Chagee, one of the largest milk tea brands in China, is set to make inroads into South Korea through a joint venture (JV) with a local partner to target the growing popularity of Chinese foods in Asia’s fourth-largest economy.
Chagee Holdings Ltd., the founder of the premium tea brand, has been in talks with South Korean coffee franchisors and major retailers to set up a JV dubbed Chagee Korea, investment banking industry sources in Seoul said on Friday.
The Chinese teahouse operator, which is in the final stages of selecting a South Korean partner, is expected to establish the JV as early as this year and prepare for the first store on the peninsula, according to the sources.
Chagee, founded in Yunnan in 2017, followed Starbucks Corp.’s model for South Korean business by setting up a JV with a local partner to reduce risk and speed up expansion.
Chagee aims to become the Starbucks Corp. of the global tea industry.
The Chinese company, which launched its first store in Kunming, Yunnan – the birthplace of tea – pursued a strategy similar to Starbucks by opening flagship branches in prime areas in major cities to build brand experience and recognition for expansions.
Chagee, which was listed on Nasdaq in April, ramped up sales to 12.4 billion yuan ($1.7 billion) last year from 464 million yuan in 2022 as the number of its stores jumped to 6,440 from 1,087 during the period.
The company, with a market capitalization of $3.5 billion, has stores in Los Angeles and major cities in Singapore, Malaysia and Thailand.
CHINESE F&B EXPANSIONS IN SOUTH KOREA
Other Chinese teahouses have already made forays into South Korea.
A HeyTea branch in Apgujeong (File photo by HeyTea) HeyTea, a prominent Chinese brand, introduced its first store in Apgujeong-dong, an upmarket residential, fashion, shopping, and educational area in Seoul's Gangnam District, in March, and opened a concept store in Myeong-dong, a foreign tourist hotspot in the country’s capital.
ChaPanda, a Chinese brand of freshly made tea beverages, launched its first branch in Daechi-dong, an affluent neighborhood in Gangnam District, Seoul, last year, and has since increased the number of its stores to about 10 across South Korea.
It is premature to expect the success of Chinese tea brands in South Korea, however, as coffee remains the overwhelmingly preferred drink in the country, food and beverage industry sources in Seoul said.
Chinese restaurant chains have expanded their presence on the Korean Peninsula to ride on the growing popularity of mainland foods such as malatang, which features a numbing-spicy hot soup base with a customizable assortment of ingredients like meat, seafood, vegetables and noodles, all cooked together, since the late 2010s.
Haidilao, a globally recognized Chinese hot pot chain, was predicted to raise sales to more than 100 billion won ($71.9 million) in South Korea this year from 78 billion won in 2024.
Haidilao restaurant in Seoul Tang Huo Kung Fu, a Chinese-owned restaurant chain specializing in malatang, reported sales of 22.2 billion won in 2024, up 22% from a year earlier, with an operating profit of 10.5 billion won. The number of its stores in South Korea jumped 46.5% to 479 last year from 327 in 2022.
Bantianyao, a restaurant chain specializing in authentic Chinese grilled fish, is expanding its presence in South Korea by opening branches in key areas such as the Gangnam District.
