out overseas markets, it gained a firm foothold in Malaysia with the concepts of "Chinese style" and "raw leaf fresh milk tea".

Michelle Ice City, which takes the affordable route, has seized the opportunity in Indonesia, but the Southeast Asian country with the most stores is not Indonesia, but Vietnam. At present, Michelle Ice City has more than 300 stores in Indonesia, but has already exceeded 1,000 stores in Vietnam.

However, since this year, a number of new tea drinks have begun to investigate and enter the Indonesian market, which may mean that Indonesia will become one of the focus of the next domestic new tea drinks to go overseas - for brands that focus on the sinking market, it may be especially important to gain a place in Indonesia.

Source: Weibo @Sweet La TLL

Why Indonesia?

It is not surprising that Indonesia has become the main battlefield for new tea drinks to go to sea. Data show that Southeast Asian consumers consume US$3.66 billion in new tea drinks a year, of which Indonesia accounts for 1.6 billion, accounting for 43% of the total market.

In recent years, Indonesia's economy has been doing well, ranking first in Southeast Asia in terms of total GDP. In 2022, the rupiah became one of the best performing currencies in Asia, and the stock market hit an all-time high. At the same time, as the world's largest nickel producer, Indonesia is expected to achieve sustained growth amid the booming new energy boom.

Economic development has created a larger middle class. Although different statistical agencies define the Indonesian middle class differently, what is certain is that Indonesia's middle class is growing and becoming the backbone of the consumer market.

According to a survey by Boston Consulting Group, the number of middle-class people in Indonesia exceeds 90 million, reaching 35%, while the daily expenses of middle-class families exceed 2 million Indonesian rupees (about 930 yuan) per month.

With a relatively young population and a growing middle class, Indonesia has become the largest market in Southeast Asia, and it can be said that it is replicating the past model of China's economic rise - rapid urbanization, from retail goods to e-commerce and chain restaurants, mobile Internet to gain a large number of new users, consumption gradually upgraded.

In contrast, after decades of rapid development in the domestic market, despite the large size of the market, growth has stagnated, and it is difficult to usher in another wave of high-speed growth in the short term. Therefore, whether it is e-commerce or catering, many overseas companies have set their sights on Indonesia.

In 2018, the new tea drink represented by fresh fruit milk covered tea was still a symbol of the fashion trend, but after several years of development, many brands carried out market competition, and by 2022, the domestic new tea drink market has reached the peak of involution.

In the commercial area of any provincial capital, often within a distance of hundreds of meters, there are many different new tea brands, and even the same brand will open two stores in adjacent neighborhoods, and the competition within the industry is very fierce.

In the face of fierce domestic competition, it is difficult for new tea drinks to receive satisfactory results, whether they reduce prices or continue to sink to lower-tier cities. Therefore, going overseas to pursue the second growth curve has changed from the icing on the cake to a mandatory option for new tea drinks.

Since Heytea opened its store in Singapore in 2018, Southeast Asia has been the focus of new tea drinks. Southeast Asia is geographically close to China, similar culture and consumption habits, and the local high temperature all year round, consumers have a greater demand for cold drinks, many local consumers buy 2 to 3 cups of cold drinks every day, the beverage industry market prospects.

Going to Southeast Asia, high-end brands represented by Heytea chose Singapore with higher unit prices, affordable brands represented by Michelle Ice City chose Indonesia and Vietnam, which had low unit prices but growing rapidly, and Bawang Chaji chose Singapore, Malaysia and Thailand to go hand in hand.

Today, a few years later, in terms of scale, the Michelle Ice City model is better: five years after entering the Singapore market, Heytea has only opened 5 stores, Bawang Chaji has opened 11 stores in Singapore, 56 stores in Malaysia and 2 stores in Thailand, while Michelle Ice City has blossomed all over Vietnam and Indonesia, and the number of stores in both places has exceeded 1,000.

Michelle Ice City's winning formula is to quickly occupy the market with low prices and localization strategies that cater to the local market.

Compared with Heytea, which is mainly based on fresh fruits, and Bawang Chaji, which is mainly based on raw leaf milk tea, Michelle Ice City may not be perfect in raw materials, but it is inexpensive and can meet the sweet needs of Indonesian and Vietnamese consumers.

Southeast Asian fruits are cheap, and locals prefer to eat fruit directly than drinking a cup of expensive fresh fruit tea. When buying fruit tea, local consumers are more concerned not about the quality of the fruit, but about being sweet enough and cool enough to relieve the heat. This consumption habit is the opposite of China's preference for low-sugar, low-fat, and healthy fresh fruit drinks.

In order to meet the needs of local consumers, Michelle Ice City has increased the sweetness of drinks in Indonesia and Vietnam. According to industry insiders, this sweetness is difficult to be accepted by consumers in the domestic market, but it has been recognized by Southeast Asian consumers.

Therefore, when Heytea is slowly expanding and Bawang Chaji is still educating the market with the two concepts of "Chinese style" and "raw leaf fresh milk tea", Michelle Ice City has created a unique expansion model in Indonesia and Vietnam.

Tianlala, which recently opened 6 stores in Indonesia, is highly similar to Michelle Ice City in terms of product composition and business methods.

Not long ago, Tianlala held a partner conference, planning to open 60 stores in Indonesia by the end of the year, while promoting global expansion plans, developing the Southeast Asian market in 2024, and conservatively opening 500 overseas stores; In 2025, it will enter North America, Europe, and the Middle East.

Source: Weibo @Sweet La TLL

Imminent

As many new tea brands set their sights on the Indonesian market, the local new tea war is about to break out.

Michelle Ice City relies on lemon tea and ice cream to seize the opportunity in the Indonesian market and become a popular brand, but some insiders believe that Michelle Ice City has not established the brand loyalty of Starbucks, but only provides relatively low-priced, hygienic, products that meet local tastes, as well as beautiful stores and comfortable dining environment.

And WEDDRINK tea proposition, sweet la la and other brands also have fruit tea, crispy ice cream and other signature products, and Michelle Ice City products have both homogeneity and differences, with the expansion of these brands in Indonesia, the overseas fruit tea and ice cream market will no longer be the only situation of Michelle Ice City.

In recent years, with the development of Indonesia's economy, a variety of local fruit tea brands have also emerged in the local area. For example, Esteh Indonesia, founded in 2018 and with a similar business model to Michelle Ice City, originally started as a roadside stall, with only a few products such as lemon iced tea, lychee iced tea, and milk tea.

After just one year of development, Esteh Indonesia transitioned to a franchise model in November 2019 and by 2023 it has opened 550 stores in Java and 310 in the outer islands. Now, it has added products such as avocado iced tea, priced at about IDR 8,000 to IDR 9,000 (about 4 yuan) per cup, which is very competitive in the local area. Its brand joining fee is about 130,000 yuan, which is slightly lower than that of Michelle Ice City.

In addition, Ban Ban, a high-end tea brand that benchmarks Hey Tea, has also appeared in Indonesia, and its products are mainly fruit cheese tea, black bubble tea, etc., with a price of about 20 yuan, which is a high-priced product in the local area. At present, Ban Ban has opened 8 stores in the first-line shopping mall in the capital Jakarta.

In addition to similar products, new tea brands such as Michelle Ice City also have to compete with coffee, bubble tea and other categories.

Bubble tea is also a traditional category of Indonesian drinks, and since the 1990s, bubble tea brands such as Gongcha, Xingfutang, and Sunrise Tea Tai in Taiwan have entered the Indonesian market.

Now, the Chinese market has completed the iteration from bubble tea to fresh fruit tea, early bubble tea is gradually replaced by new tea drinks, and some bubble tea recipes have been improved to become the signature products of new tea brands. But in Indonesia, where most people prefer high-sugar drinks, bubble tea still has a large market.

Milk tea brands such as Sunrise Tea that are gradually disappearing in the Chinese market still have a greater influence in Indonesia. And some new milk tea brands have also relied on "cost performance" to gain a foothold in the Indonesian market.

In 2018, former Indonesian banker Gufron Syarif founded the chain Haus, which focuses on bubble tea and chocolate milk tea, and sells it with baked products and potato chips. A medium cup of bubble tea or chocolate milk tea costs about IDR 14,000 (about 6.7 yuan), which is 25% cheaper than Michelle Ice City's price in Indonesia.

Haus operates directly to ensure product quality, and upgrades stores to include catering and other services. Four years after its establishment, Haus has 230 stores in Indonesia and expects to reach 400 by 2023.

Coffee also has a high position in Indonesia's beverage market. As a traditional coffee producer and consumer, Indonesia's coffee market is huge, and Starbucks has been working in Indonesia for many years and is still a well-deserved local beverage giant.

After 2016, with the growth of Indonesia's local middle class, a number of local coffee brands have emerged, such as Kopi Kenangan, Fore Coffee, Kopi Janji Jiwa and so on. In the Indonesian market, where there is a large gap between rich and poor, such local chain brands fill the "blank space" between Starbucks and instant coffee and street stalls.

Kopi Kenangan is known as "Luckin Indonesia" because of its takeaway-based sales method. In recent years, it has been favored by capital, and has successively obtained $8.5 million in angel round financing, $20 million in Series A financing, $109 million in Series B financing, and $96 million in Series C financing, with investors including Sequoia India, Kunlun Wanwei, Victoria Harbour Investment, etc., with a valuation of more than 1 billion yuan, and the number of stores has grown from 20 in 2017 to 868 in the summer of 2023.

Source: Weibo @Sweet La TLL

In the face of many local brands that are developing rapidly, as well as Michelle Ice City, which already has a certain foundation in Indonesia, it is not so easy for the new tea drink that has just gone overseas to Indonesia to replicate the miracle of Michelle Ice City.

In addition, the geographical conditions of Indonesia itself are also a huge challenge for new domestic tea brands. Indonesia is known as the "country of 10,000 islands", consisting of more than 17,000 islands, and the transportation between the islands relies on planes and ferries, which puts forward higher requirements for logistics and supply chains.

However, in the domestic market is highly involuted, competition is increasingly fierce, "not going to sea is out", new tea drinks seem to have not many choices - tea baidao, ancient tea, Shanghai aunt and other waist brands announced one after another to rush to Wandian, in Shandong, Guangxi, Guizhou, Anhui, Hebei and other sinking markets.

For brands such as Shuyi, Michelle Ice City, and Sweet La La, which are rooted in the sinking market and are difficult to achieve high-end brands, it is far easier to open the second curve of growth in Indonesia, a promising hot land, than to hold the share of the sinking market in China.

*This article is based on publicly available information and is for informational purposes only and does not constitute any investment advice