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Pearl Milk Tea Craze Sweeps the Maldives

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Pearl Milk Tea Craze Sweeps the Maldives

Source:La Caffa

Taiwan’s homegrown hand-shaken tea beverages are continuing their conquest of overseas markets. Kaffa International Co. Ltd., whose global franchise teahouse chain Chatime already has a strong presence in Southeast Asia, is expanding its reach to tropical holiday destinations.

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Pearl Milk Tea Craze Sweeps the Maldives

By Ming-ling Hsieh
From CommonWealth Magazine (vol. 628 )

Taiwan’s pearl milk tea has become a staple drink for holidaymakers in tropical island paradises in Southeast Asia and the Pacific such as Bali, Boracay, Cebu Island, Fiji, Guam, Langkawi and the Maldives.

In late July, Chatime, the teahouse franchise owned by La Kaffa International Co. Ltd., announced the opening of outlets in the Maldives, an island nation in the Indian Ocean. Exuding confidence, La Kaffa Chairman Wang Yao-hui declared that Chatime is planning to set up shop on Saipan within half a year, and that Hawaii is on the list for next year.

Targeting Resort Tourists

These new additions are part of the company’s international island-hopping strategy, a gradual expansion to popular tourism destinations mapped out some three years ago.

In terms of average per capita consumption and cups of tea sold, the outlets on resort islands clearly outperform stores in other, less leisure-oriented locations. “When you travel, you don’t really care about price; you won’t suppress your own cravings,” remarks Wang with a smile.

Over the past seven years, Wang took Chatime to 33 countries around the globe. Presently, there are 650 Chatime outlets, and 90 percent of its revenue comes from outside Taiwan. Although Chatime does not have the most outlets among Taiwan’s food and beverage brands, an expansion of Chatime’s speed and scope is rarely seen in the F&B industry.

Wang has set expansion targets for the company - adding at least three countries to the Chatime map every year and posting annual outlet growth of 15 percent to 20 percent.

In contrast to many F&B beverage industry leaders who started out as chefs, the 47-year-old Wang holds a business management degree and originally worked in the high-tech industry. When founding his company, he made internationalization and standardization its development goals. “I am not a person who makes products,” Wang points out. “I systematize, standardize and replicate in the way I want; these are the problems I keep thinking about."

He subscribes to a business philosophy called “speed is the winner”, which means there is no need to prepare fully before you act; instead, you make adjustments and reinforcements on the go. There might as well be gaps and omissions, and you might commit mistakes along the way, but you must always ride the wave, Wang believes. He is convinced that companies that are not ready to take a risk will be squeezed out by competitors.

Team Management plus Local Connections

For Wang, it is not just about conquering new markets. He believes that one needs to challenge greater goals to motivate and mobilize one’s team. “If there are only three outlets, you only need store managers. If you have five stores, you need an area manager as well as back office management and procurement. Eventually, an organization is required as backup to support brand development. If you don’t open [new stores], you will always just remain there (meaning the team won’t be able to grow),” Wang says.

Chatime aptly exploits its local connections to speed up its conquest of new markets. Corporate headquarters in Taiwan is responsible for raw materials, quality control, sales, brand building, service and marketing support, whereas local cooperation partners, with their intimate knowledge of local markets, are tasked with location-specific adjustments.

Champion Wang, vice president of the Commerce Development Research Institute (CDRI) in Taipei, observes that Wang is good at finding young people in the target markets who build the brand’s image and open up distribution channels. In the Maldives, Wang has partnered with Zahid Rameez, a 30-something restaurant operator and founder of investment company Strada Pvt. Ltd.

Coming from the high-tech industry, Wang Yao-hui, chairman of La Kaffa International Co. Ltd., has a different approach to brand development than the average food and beverage industry entrepreneur.

Moreover, Wang points out that his company is not selling a product but rather the intellectual property brand value and know-how to run a Chatime teahouse. Therefore, the company emphasizes management. To guarantee good quality, Wang developed the tea-making machines himself when he started his company. When cooperating with local franchisees, the company defines product specifications in contracts that are modeled after those used by international franchises, and revises them annually.

Aside from that, Chatime has established an international management structure with regional heads in all markets. Weekly meetings are held separately with the more than 20 agents around the world to understand how headquarters can provide support and assist in improving business in different markets. Presently, the team that manages overseas markets has between 40 and 50 members. “I take my time recruiting people and cultivating talent. I often make mistakes, but I can only rely on myself for finding a way to build and cultivate [talent],” Wang says.

Powerful Brand Attracts Partners

As the brand’s reputation increases, attention and interest in the brand naturally also becomes stronger, creating a virtuous circle. The first stop on the brand’s island-hopping expansion was Guam, where the local cooperation partner had gotten to know Chatime in Australia. Rameez in the Maldives had had his first taste of Chatime tea drinks in Malaysia. “I came across Chatime as a student in Malaysia; it was virtually ‘love at first sight',” recalls Rameez.

Presently, 90 percent of Chatime overseas stores are franchises. The focus on franchises instead of corporate stores is related to lessons Wang learned from Chatime's failure in China. In 2009, Chatime began to open outlets across China, establishing more than thirty stores within 18 months that were directly managed and operated by the company. But as Wang admits, having just entered the Chinese market, he lacked experience and connections. Stores opened whenever a location was available, but without cohesive teams, business did not go well. In the end, Wang closed shop in China, having lost NT$80-100 million with his venture. As his business kept bleeding cash, Wang borrowed money wherever he could, even mortgaging his home.

But he had learned his lesson. When Chatime began its overseas expansion the following year, Wang opted for the franchise model, which is why today some 90 percent of the overseas stores are franchises.

There are, of course, certain risks and management challenges involved when cooperating with local partners. But, as a strong believer in the brand’s development potential, Wang faces all challenges with his trademark adventurous spirit. He dreams of growing Chatime into the world’s biggest pearl milk tea chain.

“In the coming three decades, we will see even more dynamic growth of pearl milk tea, because it is truly part of people’s everyday consumption,” posits Wang with unshakable confidence in his business model.

Translated from the Chinese by Susanne Ganz

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