Overseas Market Entry Strategies of New-Style Tea Drink Companies: A Case of Mixue Company ()
1. Introduction
In recent years, the competition among domestic new-style tea drink brands has intensified continuously, and the market is gradually becoming saturated ( Fang, 2022 ), with an overall growth rate entering a stage of periodic slowdown. In response to this, new-style tea drink brands, including Mixue, have shifted their focus to the international market for overseas expansion. In 2018, Mixue opened its first overseas store in Vietnam. In the following years, it rapidly expanded to neighboring countries in Southeast Asia, successively entering Indonesia, Cambodia, Thailand, Singapore, and others. Five years later, Mixue has nearly 4000 stores overseas, totaling 32,000 globally, spread across 11 countries, and has created 500,000 employment opportunities (https://baijiahao.baidu.com/s?id=1780258518016342418&wfr=spider&for=pc). As the domestic new-style tea drink industry enters a new phase of competition, many domestic brands are actively seeking effective models for entering overseas markets. However, successful cases and experiences of Chinese drink brands expanding abroad remain limited. The five-year overseas expansion journey of Mixue can provide valuable insights for new-style tea drink companies facing similar situations.
Taking Mixue as a case study, this paper comprehensively considers international market entry models and influencing factors, using research methods such as literature review, SWOT analysis, and PEST analysis. The paper first reviews the process of Mixue’s overseas expansion, analyzes its strategies and measures for entering international markets, and then explores macro-environment, industry competition characteristics, and the strengths and weaknesses of the company from different perspectives. Finally, through case analysis, the paper provides feasible suggestions for entering overseas markets from both government and company levels. This paper supports international market entry strategies for new-style tea drink companies, helps them better understand the characteristics of international markets, enhances their competitiveness overseas, and provides references for the international development of the Chinese new-style tea industry.
The rest of this paper is arranged as follows: Section 2 presents the relevant literature for this study. Section 3 analyzes Mixue’s overseas market development. Section 4 applies SWOT methodology to study Mixue’s overseas market entry. Section 5 analyzes the competitive environment of overseas markets for new-style tea drink companies using PEST methodology. Section 6 shows the recommendations for new-style tea drink companies entering overseas markets.
2. Literature Review
New-style tea drinks refer to Chinese freshly brewed tea drinks made from high-quality tea leaves, fresh milk, fresh vegetables, and other ingredients through a more diverse combination of tea bases and additives. In addition to material innovation, the “new” in new-style tea drinks also encompasses new marketing and operational management techniques, a new generation of primary consumer groups, and new forms of cultural dissemination. In recent years, the new-style tea drink industry has attracted the attention of many researchers. Based on product prices and market positioning, new-style tea drinks can be divided into three categories: low-end, mid-end, and high-end ( Ding, 2019 ). In 2020, the retail sales of high-end freshly brewed tea drinks in China accounted for 19.7% of the overall market. Currently, the market is still predominantly composed of mid-to-low-end tea drinks. It is expected that by 2023, the revenue scale of China’s new-style tea drink market will exceed 140 billion yuan ( Fang, 2022 ).
According to business formats, new-style tea drink brands can be categorized into chain brands and non-chain brands ( Wang et al., 2022 ). The “Research Report on China’s New-Style Tea Drink Industry” points out that compared to non-chain operations, chain operations have advantages in profitability, efficiency, cost control, and other aspects. Currently, about 90% of domestic new-style tea drinks are chain brands ( iiMedia Research, 2021 ). The entry models of chain tea drink brands mainly include direct operation, franchise operation, and a combination of “direct operation + franchise operation”. Brands positioned as high-end often adopt a direct operation model to better maintain brand image and build brand culture. Represented by Mixue, a mid-to-low-end chain brand, the primary entry mode for brand expansion is franchise operation, aiming to better cover regions and consumer groups.
The current research on new-style tea drinks primarily focuses on the current situation and development trends within the new-style tea industry. Although the overall new-style tea drink market still holds considerable development space and potential, certain domestic markets have already reached saturation in some regions ( Tan, 2023 ). Issues such as disorderly industry development caused by capital impulses and a focus on marketing at the expense of product strength have been observed ( Zhang, 2023 ). In this context, many new-style tea drink companies are actively seeking solutions and future directions. Some have introduced internet technologies for promotion and marketing through comprehensive media coverage and cross-industry collaborations ( Zhang & Zhou, 2023 ). Additionally, numerous companies consider going global as a crucial strategy due to the significant allure of overseas markets for new-style tea drink companies. On one hand, overseas markets offer substantial volume and high per capita drink consumption. On the other hand, the global market lacks Chinese new-style tea brands, and enhancing brand international influence can contribute to domestic business growth ( Xia, 2023 ). Currently, an increasing number of new-style tea drink companies are choosing to explore overseas markets. However, these companies may encounter challenges in the complex and dynamic nature of overseas markets, differing consumer perceptions, and restrictions imposed by overseas laws and regulations ( Yu, 2023 ).
In general, the current research on China’s new-style tea drink industry is primarily focused on domestic companies, industry development, marketing strategies, and business models. There is limited systematic research on the internationalization of new-style tea drink brands, and there exists a certain gap in the study of overseas market entry strategies for these companies. This paper takes Mixue Company as a representative new-style tea drink company and uses various methods to analyze Mixue’s overseas market entry strategies, aiming to fill the current research gap.
2.1. Developmental Stages of New-Style Tea Drinks
2.1.1. Initial Stage (1990-1995)
During this period, new-style tea drinks, different from traditional tea drinks, were primarily formulated using non-dairy creamer, synthetic agents, artificial colors, etc., rapidly developing in the relatively blank domestic market.
2.1.2. Development Stage (1996-2015)
In this phase, new-style tea drinks began to use canned fruits, flavored syrups, and artificial synthetic ingredients for formulation to meet consumers’ more diverse consumption demands. In terms of production, machine processing started to replace some manual labor, and standardized decorations appeared in roadside chain stores.
2.1.3. Acceleration Stage (2016-Present)
During this period, the quality of ingredients for new-style tea drinks further upgraded, with a greater variety introduced. Updated food processing technologies and equipment were adopted in production. New-style tea drink brands such as Xicha and Naixue’s Tea entered the market. The business environment and consumer market improved, with capital driving further industry development. The new-style tea drink market entered an accelerated stage of development, facing new opportunities and challenges. Several new-style tea drink brands began to explore international markets, aiming for global expansion.
3. Analysis of Mixue’s Overseas Market Development
3.1. Company Overview
Mixue is a chain brand primarily focused on ice cream and tea drinks. Established in 1997 in Zhengzhou, Henan, it distinguishes itself with high cost-effectiveness. With a widespread presence throughout China, especially in third and fourth-tier cities, Mixue is one of the largest chain tea drink brands in China. Currently, the brand is actively expanding into the international market, aiming to offer high-quality and affordable delicacies to people globally. As of the end of the third quarter of 2023, Mixue has surpassed 28,000 stores nationwide, ranking first in China’s New-style tea drink brands.
3.2. Mixue’s Overseas Expansion Journey
In recent years, the motivations for domestic new-style tea drink brands to expand overseas mainly include encountering development bottlenecks, seeking new growth markets to alleviate domestic competition pressure, enhancing brand image by entering developed country markets, and utilizing the global development to gain larger profits from the capital market. In 2017, Mixue established the Southeast Asia Overseas Business Division, actively exploring overseas markets as a new business growth point. In 2018, Vietnam was chosen as the first destination, maintaining a low-price strategy with product pricing at around 25,000 Vietnamese dong. The first-day turnover in Vietnam was close to 10,000 yuan.
In the following years, Mixue rapidly expanded to neighboring countries in Southeast Asia, entering Indonesia, Cambodia, Thailand, Singapore, and others. As of the end of the third quarter of 2023, Mixue has nearly 4000 stores overseas, totaling 32,000 globally, distributed across 11 countries, and generating job opportunities for 500,000 individuals.
The overseas expansion journey of Mixue is outlined in Table 1.
From Table 1, it is evident that Mixue has Southeast Asian countries as its primary target for international expansion. Additionally, the table highlights an accelerated pace of overseas expansion in 2022, involving five countries, with a clear trend toward expanding into more economically developed nations. In 2023, Mixue officially entered developed countries such as Japan and Australia.
4. SWOT Analysis of Mixue’s Entry into Overseas Markets
In this section, we apply the SWOT analysis method to analyze the strengths, weaknesses, opportunities, and risks of Mixue’s entry into overseas markets. This analysis aims to explore ways to optimize the company’s management and operational activities, helping the company choose more feasible strategies for entering overseas markets and managing its business.
4.1. Mixue’s Strengths in Entering Overseas Markets
4.1.1. Price Advantage
The low selling price and high cost-effectiveness constitute Mixue Bingcheng’s major competitive advantage. The brand continues its strategy of thin profit margins and high sales volume overseas. For instance, the pricing of products in Singapore ranges from 1 - 3 Singapore dollars, and the coffee prices in South Korea are as low as 1500 Korean won. Mixue can capture a significant market share with its low-priced products, especially appealing to young consumers in overseas, particularly developed, countries ( Zhang, 2022 ).
4.1.2. Brand Effect
Mixue has a high level of brand recognition in China, frequently gaining exposure
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Table 1. Mixue’s overseas expansion journey.
Source: Mixue Official website.
and discussion on social media. This brand image influences overseas Chinese communities, such as students and professionals, facilitating the brand’s sales and promotion efforts abroad.
4.2. Mixue’s Weaknesses in Entering Overseas Markets
4.2.1. Insufficient Supply Chain Development
The well-established industrial parks and supply chain infrastructure in China are crucial for Mixue to maintain the low prices of its products. The domestic supply chain efficiently reduces the circulation chain of raw materials, lowers intermediate costs, and ensures high cost-effectiveness ( Fang, 2022 ). As shown in Figure 1, the main source of revenue for Mixue Company comes from selling raw materials such as tea leaves and fruits, as well as packaging consumables like paper cups, to franchisees for the production of freshly made drinks. This highlights the importance of supply chain construction for Mixue. However, the underdeveloped overseas supply chain may require the importation of certain raw materials from China, leading to potential issues such as material loss, increased costs, and difficulties in transportation logistics, which could impact normal business operations.
4.2.2. Localization Issues
Cultural, taste, and consumption preference differences exist between China and the host countries. For example, in Vietnam, where per capita income is relatively low, bubble tea may be considered a luxury. In South Korea, coffee is more popular than tea, and in Southeast Asia, there is a high demand for sugar, contrary to the low-sugar trend in China. Products beloved by Chinese consumers may not meet the demands of overseas consumers. Therefore, Mixue needs to actively engage in localization efforts, adapting and adjusting its products to better suit and integrate into local environments.
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Source: Company’s prospectus.
Figure 1. Mixue Company’s main business structure.
4.3. Mixue’s Opportunities in Entering Overseas Markets
4.3.1. Large Market Potential
The overseas countries chosen by Mixue Bingcheng for brand expansion have significant population sizes, strong consumption capabilities, and a considerable presence of Chinese and young consumer groups. The market size and potential are substantial, and the competition is less intense compared to the domestic market. Therefore, seizing these opportunities is crucial for expanding the brand’s scale and influence. In Indonesia, in 2022, the consumers most interested in new-style tea drink consumption will be those with middle to upper-income levels, as shown in Figure 2. Among ice cream enthusiasts, 43% are middle-income consumers, 33% are high-income consumers, while low-income consumers constitute only 24%. This undoubtedly presents a business opportunity for Mixue. While overseas competitors of Mixue generally target high-income communities, Mixue places a greater emphasis on reaching out to middle and lower-income consumers, making it highly competitive in this field.
4.3.2. Globalization and Policy Support
With the continuous progress of globalization and growing interest in Chinese tea culture among overseas consumers, there is an increased acceptance of Chinese new-style tea drinks. Additionally, the government actively promotes the development of Chinese culture, and policies favor the overseas expansion of Chinese catering companies. This creates a significant opportunity for new-style tea drink brands, including Mixue, to expand internationally.
4.4. Mixue’s Threats in Entering Overseas Markets
4.4.1. Increasing Competition
Overseas new-style tea drink brands face competition from local brands and those originating from other countries. The industry lacks core technology, and barriers to entry are low, leading to potential imitation of recipes and operational models. This results in homogenization, requiring higher demands on cost control and store service management to withstand market challenges and
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Source: Statista.
Figure 2. Ice cream lovers in Indonesia based on income, 2022.
maintain brand influence and competitive advantages. Taking Indonesia as an example, two local chain brands, Haus and Esteh Indonesia, started early in the local market and both focus on a large-scale, low-price market positioning. Most of Haus’s bubble tea is priced between 5000 and 15,000 rupees. Similarly, Esteh Indonesia specializes in new-style tea drinks with prices not exceeding 16,000 rupees. The positioning of these two companies is similar to Mixue, and their prices may even be lower than Mixue’s, which could impact Mixue’s expansion in the Indonesian market (Figure 3).
4.4.2. Uncertainty in Overseas Business Environment
Chinese brands entering overseas markets often encounter cross-cultural risks and uncertainties in the business environment. Thorough research and active communication are essential to understand local policies, laws, social beliefs, customs, and cultural taboos. Additionally, local disasters and health crises can impact operations, necessitating proactive contingency planning to address such uncertainties.
Based on the above analysis, the SWOT model for Mixue’s entry into overseas markets is summarized in Table 2.
5. Analysis of the Competitive Environment of New-Style Tea Drink Companies in Overseas Markets
In this section, we take the example of Mixue’s largest overseas market in Southeast Asia and utilize the PEST analysis method to analyze the competitive market environment of the new-style tea drink industry. The analysis covers political, economic, socio-cultural, and technological aspects, exploring external factors that may impact the business and feasible strategies for entering overseas markets.
5.1. Political Environment
The political environment in Southeast Asian countries is relatively stable, with
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Source: Equal Ocean.
Figure 3. Price comparison of three major tea drinking brands in Indonesia.
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Table 2. SWOT analysis model for Mixue’s entry into overseas markets.
government policies having a relatively small impact on the market. However, there may be trade restrictions or tariff policies that affect the import of raw materials for new-style tea drink companies. Food safety-related policies introduced by Southeast Asian governments to regulate the foodservice industry can also impose constraints on new-style tea drink companies. Taking the developed Southeast Asian country, Singapore, as an example, over 90% of food ingredients in Singapore rely on imports. Singapore ranks high in “Global Food Security Index”, which is closely related to the government’s strict standards and regulations on food safety. According to Singapore’s regulations, individuals working in the foodservice industry must undergo food hygiene training and obtain a food safety certificate. Singapore also rates the food hygiene and environmental standards of food establishments. Therefore, new-style tea drink companies must adhere to local hygiene standards to ensure product quality and safety. Furthermore, the international expansion of the new tea drink industry relies on strong support from national industrial policies. Initiatives such as the “Belt and Road” strategy encourage trade activities and overseas expansion. The “Thirteenth Five-Year Plan for the Development of China’s Tea Industry” sets development goals for the tea drink industry and places higher requirements on food safety.
5.2. Economic Environment
The Southeast Asian region has experienced rapid economic development, possessing significant economic market potential. The Association of Southeast Asian Nations (ASEAN) has ten member countries with a combined population exceeding 660 million. The population is substantial and predominantly young, with 50% belonging to the 20 to 50 age group, representing a major consumer demographic. As shown in Figure 4, since the full-scale initiation in 2010, the bilateral trade volume between ASEAN and China has continuously expanded. Currently, ASEAN and China have become each other’s largest trading partners.
The steady growth of the ASEAN economy increases market capacity and enhances consumers’ purchasing power and willingness, facilitating the development of the new tea drink industry and the overseas expansion of companies. However, it also poses higher demands on the management of overseas human resources costs and operational capabilities for businesses. Additionally, the post-pandemic era has influenced the economic structural transformation in Southeast Asian countries. While online digital consumption is rapidly developing, limitations on offline consumption still exist due to the pandemic. The development trend of the foodservice industry, as a fundamental part of national consumption, will continue to be influenced by the macroeconomic environment.
5.3. Social Environment
Southeast Asian countries experience hot climates throughout the year, resulting in no clear distinction between low and peak seasons for tea drink consumption. Consumers have a year-round demand for such drinks. Additionally, Southeast Asian countries have a significant Chinese population. Meanwhile, Southeast Asian countries have a significant population of ethnic Chinese, especially in Indonesia and Thailand, where the scale of the Chinese diaspora ranks at the forefront in the region, as illustrated in Figure 5. A robust foundation among the Chinese community not only facilitates the rapid establishment of tea beverage brands in the initial stages but also holds crucial advantages in expanding market
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Source: UN Comtrade.
Figure 4. China-ASEAN import and export trade, 2010-2022.
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Source: Statista.
Figure 5. 2020 Southeast Asia Chinese overseas population (Millions).
share in the later stages. These countries share similar beverage consumption habits and a foundation in tea culture with China, making them highly receptive to innovative tea beverages. This makes them suitable for the overseas expansion and development of modern tea beverage companies.
Economic growth in Southeast Asia has improved the quality of life for consumers, leading to changes in their consumption concepts and behaviors. Consumer demand for dining is increasing, displaying a trend toward diversification. Since 2018, numerous new-style tea drink brands from overseas have entered Southeast Asian countries, introducing products like fruit tea, cheese tea, and pearl milk tea. This has not only enriched the market but also cultivated consumer preferences and interest in products, intensifying market competition. Similar to Chinese consumers, Southeast Asian consumers are now paying more attention to health and quality of life, demanding higher quality and better material choices in new-style tea drinks. Additionally, young consumers in Southeast Asia appreciate fashion and trends, placing high importance on the design of new-style tea drink products and brand image. These changes in the social environment present opportunities that new-style tea drink companies need to capitalize on.
5.4. Technological Environment
In recent years, with the entry of various foodservice companies, the Southeast Asian market has started to emphasize innovation in related technologies and scientific management methods. This has accelerated the standardization, industrialization, and standardized scientific processing and supply chain construction of food. Training levels in the foodservice industry and the overall quality of staff have improved, and marketing systems continue to be perfected. This technological environment provides favorable conditions for the overseas expansion of new-style tea drink companies. Furthermore, the domestic new-style tea drink industry is experiencing rapid development and technological innovation, driving the research and use of modern equipment related to tea drinks, as well as the standardization of production processes. This helps control production costs while maintaining stable taste and quality.
Simultaneously, with the changes in consumer preferences and the increased demand for product variety and quality in Southeast Asian countries, innovative technologies such as high-pressure steam equipment and cold brewing can be employed to meet consumers’ more diverse consumption needs.
Additionally, overseas companies can draw on the digital experience of the domestic new-style tea drink industry. Leveraging advancements in the internet and information technology, they can use new media and social platforms for promotion, develop online channels, and utilize apps and other online platforms to provide diversified services such as online ordering, customization, and electronic points systems. This enhances the consumer experience, fosters a more loyal customer base, and contributes to sustainable development overseas.
6. Recommendations for New-Style Tea Drink Companies Entering Overseas Markets
6.1. Government Level
6.1.1. Enhance International Exchange and Promote Tea Culture
Governments should support and promote the development of domestic tea drink brands for international markets. This involves showcasing the cultural significance of tea drinks on the international stage to enhance the global image of the country and the cultural richness of tea. Governments can aid this process by refining relevant laws and policies, providing assistance, and facilitating collaboration with professional institutions to guide and support international expansion.
6.1.2. Strengthen Trade Facilitation and Channel Construction
Governments should facilitate trade promotion activities and establish trade channels to help new-style tea drink companies establish connections with overseas markets. Initiatives such as industry associations can serve as platforms for discussing the latest industry trends, market information, and providing consulting and technical training services. Governments can play a role in reducing the risks associated with entering overseas markets while supporting the industry’s overall development.
6.2. Company Level
6.2.1. Continue Overseas Expansion through Franchise Operations
Utilize the franchise model for overseas expansion, leveraging local capital to effectively mitigate risks and costs associated with developing foreign markets. Lower franchise fees and improve the supply chain for raw materials to maintain a competitive advantage in terms of low prices and high cost-effectiveness. Drawing from the experience of successful domestic expansion, strategically open stores in densely populated areas, gather market information, refine operational models, and adjust product strategies. Transition to a direct management model after achieving a certain scale of overseas expansion.
6.2.2. Diversify Product Offerings with Cultural Significance
Infuse Chinese cultural elements into the brand concept, focusing on differentiating products based on regional taste preferences. Innovate by combining local characteristics with Chinese cultural influences when developing new products. Maintain product differentiation while ensuring stability in taste and quality. Consider introducing culturally inspired peripheral products to create a unique selling proposition, providing consumers with a novel experience and contributing to sustainable development overseas.
6.2.3. Build a Comprehensive Supply Chain
Independently construct an overseas supply chain, addressing the limitations of importing certain raw materials from China. Develop a robust system that spans upstream manufacturing, midstream warehousing and logistics, and downstream store sales and operations. This will enhance bargaining power and reduce raw material costs, ensuring a stable supply chain for the company.
6.2.4. Localization in Marketing and Digital Operations
Leverage the power of social media in overseas brand-building efforts. As the younger generation of consumers becomes increasingly interested in packaging design and marketing, create a brand identity that resonates with them. Utilize social media platforms for exposure, and focus on creating a youthful brand culture. Implement localized marketing strategies, adapting to the preferences and trends of the target market. Additionally, embrace digital tools for operational efficiency, promptly addressing and adjusting to any issues that may arise in the overseas market.
By implementing these recommendations, new-style tea drink companies can enhance their competitive edge and establish a stronger presence in the global market.