How full equity buyouts could help China’s cooling bubble tea sector turn a new leaf

China’s bubble tea industry is entering a more cautious phase after years of rapid expansion and intense competition. Analysts now expect growth of mid to high single digits, down from the double-digit rates projected in previous years. Sandy Lim, director of S&P Global Ratings, said the slowdown followed years of capital being raised and deployed to pursue the same growth story. Against that backdrop, financial investors are changing their strategy, moving from early-stage investments and initial public offering subscriptions toward full equity buyouts of established brands. The latest example is Bain Capital’s acquisition of Gong Cha Global. On August 6, the global private investment firm said it had reached an agreement to buy the Taiwan-founded bubble tea brand from US private equity firm TA Associates and other shareholders. Bain Capital said it would work closely with Gong Cha’s management team and focus on expanding its store network in Japan, South Korea and the United States. The deal highlights the appeal of brands with established operations and identifiable overseas growth opportunities as China’s domestic market matures. Gong Cha operates almost 2,200 stores across 33 markets worldwide. It is well established in the Asia-Pacific region, particularly Japan, South Korea and Australia, and is also expanding in the Americas and Europe. The company has no stores in mainland China but operates outlets in Hong Kong and Macau. For investors, the transaction illustrates how private equity is adapting to slower sector growth. With broad double-digit expansion no longer assured, returns may depend more heavily on ownership, capital allocation and execution in selected international markets. The deal also suggests that established consumer brands with cross-border potential could attract greater interest than businesses relying primarily on continued mainland expansion.