Tealive's Rise as a Malaysian Milk Tea Brand Innovation in FDI-Friendly Malaysia

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KL Foodie

I remembered having a meal at Tealive Ayala Central Bloc (read here). What I never thought of was that Bryan Loo, the founder of Tealive and CEO of Loob Holdings, was once the CEO of Chatime Malaysia. I read through Compare Hero's article on Chatime vs. Tealive (the article was updated last November 2021). From the ashes of a terminated contract came forth a rival for Chatime. 

The Bubble Tea Disagreement

The original disagreement between Chatime and Tealive started back in January when La Kaffa, the Taiwanese owner of the Chatime brand, announced they had terminated the master franchise agreement with Bryan Loo and his company Loob Holding even though the agreement still had more than 20 years to go. The reason for the termination was that Loob Holding was allegedly using raw materials that were not part of the prescribed recipe to produce its tea.

During the initial press release, La Kaffa International also declared that all Chatime outlets would now fall under the direct control of La Kaffa. They intended to effectively cut out Loob Holding of the franchising chain but what they failed to take into account was Bryan Loo’s powers of persuasion.

Within days of the initial announced by La Kaffa, Bryan Loo issued his own statement. He characterized the disagreement as the result of longer relationship issues between his company and La Kaffa. One of the major pain points was the tight control that the franchisor had over the product offerings. Bryan Loo wanted to continually innovate his tea products, and he claimed that the Taiwanese franchisor withheld him from doing that.

What was announced next, probably came as a big shock to everyone. Loob Holding announced that 95% of all existing Chatime outlets would join him in a new venture under the Tealive brand. In what is an almost unbelievably shrewd business move, Bryan Loo was able to convince 162 bubble tea outlets to abandon their existing franchise agreements and join his new and unproven venture.

This must have come as quite a shock to La Kaffa, who had initially expected not much trouble in retaining their individual franchises. At the time of the takeover, Chatime in Malaysia was bringing in more than 100 million ringgit in annual revenue, and accounted for more than 20% of La Kaffa’s total revenue. Their entire position in the Malaysian market evaporated instantly.

This would be a very bold move. Loo himself was going to start from scratch. Rather than cry, he chose to finally use his power of persuasion to get the 162 outlets to start all over It wasn't a very easy move since it means that Loo would need to go against an already huge power from Taiwan. This reminds me of the lesson that the late John Gokongwei Jr.'s maternal grandfather said, "Don't fear the big businesses. They were once small." Loo saw the opportunity of the franchise termination to start his own milk tea brand. Loo had his struggles before becoming the CEO of Chatime Malaysia. Now, Loo was willing to turn the tables with innovation and past experience than cry over what happened. 

Chatime wasn't going to be that easy to defeat. Even without Loo who made it strong--it was still a strong presence. Just reading this should make one think about how Chatime still proves to be a strong competitor against the Malaysian brand.

Time to shake the blues away – a closer look at the Chatime brand

Robbed of its franchise outlets, Chatime still has strong brand recognition which could be a significant advantage if it can recreate the massive franchising network that it had before. This will be a challenge because the market dominance that Chatime had in the Malaysian market was largely the result of the efforts of Bryan Loo.

Even before the whole franchising disagreement, Bryan was already famous because he was able to grow Chatime in Malaysia at an astounding pace. If Chatime wants to re-emerge as the dominant bubble tea brand, it is going to have to find someone who can do the same. This time, it will be a lot harder because the new master franchisee will have to differentiate itself in a market that is already very familiar with bubble tea, while competing against a very strong competitor in the form of Tealive.

Despite the odds being stacked against them, Chatime seems to have every intention of reclaiming its former glory. La Kaffa has already reached an agreement with a new company to become the next master-franchisee in Malaysia. La Kaffa has chosen Will Group to become the new master-franchisee of Chatime Malaysia. Will Group is reportedly no stranger to bubble tea and is planning to open 70 new Chatime outlets over the course of 2017.

More recently, Chatime published a cryptic message on their Facebook page, suggesting that former franchisees might be coming back to the Chatime brand. If that were the case, and the number of outlets is actually significant, Bryan Loo’s Tealive brand might have lost its edge before the real battle even began.

Basically, it was going to be a difficult move since Loo may have met his match. However, he didn't fear competition. Instead, a closer look at the Tealive brand would totally show that the company was more than willing to face competition.

Positioned as a new and innovative bubble tea brand, Tealive is currently in the prime spot to become the next Malaysian tea empire. In the Malaysian market, Tealive is currently miles ahead of Chatime and this has several reasons.

The first and probably most important reason is the massive scale that the Tealive franchise network inherited from its Chatime ancestor. With more than 160 outlets throughout Malaysia, Tealive’s brand recognition is expected to grow rapidly. With brand recognition on the rise, Tealive can expect to increase its current revenue and even add to it by opening more outlets. In a recent interview, Bryan mentioned that he intends to raise the number of outlets from 160 to 250 by the end of October. An ambitious goal that, if achieved, might establish Tealive as the number one bubble tea brand in Malaysia.

Next to a sizeable distribution network, Tealive also enjoys freedom to innovate on its products. Highlighted by Bryan Loo as one of the prime reasons of the disagreement, the freedom to innovate could allow Tealive to offer products that are more adjusted to the wants and needs of the Malaysian customers. With years of experience in the Malaysian market, Loob Holding can adjust quickly to changing consumer demands and remain relevant as a trending tea brand. Because Loob Holding was solely responsible for the growth of Chatime in Malaysia, La Kaffa will now have a knowledge disadvantage when it comes to adapting its products to the Malaysian market.

Innovation will always be the key player. In the case of Loo, it would be to make sure his milk tea brand would fit more into the needs and wants of Malaysian customers. That means the usage of Halal-certified products since most Malaysian citizens are Muslims. The ongoing Aren Caramel series (read here) might have that Southeast Asian flavor Malaysians love. I tried drinking it and I'm reminded of Surigao. I remembered using palm sugar syrup during my trips to Surigao City. it would also face the Singaporean brand KOI which intended to open its first branch in Malaysia last 2017. Also, Singapore used to be part of Malaysia before becoming independent. 

Eventually, Tealive went from being a Malaysian brand to actually being Chatime's competitor abroad. From Loob Holdings' website, this can be read about Tealive which is part of their family:

Tealive is Southeast Asia's largest lifestyle tea brand currently brewing strong in 650 outlets across three continents. Born in Malaysia in 2017 with a mission is to always bring joyful experiences through tea, it has won the backing of Creador, a leading private equity group with deep market knowledge and operational expertise to help grow world-class businesses.

Tealive now has a variety of beverages, from signature brown sugar pearl milk tea and hand-crafted teas to coffee and smoothies. Already the top-of-mind leader in Malaysia, Tealive is now in Vietnam, Myanmar, Brunei, the Philippines, Cambodia, Mauritius, and Canada.

With set plans to continue spreading the “Joy of Tea” through strategic expansion and product innovation, Tealive has its eyes on the world.

According to the official site, there are already over 800 outlets around the world. This really shows that Tealive's choosing to be innovative allowed it to continue to have an edge over Chatime. Maybe, it can have a stronger advantage in Southeast Asia due to its preparation of style. I feel that Tealive might gain a strong territory in the Philippines due its more Southeast Asian appeal. It's no surprise that fitting something fit for most Southeast Asians makes it a worthy competitor to the already legendary Chatime. 

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