The And Sense Of Working A Bubble Tea Enterprise In S’pore: Is It Truly Profitable?

The Dollars And Sense Of Running A Bubble Tea Business

Bubble tea is a beloved Taiwan traditional, with origins that date all the best way again to the 1980s.

The bubble tea craze has not solely gripped Asia, nevertheless it has additionally grown to turn into a world habit.

In accordance with Fortune Enterprise Insights, the Asia Pacific area holds the biggest market share and is predicted to develop at a compound annual development price (CAGR) of 10.07 per cent by 2027.

It additionally revealed that the worldwide bubble tea market measurement was valued at US$2.02 billion in 2019, and is predicted to achieve US$three.39 billion by 2027.

Zooming In On The Bubble Tea Scene In S’pore

The bubble tea panorama in Singapore has gone by a really attention-grabbing increase and bust section.

Bubble tea served in cocktail glasses / Picture Credit score: Chicago Guardian

First launched in Singapore in 1992, bubble tea took on an entire completely different idea again then. Drinks had been served in glasses, and bought at dine-in cafes as a substitute of takeaway kiosks.

Bubble Tea Backyard in Marina Sq. was the primary entrant to the market and bought flavours just like the Yam Shake, Honey Egg Yolk and Whisky Purple Tea. Surprisingly, the shop was a success and others scrambled to hitch the market.

The bubble tea fad peaked from March to October 2001, when retailers bought about 800 to 1,000 cups a day.

In 2002, the variety of bubble tea retailers in Singapore rose to at the very least 5,000, with many occupying the heartland space and steadily shifting to the takeaway mannequin.

Sadly, a surge in demand wasn’t enough to maintain the enterprise alive, as fierce competitors and worth cuts finally led to the loss of life of bubble tea on the finish of 2002. From then until 2004, many retailers closed down.

When Taiwanese bubble tea heavyweights Koi and Gong Cha entered Singapore in 2007 and 2008 respectively, the bubble tea hype noticed a resurgence.

The Alley at Jewel Changi AirportThe Alley at Jewel Changi Airport / Picture Credit score: Daniel Meals Diary

As an example, when Taiwanese bubble tea chain The Alley lastly landed in Singapore, its outlet at Jewel Changi Airport acquired an enormous fanfare, persistently promoting greater than 1,000 cups a day.

Bubble Tea Sees Continued Demand Right here

Precisely how standard is bubble tea in Singapore?

On Deliveroo, bubble tea is the preferred merchandise in its beverage class, with customers ordering 385,000 cups in 2018.

In the meantime, bubble tea orders on the GrabFood platform has seen greater than 700 per cent development in Singapore from Might 2018 to December 2018.

grab bubble tea clubSeize affords bubble tea subscription / Picture Credit score: Seize

In October 2019, GrabFood even rolled out Singapore’s first-ever bubble tea subscription. Priced at S$9, it permits Seize customers to get vouchers that can be utilized at Gong Cha, LiHo, Woobee and iTea.

The COVID-19 pandemic has additionally shed a highlight on Singapore’s obsession with bubble tea.

When the federal government introduced the closure of bubble tea joints throughout circuit breaker on April 21, many Singaporeans began queueing that very night time to get their final repair.

liho queueLengthy queues at LiHo a day earlier than circuit breaker / Picture Credit score: Mothership

When bubble tea shops reopened in Part 2, snaking lengthy queues fashioned but once more.

It continued to turn into a sizzling favorite on meals supply platforms — GrabFood noticed 60 per cent greater complete bubble tea orders in April final yr in contrast with the earlier month.

On Deliveroo, orders for the drink noticed a double-digit development between June and August 2020, in contrast with April to June.

Who Are The Key Gamers Now?

Variety of bubble tea shops in Singapore in 2019 / Picture Credit score: Statista

In accordance with Statista, Koi, Gong Cha and LiHo had probably the most variety of shops in Singapore in 2019.

A current test on their respective web sites present that LiHo has an amazing 96 shops in Singapore, whereas Koi has 60 and Gong Cha has 31.

It’s attention-grabbing to notice that LiHo made its debut in Singapore at a time when Gong Cha made its comeback after a short lived exit, and was meant to switch the model.

At launch, Rodney Tang, basic supervisor of RTG Holdings and the person who introduced the Gong Cha franchise to Singapore in 2009, transformed greater than 30 Gong Cha shops to LiHo.

Whereas Koi, Gong Cha and LiHo are dominating the bubble tea panorama in Singapore now, they’re more and more going through stiffer competitors as new gamers emerge.

As of January 2021, native meals weblog LadyIronChef reported that there are 62 bubble tea manufacturers in Singapore. This quantity has continued to snowball as new corporations frequently arrange store right here to hitch the bubble tea revolution.

Regardless, it’s a completely completely different battlefield now in comparison with 2011, when Every A Cup and Candy Speak — that are nonetheless round at this time — used to dominate the market.

How Profitable Is Bubble Tea As A Enterprise?

A Statista survey that polled Singaporean bubble tea shoppers in 2020 revealed that 69 per cent selected style as their important consideration when buying bubble tea, whereas 61 per cent acknowledged worth to be an element.

The value of bubble tea has considerably risen over time, virtually similar to a Starbucks drink. Within the early days, bubble tea had been largely bought at beneath S$2 a cup.

bubble tea price singaporeCosts of varied bubble tea manufacturers in Singapore / Picture Credit score: Seedly

Now, the costliest cup of bubble tea in Singapore is at about S$5 — from manufacturers like Jenjudan, Tiger Sugar and Xing Fu Tang, which specialises in brown sugar bubble tea.

In the meantime, the most cost effective bubble tea in Singapore is from Candy Speak at solely S$2.

When it comes right down to the and sense, how profitable is the bubble tea enterprise?

Gerald Hee, the managing director of Taiwanese chain Jenjudan in Singapore instructed Enterprise Instances that “promoting drinks provides the very best revenue margin.”

Bubble tea store operators reported web revenue margins starting from 20 to 30 per cent.

Koi Singapore, for one, turned in a income of S$45 million in 2017, and yielded a margin of 23 per cent, in keeping with regulatory filings.

In the meantime, LiHo instructed Vulcan Put up that it raked in S$30 million in annual income that very same yr.

With regards to the prices concerned to start out up a bubble tea enterprise, LiHo stated that it contains “tools and furnishings, house rental charge, price of ingredient, franchise charge, advertising and marketing charge and employees wage.”

To be worthwhile nevertheless, Joseph Oh, co-founder of homegrown bubble tea chain Bober Tea, stated that it “relies upon extremely on rental and labour prices.”

Goh Chee Cheng of one other homegrown bubble tea chain Yuan Cha, echoes his sentiments, agreeing that rental and labour price take up a really vital a part of the enterprise price.

As a benchmark, Benjamin Lim of Woobbee instructed Enterprise Instances that “the price of items and labour shouldn’t be greater than 25 per cent of gross income”.

“Good location” additionally performs an essential position, stated Joseph, including that manufacturers ought to supply for places with crowds of a younger demographic.

As an example, places with loads of faculties within the space make a superb guess.

yuan cha singaporeYuan Cha outlet / Picture Credit score: Yuan Cha

Chee Cheng nevertheless, holds a special opinion — he feels that the placement needs to be “accessible to a superb mixture of residential and industrial crowd” as a substitute.

For LiHo, it appears at strategic places which might be suitable with their wants and targets. Of their case, neighbourhood malls is the most suitable choice because it caters extra in the direction of home shoppers and have a superb steadiness of competing shops.

It added that relying on the shop quantity and market, operating a bubble tea enterprise is unquestionably worthwhile because the trade remains to be experiencing development.

To Break Even, It Can Take A Month Or A Yr

bober teaPicture Credit score: Bober Tea

Bober Tea began in 2017 after Joseph received impressed after touring to Taiwan and China for a enterprise journey.

Earlier than beginning up his personal bubble tea store, Joseph cited a number of issues: title and emblem of the enterprise, whether or not he might discover the correct suppliers abroad to verify his drinks can win different opponents, and whether or not to easily franchise or create his personal model.

He invested S$200,000 to arrange his first store, and spent one other S$40,000 on R&D efforts. It took him about 12 to 16 months to interrupt even.

“We need to differentiate from different manufacturers (by way of) the style and elements we use in our drinks,” stated Joseph.

Not like most manufacturers that use flavoured syrups, he claims that Bober Tea makes use of higher milk, matcha, brown sugar, creamer, in addition to recent fruits.

Presently, Bober Tea sells a mean of 500 to 700 cups a day.

Commenting on the bubble tea panorama in Singapore, Joseph famous that the trade has a “very low barrier of entry”.

Due to this fact, bubble tea manufacturers — new and previous alike — have to step up their recreation and “be extra progressive to create new drinks mixture” to keep up a aggressive edge.

LiHo as an example, first launched with the unfamiliar Cheese Tea, nevertheless it truly set individuals speaking and sparked curiosity for individuals to strive it out.

“LiHo’s model consciousness stored rising and naturally results in gross sales, and (we hit) breakeven inside a month,” stated a LiHo spokesperson.

liho redbullLiHo x Purple Bull / Picture Credit score: Darren Chiong through DANAMIC

Most lately, LiHo struck a partnership with Purple Bull as a part of its fixed efforts to push boundaries and provide one thing completely different.

On February 6, LiHo launched two limited-edition practical fruit teas that was created along with Purple Bull.

“We noticed the chance to create historical past — to be the primary beverage model to accomplice with Purple Bull right here in Singapore and jumped at it.”

“For the aim of this launch, we stored issues thrilling and progressive by creating an Instagram filter that lands on how the 2 manufacturers are there for our shoppers’ “second of want” – whether or not they’re making their method by countless to-do lists at work, burning the midnight oil finding out for exams, or preparing for that additional powerful exercise.”

The spokesperson added that LiHo focuses on each offline and on-line facets of selling to remain related and preserve the connection with its shoppers.

Covid-19 Is A Double-Edged Sword

Past coping with excessive rental and labour prices, bubble tea manufacturers now should deal with the Covid-19 pandemic.

“With the push in the direction of the ‘new regular’, it’s onerous to have a transparent method ahead. Your complete retail trade, not simply bubble tea, must rethink,” stated Chee Cheng.

“The bubble tea enterprise isn’t all rosy. Gross sales have dropped to solely 20 per cent as a consequence of Covid-19, (and) we’re going to shut our outlet at UE Bizhub very quickly.”

Following the closure, Yuan Cha may have two remaining shops at Jurong Level and Far East Plaza.

He additional lamented that many malls are nonetheless asking for “sky-high rental (charges)”, which makes it tough for SMEs like Yuan Cha to outlive.

Regardless, he stated that Yuan Cha will do its finest to carry on to its different two shops.

For LiHo, though the closure of standalone bubble tea joints did take a success on its gross sales, it didn’t merely put up a white flag and name it a day.

LiHo DIY bubble tea kitLiHo DIY bubble tea package / Picture Credit score: LiHo

As an alternative, it was the primary to introduce DIY bubble tea kits to Singapore so bubble tea followers can preserve their cravings at bay from house. Every set could make 15 to 20 cups, and retails for S$85.

Moreover, LiHo continued to increase and opened 10 new shops final yr regardless of Covid-19.

However then, when is the ‘proper’ time to exit the bubble tea trade?

Chee Cheng mused that all of it is dependent upon the enterprise itself. If manufacturers put within the effort to evolve with time, they’re more likely to keep within the recreation for lengthy.

Merely put, companies have to disrupt, or get disrupted.

In the meantime, LiHo confidently expressed that it has received the hearts of its shoppers over time and maintained that it’ll “be round for some time (extra)”, however will frequently work on exploring development and alter.

The identical goes for Bober Tea — Joseph believes that bubble tea is a “long-lasting trade” and doesn’t foresee an exit anytime quickly.

In truth, each manufacturers have long-term plans for worldwide enlargement and additional develop their footprint in Singapore.

A Burgeoning Alternative

Presently, bubble tea has developed to turn into a quintessential drink for Singaporeans, very similar to espresso and tea.

Many manufacturers are pioneering progressive bubble tea drinks throughout an intensive market, they usually’re even penetrating the meals trade.

Historically handled as extra of a dessert drink due to its sweetness and “chewing” expertise, bubble tea has developed to tackle completely different meals kinds like seaweed snacks, prompt noodles, bread, ice cream, and even sizzling pot.

As one of many most-frequently consumed drinks, there’s clearly a burgeoning alternative for a lot of entrepreneurs and companies throughout the trade.

Featured Picture Credit score: South China Morning Put up

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