IPOs in bubble tea market brewing as Asia’s appetite for novel beverages booms

08 Jan 2024 --- Guming Holdings and Mixue Group, two of China’s biggest beverage makers renowned for their crowd-pleasing bubble teas, have both recently filed for initial public offerings (IPOs) in Hong Kong to mark the beginning of 2024.

Guming, positioned as China’s second-largest bubble tea chain, is focused on expanding its store base and investing in technology to enhance operational efficiency. The company is also committing to product innovation while strengthening the supply chain in the industrial sector.

“We have applied to the listing committee for approval of the initial public offerings,” Guming confirms in its prospectus.

“As for our future strategy, we will continue to focus on research on food science, strengthen our product development capabilities, and enrich our raw material library.”

“We will also continue to capture the emerging trends in the ready-made tea market, optimizing our products according to the latest trend.”

Mixue, another bubble tea giant in China and Southeast Asia, has stated its planning to build a production base in Hainan, China, specializing in frozen fruits, coffee, syrups, toppings, and other ingredients that form the backbone of its popular beverages. 

“We will use innovative technology to produce ice cream powder and other dairy products in-house and expand the production of other ingredients such as sugar, tea and fruits,” Mixue says.

“We will also build supporting facilities to support our production and research and development to increase the production of packaging materials and equipment.”

This push for IPO is not the initial instance for leisure tea companies to seek a breakout. Nayuki, the first bubble tea brand listed on the Hong Kong Stock Exchange, set a precedent in the market in 2021.

Growing global appetite
This industry expansion isn’t limited to China. The bubble tea market, originating from Taiwan in the 1980s, has become a global phenomenon, particularly popular among Millennials and Gen Z for its Instagram-worthy aesthetics and non-alcoholic nature. 

While East Asia is driving the demand for the refreshment, South Asia is poised to become the next major market for bubble tea worldwide. The expanding market size, fueled by urbanization and a growing middle class in nations such as India and Pakistan, provides an opportunity for international brands to establish a foothold in these regions.

The global market for bubble tea is expected to expand further, driven by factors like rising consumer demand, product innovation, globalization, and a growing interest in Asian food and drinks.

The US bubble tea market is experiencing rapid growth in particular, with projections indicating a threefold increase in the coming decade.

Guming says that it will continue to expand their beverage matrix and optimize existing products to seek sustainable business growth (Image credit: Guming).Collaboration and inclusivity innovations
With promising market potential, global companies are exploring the production of bubble tea ingredients.

Cargill is collaborating with Starpro, a Thai food-grade tapioca starch producer, to enhance its specialty tapioca starch offerings in the Asia-Pacific region. This partnership encompasses a range of locally manufactured modified tapioca starches, catering to the F&B industry’s needs across the region.

Despite the widespread craze for the beverage, some consumers are expressing concerns about the health implications of bubble tea due to its high sugar content. 

Research suggests that, while the long-term effects of bubble tea on weight are very limited, persistent consumption of bubble tea can lead to anxiety and depression-like behaviors, as well as impair cognitive function in mice.

In response to health concerns, innovation in the bubble tea industry goes beyond just introducing new flavors.

Companies like Mother Pearl from Hong Kong are focusing on vegan bubble tea in order to cater to health-conscious consumers. Meanwhile, US company Boba Guys is working to transform the bubble tea experience by introducing dairy-free alternatives such as almond and oat milk, expanding their appeal.

By Sichong Wang