Chinese dining and milk tea franchise brands are accelerating their entry into the Korean market. Following mala soup and hot pot specialists such as Tanghuagongfu and Haidilao, many milk tea brands including Chabaekdo, Mixue, and Heytea have moved into major commercial districts in Seoul. The moves are seen as efforts to use Korea as a strategic bridgehead for overseas expansion amid slowing domestic demand growth in mainland China.
According to related industries on the 10th, Chinese dining and tea brands are actively entering the Korean market. Chaji Holdings, the operator of China's largest milk tea brand Bawang Chaji, is currently negotiating with domestic coffee franchise and distribution corporations to establish the joint venture (JV) Bawang Chaji Korea. The JV could be set up as early as the second half of this year, with the first store in Korea expected to follow.
Chabaekdo, a Chinese milk tea brand that opened its first store in Korea last year, is set to open its 19th location. Heytea, a milk tea franchise that entered the Korean market around the same time, operates six stores centered on the Gangnam, Myeong-dong, and Hongdae districts. The Chinese milk tea brand Mixue entered Korea in 2022 and is operating 12 outlets mainly in university areas in Seoul.
The influence of Chinese dining franchise brands is on the rise. Haidilao, which entered Korea in 2014, plans to open its 11th location in Daegu this year. Haidilao posted domestic sales of 78 billion won last year. This year, domestic sales are expected to top the 100 billion won range.
Tanghuagongfu, a specialist in mala soup and malaxiangguo, recorded sales of 22.2 billion won last year, up 22% from the same period a year earlier. Over the same period, operating profit was 10.5 billion won, with an operating margin of 47%. It currently has 494 stores in Korea. Bantiancao Kaoyu, a Chinese-style steamed and grilled fish franchise that entered Korea in 2020, operates six stores centered on major districts such as Gangnam and Hongdae.
◇ Korea seen as a breakthrough amid slowing growth in China's domestic market
Behind the push by Chinese franchise brands to enter the Korean market is the slowdown in growth of the mainland's domestic market. According to Hongchanwang, a Chinese dining trade media outlet, 3 million establishments such as restaurants, cafes, and bakeries closed last year. An industry official said, "China's domestic market has already entered a saturated phase, and its growth has slowed," adding, "They have no choice but to seek a breakthrough in overseas markets, and one of those is Korea."
Another reason cited is that success in Korea is advantageous for entering overseas markets such as the United States, Japan, and Southeast Asia. In fact, Chabaekdo used its entry into Korea as a springboard to expand into 10 countries, including Spain, New Zealand, Thailand, and Malaysia. An industry official said, "Because Korea is sensitive to trends and has exacting consumption standards, it is regarded as a proving ground for overseas expansion," adding, "Success in the Korean market serves as a guarantee check for gaining trust in overseas markets."
The districts where these brands mainly open stores include Gangnam, Hongdae, Myeong-dong, Apgujeong, and university areas. These are regions dense with consumers who prioritize experience through spending, such as the MZ generation (born from the late 1980s to the early 2000s), influencers, and foreign tourists. An industry official said, "To raise brand awareness, you need many consumer touchpoints," adding, "Word of mouth via social networking services (SNS) also cannot be ignored. It's a strategy based on the judgment that these areas are the right place to build awareness."
The Korean market, where recent consumption trends are starkly divided into "premium vs. ultra-low price," is also seen as attractive. An industry official said, "We are building overseas expansion strategies in the Korean market, where brands focused on premium products and those competing with low-priced products coexist."
◇ Diverging views: overheated competition or new opportunity
With Chinese dining franchise brands entering Korea, competition in the franchise industry is expected to intensify. According to Statistics Korea, in 2023 the number of domestic franchise outlets was about 301,000, and total sales were about 108.8 trillion won.
An industry official said, "Korea's dining market is already saturated with competition," adding, "The large-scale inflow of Chinese brands armed with massive capital and mainland supply chains is highly likely to lead to short-term overheated competition in price and volume." Another official said, "There are also many Korean franchise brands offering milk tea, hot pot, and mala soup," adding, "As they compete with similar menus and flavors and aromas, marketing overheating cannot be ruled out."
Others see a possibility that fierce competition will lead to positive outcomes. Lee Jong-u, a professor in the business administration department at Ajou University, said, "Intense competition could later lead to price cuts or be linked to developing new menus tailored to more segmented consumer needs."