Franchise battle stirring up Vietnamese milk tea market

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Milk tea can be considered a “fun-filled” product because the drink contains numerous chewy ingredients and savoury flavours that people, especially white-collar workers and youngsters, enjoy a lot. Previously, milk tea was just a popular drink for teenagers and students.

By now, its customer base has expanded and became more diverse. Office workers and middle-aged people are now also considered the target customers of milk tea brands.

Milk tea is one of the most popular beverage in Vietnam. (Photo: PNNews)

Investors said that the wave of opening milk tea shops in Vietnam today is similar to the coffee shop or eateries trends of the past.

Over the past few years, milk tea shops have been sprouting on almost every street. However, only foreign giants could build up a good reputation or maintain a high degree of market penetration.

These brands are competing directly with each other through their store chains, such as Ding Tea, TocoToco, Chatime, ChaGo, ChaChaGo, Bobapop, Citea Fun, Blackball, Tea, Gong Cha, Koi The, T4, Tealive, Queeny or Goky, and a recent addition, Mr. Good Tea.

Among them, Ding Tea is leading the race with more than 100 points of sale, followed by TocoToco with more than 60 outlets. Meanwhile, Goky has nearly 20 outlets in Hanoi and Mr. Good Tea has over 20 points of sale.

Given the scale of the Vietnamese market and its growing young population, a lot of foreign milk tea and juice brands will try their luck in the coming time, heating up the battle for market share.

Nevertheless, when it comes to milk tea, Taiwan is universally accepted as the “home of milk tea,” at least in Asia. This is why Taiwanese milk tea brands are confident in becoming market leaders.

According to a Q&Me survey published on May 19, 2017, Ding Tea is the most popular chain of milk tea shops among respondents in Hanoi (49%), followed by Toco Toco (16%), and Gong Cha (9%).

In Ho Chi Minh City, Hot & Cold is the largest chain (22%), followed by Hoa Huong Duong (14%), and Phuc Long (13%).

However, there are also different viewpoints apart from market share. Accordingly, success arguably depends on a company’s ability to create a product that fits all tastes and still remains unique.

Some people are in favour of Royal Tea Goky because of its distinctive and luxurious products. The difference is highlighted by Goky’s cream cheese milk tea—a wholly novel innovation breaking with people’s general preconception that milk tea is tea mixed with milk and pearls.

Meanwhile, Japanese brand Goky is opening tea shops everywhere and are attracting a lot of customers because of their belief in the quality of Japanese tea.

In addition, the astounding number of milk tea shops run by individual business households in Vietnam gives cause to worry for the main franchisees.

Ding Tea is currently the leading brand with more than 100 points of sale. (Photo: BorneoPost Online)

A number of them have questioned these shops’ origins of the ingredients, since if a tea shop is found unsafe or unhygienic, it will damage the whole industry, including franchisees from abroad.

The head offices of franchisors conduct unexpected inspections every year to check product quality and the operation process. In case of violations, there will be warnings and fines.

If violations occur three times, the franchise license will be withdrawn. Thus, master franchise units are very cautious in implementing franchising plans in Vietnam.

“Gong Cha is growing fast, but its franchising in Vietnam is limited because we want to control the quality. It is not like any investor with VND5-7 billion (US$220,260-308,370) can become a franchisee. Nevertheless, the most important criteria for choosing a franchise partner is that the owner must know how to sell the product at all cost,” Phuong said.

Also, Gong Cha tends to carefully choose its franchisees based on their understanding of local conditions. For each region, Gong Cha will choose a qualified partner with adequate economic capabilities and business perspective to take charge of business expansion.

Similarly, another Taiwanese milk tea brand, Tra Tien Huong, keeps the number of tea shops low and instead focuses on strengthening its brand name and controlling product quality.

According to the franchisee, Tra Tien Huong will not expand in Ho Chi Minh City. Instead, the brand will focus on upgrading its reputation and target the higher-end segments to reinforce its brand name.

With the dynamic growth of the economy and its young population, Vietnam appears to be a fiercely competitive market for franchised foreign milk tea brands.

Apart from attempts to penetrate the market and carefully expand chains, only brands with a well-developed business plan and a captivating product will have the opportunity to survive and thrive.

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