STiR coffee and tea magazine

STiR coffee and tea 17 collected much like vintage wine. In 2013, seven cakes of FuYuanChang Blue Ticket Round Tea from the early 20th century sold for 10.35 million yuan (about $1.5 million). TCM medicinals Goldthread, white peony root, and tree peony bark have tripled in price during the past two years, driving the Kangmei index up by 50%. Dealers say tight supplies due to floods are partly to blame, "but a bigger factor is manipulation by capital." Xilong Zhang, a business writer at Jiemian Global.com, explains that the tea futures market is and always has been highly unregulated. No one except the participants oversees it. "If your word turns out not to be your bond, then you can find yourself in all kinds of trouble," he writes. Amateur Pu'er speculators lost millions trading tea in 2006-07, a period of high savings rates and limited domestic and overseas investment assets. The Bozhou Traditional Investors Wary of Bubble Tea Bubble Market researchers forecast continued expansion of the global bubble tea market, but wary investors caution that the bubble may burst. According to Bloomberg News, six Chinese bubble tea makers are weighing initial public offerings. Hong Kong IPOs include Auntea Jenny, with 6,000 locations; ChaiBaiDao, also with 6,000 locations; GoodMe, with 6,700 locations; Mixue, with 28,000 locations; and XSQ Tea, with 1,600 locations. The China Chain Store & Franchise Association estimates the bubble tea market was worth about 145 billion yuan ($21 billion) in 2023. Average sales per unit have declined as young consumers are squeezed for cash and spend less, driving share prices down. Bubble chains that built their fortunes selling drinks priced from 25 to 40 yuan ($3.50 to $5.50) must now contend with low-cost disrupters selling drinks for $1 or less. Bloomberg writes, "Chinese regulators issued guidelines earlier this year discourag- ing certain companies from listing in the domestic A-share market. Using so-called window guidance, regulators discreetly advised that companies that rely on explosive franchise business models also cannot list locally, according to a person briefed on the matter." Market saturation, concerns about whether bubble tea is a passing trend, questions about its healthfulness, high operational costs, and steep pricing amid economic uncertainty threaten the viability of franchise retailers that have made the drinks available in major cities worldwide. Companies that rely on opening new stores to sustain revenue growth often experience a decline in gross profit margins due to higher costs associated with store operations and management. The market may look promising but individual ventures share an inherent weakness. A BBC report cited the example of Nayuki Holdings, a Chinese bubble tea chain that briefly made its founding couple billionaires after going public in 2021. According to Bloomberg, the company's stock, issued in Hong Kong, has since declined 90% from its IPO price, lowering the net worth of founders Peng Xin and Zhao Lin from $2.2 billion to $300 million. A similar fate befell China's third-largest bubble tea chain, Sichuan Baicha Baidao Industrial, known as Chabaidao, which made its stock market debut in April. The shares plunged on their first day of trade and have yet to recover. In the BBC report, senior economist Gary Ng at Natixis in Hong Kong explained that "Chinese food and beverage chains usually rely on quick expansion to achieve a large market share and pitch the story to investors as the exit strategy." Ng said, "It also means that the corporate health of these firms may not be very sound with leverage, and the chains are usually highly replaceable if there are new, good competitors." By Dan Bolton Straits Research predicts the global bubble tea market will expand to $6.46 billion in 2032. 2022 2021 2020 2023E 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F USD 6.46 billion CAGR 8.12% Forecast Years USD 3.2 billion USD 3.45 billion Base Year Historical Years Source: Straits Research Chinese Medicinal Material Association, an industry group, advised members to warn speculators "not to pump up prices." In early December, a much-hyped Pu'er that retailers rushed to obtain for 50,000 yuan dropped to 2,000 yuan overnight when authoritative critics published terrible reviews. In January, Chinese state broadcaster CCTV aired the story, reporting prices of Chang Shi Tea, a Pu'er brand from tea trading hub Guangzhou, shot up to 50,000 yuan ($7,023) per 2.5 kg brick before collapsing, causing hundreds of thousands in losses. "Investors should be on high alert and get rid of the whim to get rich overnight," according to Liwan District officials. Liwan is home to Guangzhou's wholesale Fangcun tea market. More than 80% of all pu'er tea goes through Fangcun. By Dan Bolton Tea Report

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