India's Chai Sutta Bar plans expansion in Middle East.
Bouncing back from contraction during the Covid-19 pandemic, the global market for tea consumed away from home is expanding briskly, led by chai bars and bubble tea outlets. The trend caters not only to tea drinkers but also investors, generating a pipeline of plans for initial public offerings.
Taiwan's Gong Cha opened its 2,000th location on July 21. Serving bubble tea, milk tea and other offerings, the company operates in 23 countries. In the United States, it has 225 locations in 19 states. Gong Cha celebrated the new opening with a Global Tea Party that kicked off with an event in New Zealand and reached a finale in Boston, Massachusetts. Gong Cha was launched in 2006.
Estimates on the industry's size vary but all sources predict solid growth. The global bubble tea market is expected to generate $4 billion per year by 2030, according to Fortune Business Insights, which forecasts a combined annual growth rate (CAGR) of 7.5% for the segment through that year.
According to Vantage Market Research, the worldwide bubble tea market will reach $3.8 billion by 2030. Singapore-based Momentum Works writes that in China, sales of flavored tea reached $20 billion in 2021, double that of coffee. According to the China Tea Marketing Association (CTMA), 450,000 tea shops generated $47.3 billion in China in 2021.
Market leader Mixue Bingcheng Co., which operates 25,000 outlets in China and 3,000 overseas, is weighing a $1 billion initial public offering (IPO), according to Bloomberg News. Mixue is now the fifth largest fast-food chain in the world by number of outlets, reports the Economist. Competitors include HeyTea, Nayuki Tea, ChaGee, and Happy Lemon.
Growth above 9%
Transparency Market Research forecasts that out-of-home tea and herbal tea sales will reach $47.7 billion, expanding at a compound annual growth (CAGR) of 9.3% through 2031. Zion Market Research projects a CAGR of more than 11%, with revue exceeding $49.9 billion by 2026. Data Intelo projects a CAGR of 5.5% for black tea consumed out-of-home.
In South Asia and the Middle East, franchised chai ventures are more popular than bubble tea outlets, but expansion is at a somewhat moderate pace compared to boba's fast international growth. India's Chai Sutta Bar, the brand having the most locations, announced in late July that it had established a regional headquarters in Dubai, according to Arabian Business. Founded in 2016 in Idore, Madhya Pradesh, the company has 470 outlets in 190 Indian cities and three countries.
Chaayos, founded in India in 2012, operates 200 outlets in six cities and recently announced financing to open 400 locations by the end of 2023. Rival Chai Point operates 100 chai outlets.
By way of comparison, India's largest coffee retail chain, Café Coffee Day, has 500 outlets, while Tata's Starbucks outlets in India number about 270.
Statista Market Research estimates that by 2025, global revenue from out-of-home tea purchases will amount to 52% of total spending on tea — i.e., exceeding revenue generated for in-home consumption. However, in volume terms, in-home consumption will remain above 90% of the total.
The impact of the Covid-19 pandemic on bubble tea sales was large as the segment is “heavily reliant on out-of-home consumption,” according to Euromonitor. But the segment appears to be on track to a full recovery, judging from anecdotal evidence and six pending IPOs.
U.S., U.K., Germany: mostly at home
In many countries, however, relatively little tea is consumed outside of the home. Euromonitor estimates that in Germany, out-of-home consumption was just 6% of total consumption in 2019, while in the tea-loving United Kingdom, it was only 13%.
A consumer survey of tea drinkers by Statista found that 89% of respondents in the U.S. say that they usually drink their tea at home. In the U.K. and Germany, that preference rises to 92%.
“It’s very much an at-home drink [in the U.K.],” wrote STiR in 2019. “Tea must get out of the home to fit into the new generations and demographic groups’ routines and preferences. The traditional tea houses lack national chains and scale, but they fill the teapots mostly for special groups and occasions — and tourists searching for heritage.”