, Southeast Asia
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Southeast Asia's coffee and tea shop sales surge to $4.4b

Singapore was seen by some coffee chains as a strategic hub for their international ventures in the coffee industry.

Coffee chains originating from Southeast Asia have been extending their reach beyond local borders, with specialist coffee and tea shops in the region posting sales soaring to $4.4b in 2023, with an expected 8% annual growth rate through 2028, according to Euromonitor International.

Chinese coffee giants Luckin and Cotti Coffee, along with Indonesia's Kenangan Coffee, are expanding into international markets, starting with Singapore. 

“The strategy to enter Singapore is attributed to its status as a financial hub, as well as its visibility for international investors leading to future expansion,” Nathanael Lim, Insight Manager at Euromonitor International, said in the report.

Luckin Coffee made its overseas debut in Singapore in March 2023. The chain's aggressive expansion, featuring enticing promotions and unique flavours, has gained widespread attention. Its pricing in Singapore is also higher than in its domestic market.

Similarly, Kenangan Coffee entered Malaysia and Singapore in 2022 and 2023, respectively, boasting a network of 50 outlets. Kenangan Coffee also utilized complimentary vouchers and emphasized its local espresso offerings to attract customers.

However, as competition intensifies in Southeast Asia's coffee landscape, concerns arise regarding the sustainability of numerous chains. The recent exit of Flash Coffee from Singapore in late 2023 highlighted the challenges faced by players in this market. Despite aggressive expansion efforts, Flash Coffee struggled to retain its customer base in the face of fierce competition from newcomers.

Southeast Asia's per capita spend in coffee shops remains relatively low at $7.3 in 2023, trailing behind the global average of $14. 

ALSO READ: TOMORO Coffee enters Singapore market

Looking ahead, the coffee chain landscape in Southeast Asia is poised for further consolidation, with profitable players expanding their footprint while non-profitable ones make their exit. 

“To thrive in the long term, regional chains need to have strong investor funding as they expand their presence. This is amidst global high interest rates which might pose a challenge for expansion,” the report read.

Additionally, diversifying service options to include dine-in experiences and exploring alternative channels such as vending machines, drive-throughs, and subscription services will enhance convenience and accessibility for consumers in the region.
 

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