Ten Ren bubble tea stores close over saturated market

The Coffee House found its subsidiary could not find a business model suitable for Vietnam

Five-year-old cafe chain The Coffee House recently announced halting the operation of its 23 Ten Ren bubble tea stores. “Ten Ren has been on the market for two years but has yet to find the appropriate business model. It seems like our products are not suitable for Vietnamese consumers’ taste,” said Vo Duy Phu, The Coffee House’s marketing and commerce director.

Accordingly, the golden era of bubble tea in Vietnam may be arriving in its dusk as growth speeds are falling from the 20 per cent in 2016 (cited by Euromonitor International) to the 5.7 per cent now.

As the market has reached the saturation point, the increasing appearance of new brands has been increasing pressure on all bubble tea players. As of the end of 2016, Vietnam had 1,500 bubble tea stores with more than 100 brands. The number was forecast to keep rising in the next years by Lozi – a company specialised in providing sales tools.

In addition, the battle for business space among bubble tea players has become fierce. This is really a big challenge for the brands because store areas have to be large enough to house eye-catching display and decoration for young people to check-in and take selfies.

VIR’s source revealed that the leasing price for what is considered a golden spot in Ho Chi Minh City and Hanoi is about $15,000-16,000 per month. Thus, stores’ monthly minimum revenue has to be VND2 billion ($87,000) to stay in business.

In dynamic cities with high population density and an already saturated market finding good space for business has been increasingly difficult. Furthermore, the competition among food delivery brands like GrabFood and Now also had an impact on bubble tea stores. Specifically, the race among these platforms has brought about heavy promotion programmes, adding to vendors' burdens.