China’s Bubble Tea Boom Enters Its Buyout Era as Growth Cools

Bain Capital announced on August 6 that it would acquire Gong Cha Global from TA Associates and the company’s other shareholders, with completion expected in the fourth quarter of 2026 subject to customary conditions. Financial terms were not disclosed. Gong Cha operates nearly 2,200 stores across 33 markets and serves more than 150 million beverages annually, largely through a capital-light franchise network. Bain intends to support continued expansion in Japan and South Korea while accelerating growth in the United States, alongside investment in product development, digital marketing and customer-loyalty programmes. The chain’s “Digital Kitchen” format, which uses dispensing technology and a flexible store design, also offers a platform for improving consistency and labour productivity across different markets.

Earlier reports indicated that Gong Cha’s seller had sought a valuation of as much as US$2 billion. The company was reported to have generated more than US$70 million in annual earnings before interest, tax, depreciation and amortisation, meaning the proposed valuation would have approached 30 times core earnings. Gong Cha’s revenue reportedly increased 14 per cent to US$217 million in 2025, supported by Japan, South Korea and entry into additional international markets. The final purchase price remains confidential, so the earlier US$2 billion figure should not be interpreted as the amount Bain ultimately agreed to pay. Nevertheless, the deal shows that private equity is still willing to commit substantial capital to beverage brands with strong franchise economics and credible international expansion opportunities.

The transaction comes as China’s domestic freshly made tea market is losing momentum. Industry estimates put mainland sales at approximately 370 billion yuan in 2025, spread across more than 400,000 stores. Sales grew by 6.4 per cent, sharply below the annualised growth of more than 20 per cent recorded during much of the previous two decades. More than 130,000 milk-tea shops were reportedly closed or liquidated during the year, even as major chains continued opening new locations. The resulting churn reflects an overcrowded market in which stores frequently offer similar menus, depend heavily on delivery platforms and use discounts to compete for increasingly price-conscious consumers. China’s wider consumption weakness adds to the pressure: national retail-sales growth slowed to only 0.6 per cent year on year in July 2026.

For much of the industry’s expansion, outside investors typically purchased minority stakes in promising chains, financed aggressive franchising or subscribed to initial public offerings. That model produced very different outcomes. Chabaidao fell nearly 27 per cent on its Hong Kong debut in 2024, contributing to regulatory caution over additional offshore listings, while Guming declined by as much as 10 per cent on its first trading day in 2025. By contrast, value-focused market leader Mixue gained more than 47 per cent on its debut. These results demonstrated that investors were no longer prepared to reward every tea chain simply for increasing its store count. Brands increasingly have to prove that their supply chains, franchisee returns and store-level sales can remain healthy after the initial expansion phase.

A full-equity buyout offers more direct tools for addressing these challenges than a passive minority investment. A controlling owner can close persistently weak outlets, revise franchise agreements, centralise procurement, acquire important master franchisees and introduce common systems for inventory, product development and customer data. Private ownership may also give management more time to undertake these changes without having to defend short-term earnings every quarter. In Gong Cha’s case, Bain’s experience with restaurant and franchise businesses could help the company improve store development, franchisee recruitment and supply-chain efficiency while adapting its menu and marketing to individual countries. This approach shifts the investment thesis away from financing more outlets and towards improving the productivity and long-term value of the existing network.

However, Gong Cha does not currently operate stores in mainland China, although it has outlets in Hong Kong and Macau. Its acquisition is therefore a signal for China’s broader tea-investment landscape rather than a direct consolidation of mainland capacity. Similar buyouts could eventually help stronger Chinese chains absorb smaller brands, manufacturing assets, delivery technology or desirable store locations, but highly leveraged acquisitions would become risky if sales continued to slow. The companies most likely to emerge stronger will be those that improve same-store sales, protect franchisees from excessive competition, maintain food quality and build distinct products rather than relying on subsidies. China’s bubble tea market is not disappearing; it is moving from a growth phase defined by store numbers to a more demanding phase governed by cash flow, operating discipline and sustainable brand value.