Bubble tea battle: Chatime Malaysia targets market-leading position after franchise dispute

By Pearly Neo contact

- Last updated on GMT

Bubble tea chain Chatime Malaysia has grand plans to emerge as the top operator globally by the end of 2019. ©Chatime Malaysia
Bubble tea chain Chatime Malaysia has grand plans to emerge as the top operator globally by the end of 2019. ©Chatime Malaysia

Related tags: Tea, franchise, Market

Bubble tea chain Chatime Malaysia has grand plans to emerge as the top operator globally by the end of 2019 – this despite a long and hefty court case with its previous master franchisor in the country.

Chatime Malaysia has outlined an ‘aggressive’ expansion plan that will span across five years in order to achieve this, and appears optimistic about its targets.

Aliza Ali, Managing Director of Will Group Sdn Bhd (Chatime Malaysia’s current master franchisor), told Bernama​ that the group will be targeting several countries to expand to, starting with the (phased) opening of 20 outlets in Singapore (this quarter) and 30 outlets in Saudi Arabia’s Makkah and Madinah (Q3 this year).

Other markets it is looking at include India due to its ‘warm weather’ ​ and ‘similar drinking culture’,​ and the United States as Chatime says it does not have a bubble tea brand that is ‘heavily marketed and known’​.

A yearly investment of RM250mn (USD$61.4mn)  is being focused on all of these expansions as a whole.

“We are currently behind Indonesia (by revenue and number of outlets). Within a few months, we expect to claim the top spot,”​ said Aliza.

Optimism despite setbacks

Locally, Chatime Malaysia is investing some RM40mn (USD$9.8mn) to open another planned 70 new outlets in the country.

Despite previous legal troubles with its ex-master franchisor Loob Holdings that lasted for around two years, the company appears confident and optimistic about developments in the future.

“I think the customers [are] aware […] and we don’t have to do so much to convince them because they know what had happened. So, our job is to really expand again and to give them back Chatime,”​ said Aliza.

“Chatime is the same in 40 countries. I don’t think the hiccup [with Loob Holdings] will affect market sentiment and deter the brand from expanding [locally].”

More on the bubble tea drama

In 2016, drama arose in the local bubble tea industry when Chatime brand owner La Kaffa International terminated then-master franchisor in Malaysia, Loob Holdings.

This was a result of La Kaffa’s claims of ingredients being purchased from external suppliers (in violation of their contract), being denied access to view and conduct audits, and outstanding royalties.

Loob Holdings CEO Brian Loo hit back at La Kaffa, telling SAYS ​that the unapproved ingredients in question were from collaborations used to ‘localise and help [the company] remain relevant over the years’​, such as Horlicks and Cadbury. As for the royalties, Loo claimed that this was not paid under legal advisement.

Further to this, he also accused La Kaffa of being ‘greedy’​ and terminating Loob Holdings over a ‘desire to take over operations in Malaysia’​, in addition to launching a 3-in-1 Chatime milk tea powder in supermarkets without Loob Holdings’ consent and/or knowledge. This led Loo to take legal action against La Kaffa as well.

Loo went on to create another bubble tea chain Tealive under Loob Holdings, which essentially took over all 165 of the original Chatime locations.

La Kaffa took Loob Holdings to court in an attempt to halt Tealive’s operations, and the legal battle between both chains raged on until August 2018, when both companies issued a joint statement saying that they had reached an out-of-court settlement and had ‘amicably resolved all disputes​, and as such would be ‘[stopping] all court or any other enforcement actions against each other’​.

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