China’s Tea-Drink Market Faces Consolidation Amid Brutal Price Competition

China’s tea-drink market, with estimated annual sales of 370 billion yuan (US$54.2 billion), has become yet another example of involution as brutal price competition threatens to expel thousands of unprofitable small players.

“Bubble tea is a dynamic market, and it is never easy to make money from this business because of thin profit margins and high operating risks,” said Robert Zhu, owner of a shop in Shanghai’s Pudong district. “On a single shopping street in Shanghai, more than a dozen stores could serve similar tea products to pedestrians, and most of them are unable to break even after months of hard work.”

Known as milk tea on the mainland, the category comprises tea-based drinks garnished not only with tapioca “bubbles” but also fruit, grass jelly or ice cream.

According to a report released by Shenzhen-based research firm ChinaIRN in February, more than 400,000 shops across the mainland shared in the annual sales of 370 billion yuan last year.

That number represented 6.4 per cent growth over 2024, but was a sharp drop from an annualised growth pace of more than 20 per cent over the past two decades, it added.