China’s "Sugar Rush" Export: J.P. Morgan Breaks Down the ASEAN Bubble Tea War
With China's domestic consumption story facing secular headwinds and fierce internal competition, 2025 has become the year of the "Great Escape" for the country’s beverage giants. Following a wave of IPOs this year—from MIXUE Ice Cream & Tea to Goodme—the battle for dominance has spilled over borders.
In a research note released on November 20, 2025, entitled "China Bubble & Brew," J.P. Morgan’s Asia Pacific Equity Research team, led by Jessie Xu, dives into the aggressive expansion of Chinese "freshly-made-drink" (FMD) players into the ASEAN region. The report is essential reading for investors tracking the spillover effects of China’s hyper-competitive consumer sector. It paints a picture of a saturated domestic market exporting its deflationary price wars to Indonesia, Malaysia, and Thailand—economies with their own entrenched local warlords.
The bank has initiated coverage on the sector, naming Luckin Coffee and Goodme as their top picks, but the real story lies in the brutal mechanics of this cross-border expansion.
The Scale of the Invasion
The speed of deployment is staggering. According to J.P. Morgan, MIXUE Ice Cream & Tea is the undisputed early mover, boasting 4,733 overseas stores as of mid-2025. The vast majority of these are entrenched in ASEAN, with over 2,000 outlets in Indonesia alone and another 1,000 in Vietnam.
Other players are playing catch-up. Chagee, positioning itself in the premium segment, has established over 200 overseas stores, primarily in Malaysia. Meanwhile, Luckin Coffee is steadily building its footprint with 68 stores in Singapore and 45 in Malaysia.
But as these capital-flush Chinese giants land on foreign shores, they are finding that the "low-hanging fruit" has already been picked.
A Bifurcated Battlefield
The notion that Chinese brands can simply steamroll Southeast Asia with superior supply chains is being tested. J.P. Morgan analysts note a critical reality check: ASEAN consumers are not a blank slate.
"We get the impression that ASEAN consumers are similarly price sensitive to Chinese consumers when it comes to mass market brands. But unlike China, ASEAN consumers are already well educated about coffee and tea. The coffee & tea market in ASEAN is highly competitive with a lot of strong local players who know their consumers well."
The report highlights that in markets like Indonesia and the Philippines, local incumbents like Kopi Kenangan and Pickup Coffee have already normalized coffee consumption. This isn't a greenfield expansion; it’s a market share grab against entrenched competitors like Tealive in Malaysia, which operates over 800 stores and is eyeing its own listing.
The Deflationary Playbook
The strategy for the mass-market players remains identical to the domestic Chinese playbook: ruthless price undercutting.
In Malaysia, MIXUE Ice Cream & Tea is pricing products as low as RM5 (approx. US$1.20), undercutting local giant Tealive’s RM8 price point. In the Philippines, they are operating as one of the lowest-priced chains in the country. For these players, J.P. Morgan notes, "affordable price and scale matters."
However, the supply chain advantage—often cited as the "moat" for Chinese firms—may be diluted in this region.
"ASEAN has plenty of local supplies, so the supply chain advantage of Mixue may be less of an edge in ASEAN... Only a few use fresh fruits as ingredients, which seems different from China."
The Premium Trap: The "Chagee" Risk
Perhaps the most interesting observation in the report concerns the premium segment, occupied by brands like Chagee. While selling cups at US$3–5 caters to the affluent upper-middle class in Indonesia and Thailand, the business model carries significant distinct risks compared to the low-cost franchises.
J.P. Morgan warns of the dangers of "operating deleverage" if the initial hype fades:
"Once volumes and fads normalize, the operating deleverage could trip them up as they usually rent large areas in prime locations. In Malaysia, it was observed that the craze has come down significantly, with the shops a lot quieter now."
In the Philippines, the barrier is even higher, with analysts noting it might be "challenging to scale up given the lack of brand awareness and consumer education" for premium tea products.
Conclusion: Survival of the Fittest
The narrative of 2025 is clear: the Chinese beverage bubble hasn't popped; it has simply expanded geographically. While J.P. Morgan remains bullish on select tickers like Luckin Coffee, the broader ASEAN landscape is shaping up to be a war of attrition.
With local brands fighting back on taste and trend adaptability—such as the Indonesian preference for extreme sweetness or the Thai demand for specific toppings—Chinese entrants must navigate a complex web of local preferences. For the mass market, it is a race to the bottom on price. For the premium players, it is a race against the clock to build brand equity before the high rents of Jakarta and Kuala Lumpur erode their margins.