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Chinese bubble tea chain takes off in Southeast Asia

Europeopposite the university Motorbikes line up in front of Ricky Salim’s ice cream and tea shop at his campus on the outskirts of Jakarta. Mr Salim, one of thousands of Mixue franchise owners in Asia, said his business was so good that he hoped to open more stores this year. Chinese company Michelle established its brand in small Chinese cities with relatively low average incomes, selling flavored teas and soft serve ice cream, and is now exporting its model to Southeast Asia.As of early last year, it had nearly 22,000 franchised locations worldwide, making it the fifth-largest fast-food chain in the world behind McDonald’s, Subway, Starbucks and KFC.

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Part of Michelle’s success is its ability to sell Asia’s most popular emerging beverage: bubble tea, a milk tea with chewy tapioca balls. In China, the market for these new flavored teas will be twice the size of the coffee market, worth $20 billion in 2021, according to Singapore-based research firm Momentum Works. Bubble tea brands have set their sights on the $4 billion Southeast Asian market as growth in China slows. Several other large Chinese ready-made tea brands, including HEYTEA, Naixuecha, Chayin and Happy Lemon, have also entered the region.

However, no milk tea chain has spread faster than Michelle, which opened its first store in Vietnam in 2018. It had about 1,500 stores in Indonesia as of March; Andy Meitri Hartanto, franchise manager at Mixue Indonesia, said the company hopes to double its presence there by the end of the year. The brand’s bright red signage and yeti logo have become ubiquitous in malls, dusty alleyways and shophouses across Indonesia. Many branches stock board games, magazines, picture books and soft toys. On weekends, Mr Salim’s shop is packed with parents taking their children out for ice cream, while on weekdays his main customers are students and office workers looking for an affordable and comfortable place to study or work. A serving of ice cream costs just 8,000 rupees ($0.50).

Almost all Mixue branches are franchise stores. About 95% of the company’s 10.3 billion yuan ($1.5 billion) in 2021 revenue will come from selling ingredients, packaging and equipment to franchisees. The sprawling factory and extensive supply chain enable it to drive down retail prices for ice cream and tea, according to Chinese brokerage Zheshang Securities. About 90% of Mixue Indonesia’s products are imported from China. But the company’s Indonesian operations have grown to such an extent that it plans to start producing ingredients locally, Mr. Hartanto said. Michelle also adapts to local conditions. The Indonesian Ulema Council, a religious body, declared Mixue halal in February. In a country of 230 million Muslims, “this decision is significant”, Mr Saleem said.

Michelle’s history dates back to 1997, when its founder Zhang Hongchao started selling shaved ice and drinks at roadside stalls in the central Chinese province of Henan. However, the brand didn’t become a household name until a few years ago when a video of its mascot, a chubby snowman singing the Mixue theme song, went viral on Chinese social media. Mi Xue’s short videos have been viewed more than 17 billion times on TikTok’s Chinese sister app Douyin.

Unlike more premium bubble tea brands, Michelle positions itself in both China and Southeast Asia as cheap and cheerful, rather than trendy. Its viral songs have been translated into 20 languages ​​and are often played relentlessly throughout its franchise. “What took our Chinese team 10 or 20 years to figure out, by learning from their experience, we can perfect it in just one year,” Mr. Hartanto said.

Michelle’s biggest growth ambitions are in countries with fast-growing economies and large youth populations, such as Indonesia, the Philippines, Thailand and Vietnam. However, in the past year, Michelle has also opened stores in Australia, Japan, Singapore and South Korea, and the company has also registered its trademark in markets such as Europe, America, Kyrgyzstan and Uzbekistan. It has announced plans for an initial public offering on the Shenzhen Stock Exchange. A singing snowman is coming to you.

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