Gong Cha Korea: Potential Sale as Growth Slows & Overseas Expansion Gains Traction

Seoul – Gong cha, the Taiwanese bubble tea franchise, is once again the subject of potential ownership changes as its parent company explores a sale, October 30th reports indicate. The move comes six years after its acquisition by U.S. Private equity firm TA Associates, sparking market speculation about the future direction of the globally recognized brand.

While previously hailed as a successful private equity investment, particularly within the franchise sector, Gong cha has reportedly experienced a slowdown in growth within its key South Korean market. This has led to increased scrutiny regarding the potential exit strategy for TA Associates, with industry observers suggesting that the performance of its Korean operations will significantly influence the franchise’s valuation.

According to sources within the investment banking sector, several domestic and international private equity firms have expressed interest in acquiring Gong cha Korea, but no formal transactions have materialized. TA Associates has not initiated a formal sale process, but has reportedly gauged the interest of select investment firms.

Rumors of a potential sale surfaced in 2023, coinciding with increased competition within South Korea’s coffee and dessert market. However, company officials dismissed these claims at the time. Estimates then placed a potential sale price between 600 billion and 700 billion Korean won.

Gong cha’s aggressive expansion strategy following its 2014 acquisition by UCK Partners, which included the acquisition of the Taiwanese headquarters in 2016 and expansion into Japan, initially fueled rapid growth. TA Associates acquired Gong cha Korea from UCK Partners in 2019 for approximately 350 billion Korean won, delivering a substantial return on investment for UCK Partners – reportedly six times their initial capital.

However, the high growth rates experienced prior to the TA Associates acquisition have not been sustained. Gong cha Korea’s net profit fell from 33.4 billion Korean won in 2019 to 19.5 billion Korean won in 2020 and 12.1 billion Korean won in 2021, impacted by the COVID-19 pandemic. While a slight recovery was observed in 2022, with profits reaching 14.2 billion Korean won, 2023 saw a significant decline to just 4.3 billion Korean won – a roughly 70% decrease.

In an effort to revitalize the business, Gong cha appointed former Milleg Korea CEO Ko Hee-kyung as its new chief executive at the end of 2023, focusing on strengthening its global business capabilities.

Analysts suggest that changes in management and overall business strategy following the TA Associates acquisition may have contributed to the recent performance. The firm’s initial focus on rapid growth may have created internal discrepancies between the company’s vision and existing management, potentially leading to personnel changes. TA Associates has largely allowed the company to manage its franchise operations both domestically and internationally.

Despite challenges in the domestic market, Gong cha’s international performance, particularly in Japan, is viewed positively. The company operates over 150 stores in Japan, and its profitability in that market is reportedly higher than in South Korea. This has led to speculation that Japanese companies may emerge as potential bidders should a formal sale process commence.

Gong cha has been actively pursuing global expansion, identifying Japan, the United States, and the Middle East as key target markets. The company recently signed a master franchise agreement with Saudi Arabia’s Shahia Foods Group to open 300 stores across the Middle East and is planning to open its first store in Mongolia in August 2025. The company also plans to debut in Washington D.C. And Puerto Rico, and is exploring opportunities in Central America.

The potential sale of Gong cha Korea reflects a broader trend of private equity firms reassessing their investments in the food and beverage sector, where successful exits are less common. While once considered a “success story,” Gong cha’s recent financial performance suggests a more complex outlook for its future ownership.