China’s bubble tea boom creates a half-dozen billionaires
ARE you a fan of bubble tea? Love it or hate it, you probably know a millennial or Gen Zer who’s crazy about the cloyingly sweet drink filled with sticky balls of tapioca (the bubbles, or boba) that make it almost chewy as it slithers down your throat. That growing passion has created at least a half-dozen billionaires in China in the past few years and is at the heart of several other potential fortunes.
On April 23, Sichuan Baicha Baidao Industrial, China’s No. 3 bubble tea chain, is scheduled to start trading, aiming to raise more than US$300 million in the biggest Hong Kong listing since November.
That valuation would give its husband-and-wife founders, Wang Xiaokun and Liu Weihong, a combined net worth of US$2.7 billion based on the 73 per cent stake they’ll own after the initial public offering, according to the Bloomberg Billionaires Index.
Despite Baicha Baidao’s confidence, the market debuts of several other Chinese bubble tea makers that have hinted at Hong Kong IPOs are in limbo.
Growing competition threatens to take out some of the weaker players, and Hong Kong — once among the busiest venues for deals — has lost its appeal as shares have slumped in China’s economic downturn.
The market is not giving this sector as lofty valuations as before, says Kenny Ng, a strategist at Everbright Securities International. There’s been an uneven revival of consumption in mainland China, so the profitability of consumer businesses remains uncertain.
Bubble tea was invented in Taiwan in the late 1980s, with small stalls selling it near schools and offices. As the trend started to take root in Hong Kong and mainland China in the ’90s, chains began springing up.
Today, thousands of brands vie for the attention of thirsty tea lovers across China, and countless shops have popped up in the US and Europe, though the biggest Chinese providers don’t sell there — yet.
Like Starbucks, these chains offer an almost infinite number of combinations. You can pair your favourite tea (any black, white, green or pu’er variety, with or without milk) with fresh fruit (mulberry, grapefruit, strawberry, orange), various bubbles (the original dark tapioca balls, crystal, cactus, taro and more), special additions (red beans, chunks of flavored gelatin, a topping of cream cheese foam) and various levels of sweetness and iciness.
For an extra kick, some chains offer a shot of Moutai, the traditional Chinese grain liquor. Life is tough, and something sweet will make you happier, was the top response to the question Why do you buy tea drinks? in a survey cited by Minsheng Securities.
Baicha Baidao, also known as Chabaidao (100 Varieties of Tea), was built on serving price-conscious fans of the stuff.
The founders opened their first outlet in 2008, a 20 sqm shop near a middle school in Chengdu. In 2018 they introduced a franchise model that turbocharged growth, and today the company has more than 8,000 shops across China. In January, Baicha Baidao opened an outlet in Seoul, its first outside China, and at home it introduced its first coffee shop, Coffree.
