How to be like Chagee | Story and Strategy

Chagee, a brand originating from Yunnan, that took the essence of Chinese tea culture, and its goal is to become the oriental Starbucks. It has rapidly carved a significant niche in the competitive Malaysian and Southeast Asian markets. Their success isn’t accidental; it’s a result of a well-defined and meticulously executed strategy. For aspiring entrepreneurs and those looking to understand the dynamics of a thriving franchise, dissecting Chagee’s approach offers invaluable lessons.

The Story of Chagee’s Founder

While specific details about the individual founder of Chagee might not be as widely publicized as some other franchise stories, the narrative surrounding the brand emphasizes a deep appreciation for traditional Chinese tea culture, coupled with a modern, consumer-centric approach. The brand’s origin story likely revolves around a passion for high-quality tea and a vision to elevate the traditional tea drinking experience for a contemporary audience. This foundational respect for tea heritage is subtly woven into their brand identity, as evidenced by the retention of “Cha” in their name, bridging tradition with modern appeal. Understanding this initial passion and the desire to innovate within a traditional framework is the first step in appreciating Chagee’s strategic direction.

Championing Hero Products

One of the core tenets of Chagee’s success, as highlighted in the provided reference, is their product strategy with fewer SKUs, focusing on hero products. Instead of overwhelming customers with an extensive and often confusing menu, Chagee strategically curates a selection of signature drinks that they excel at. This allows for several key advantages:

• Mastery of Quality: By concentrating on a smaller range, Chagee can ensure consistently high quality in their ingredients, preparation, and presentation of their core offerings. This focus on excellence builds customer trust and loyalty.
• Operational Efficiency: A streamlined menu simplifies inventory management, staff training, and overall store operations, leading to greater efficiency and potentially lower costs.
• Brand Recognition: Hero products become synonymous with the brand. For Chagee, drinks like their “Da Hong Pao Perfumed Lemon Tea” and “Tie Guan Yin Milk Tea” have become signature items that customers specifically seek out. This creates a strong brand identity around these key offerings.
• Marketing Punch: Focusing marketing efforts on a few star products allows for more impactful campaigns and clearer messaging, driving consumer interest and trial.

This strategic emphasis on hero products demonstrates a clear understanding of the Pareto principle – that a significant portion of results often comes from a small percentage of efforts. By identifying and perfecting their star performers, Chagee has built a strong foundation for growth.

The Allure of Chagee’s Merchandise

The reference also points to Chagee’s heavy investment in its marketing – around ¥1 billion ($137m) last year – with a focus on branded merchandise. This isn’t just about slapping a logo on a cup; it’s a strategic move to:

• Enhance Brand Visibility: Branded merchandise, from aesthetically pleasing cups and tumblers to other lifestyle products, acts as walking advertisements, extending brand reach beyond the point of purchase.
• Foster Brand Loyalty: Well-designed and desirable merchandise creates a sense of ownership and belonging among customers, strengthening their connection with the brand.
• Drive Engagement and Social Sharing: Unique and appealing merchandise encourages customers to share their purchases on social media, generating organic buzz and attracting new customers.
• Create Additional Revenue Streams: Merchandise can also contribute directly to revenue, further bolstering the franchise’s financial performance.

Chagee’s approach to merchandise suggests a deep understanding of consumer psychology and the power of tangible brand experiences. By creating items that customers genuinely want to own and use, they transform a simple beverage purchase into an ongoing brand interaction.

The Winning Formula: Differentiation and Scarcity

Chagee’s success can be attributed to a potent combination of differentiation and scarcity, although the reference explicitly mentions differentiation through product focus and marketing investment.

• Differentiation: Chagee differentiates itself through its focus on “original leaf fresh milk tea,” positioning itself as a purveyor of higher-quality tea experiences compared to more generic bubble tea offerings. Their investment in branding and aesthetically pleasing stores further contributes to this differentiated image. The unique flavor profiles of their hero products, like the Da Hong Pao infused lemon tea, also set them apart.
• Scarcity (Implied): While not explicitly stated as a primary strategy, the focus on specific, high-quality hero products can create a sense of “must-try” exclusivity. Limited-edition merchandise or seasonal hero product variations can further amplify this feeling of scarcity and drive demand. The buzz generated by their strong marketing and popular products also contributes to a perceived scarcity of missing out on the Chagee experience.

This combination of offering something distinctly appealing and creating a sense of desirability has been crucial in attracting and retaining a loyal customer base.

An Analysis of Chagee’s Strategy for Globalization

The provided reference offers valuable insights into Chagee’s strategies for internationalization, particularly focusing on their approach to translation and cultural adaptation. Their key strategies appear to be a thoughtful blend of domestication and foreignization:

• Brand Name Adaptation: The name “CHAGEE” itself demonstrates a slight leaning towards domestication with its concise pronunciation being easily grasped by English speakers. However, retaining “Cha” introduces an element of foreignization, subtly linking it back to its Chinese tea origins. This creates a memorable and approachable brand name with a hint of its heritage.
• Product Name Translation: Chagee cleverly integrates both strategies in their product naming. For example, “Da Hong Pao Perfume Lemon Tea” retains the Chinese pinyin “Da Hong Pao” (foreignization), preserving its cultural significance and unique identity, while pairing it with the familiar “Lemon Tea” (domestication) to enhance understanding and appeal to a global audience. Similarly, “Tie Guan Yin Milk Tea” uses the recognizable “Milk Tea” while keeping the original “Tie Guan Yin,” educating international consumers about a specific type of Chinese oolong tea.
• Balancing Cultural Sensitivity and Brand Identity: Chagee recognizes the importance of functional equivalence in their marketing materials. They aim to convey the brand story and product features in a way that resonates with different cultural backgrounds. This involves understanding local expectations and perceptions and making necessary adjustments while still maintaining the core essence of the brand.
• Cross-Cultural Adaptability: The brand emphasizes the need for translators to have a deep understanding of both the source and target cultures. This ensures that the brand’s message is conveyed accurately and respectfully, avoiding any cultural misunderstandings.

Chagee’s approach to globalization highlights the crucial role of linguistic and cultural intelligence. They are not simply translating words; they are carefully crafting their brand narrative and product offerings to resonate with diverse audiences while staying true to their core identity. This nuanced approach to internationalization is likely a significant factor in their successful expansion.

Lessons for Aspiring Franchise Owners

While replicating Chagee’s exact success requires numerous factors to align, their strategic blueprint offers valuable lessons for anyone looking to build a thriving franchise:

• Identify and Perfect Hero Products: Focus on a core offering that you can deliver exceptionally well.
• Invest Strategically in Branding and Marketing: Create a strong brand identity and utilize marketing to build awareness and desire. Don’t underestimate the power of well-designed merchandise.
• Understand Your Target Audience: Whether local or global, deeply understand their preferences and cultural nuances.
• Prioritize Quality and Consistency: Build trust by delivering a consistently high-quality product and experience.
• Consider a Phased Approach to Expansion: Learn from Chagee’s thoughtful approach to globalization, prioritizing cultural sensitivity and effective communication.

In conclusion, Chagee’s success story is a compelling case study in strategic brand building. Their focus on hero products, savvy marketing including impactful merchandise, and a culturally intelligent approach to globalization provide a roadmap for aspiring franchise owners. By understanding and adapting these key principles, one can certainly learn how to “brew success” in their own ventures.

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Resources:

1. ChinaSkinny, CHAGEE: A case study for simplification and merchandise done well, https://chinaskinny.com/blog/chagee-china-merchandise
2. International Journal of Social Sciences and Public Administration, A Case Study of CHAGEE,
   ISSN: 3005-9836 (Print), ISSN: 3005-9585 (Online) | Volume 4, Number 2, Year 2024

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