Then Bloomberg reported last month that Loob Holding Sdn, which owns the Tealive bubble tea brand, was headed for a Malaysian initial public offering (IPO) that could raise as much as 300 million ringgit (S$98 million), according to sources.
In Singapore, there has been renewed hype in bubble tea in the past year, spurred by the entrance of well-known global franchises, and local entrepreneurs stepping up to give those brands a run for their money.
But the story of bubble tea in Singapore dates back almost three decades. While frozen yogurt, Rotiboy and doughnuts made a loud bang, then quietly retreated, bubble tea has clearly withstood the test of time to become more than just a fad. What’s the secret?
Back with a bounce
Bubble tea looked quite different when it was first introduced to Singapore in 1992. Back then, the drink was served in big, round cocktail glasses and customers drank it seated at shops called “bubble tea huts”. The first entrant, Bubble Tea Garden in Marina Square, sold whacky flavours such as Yam Shake and Honey Peppermint, chock-full of sugar and bright colours.
Slowly but surely, bubble tea grew its fan base and in 2002, the number of bubble tea shops had swelled to at least 5,000. It helped that by that time, the “takeaway” model had grown popular. With shops needing to occupy only about 200 to 400 sq ft, bubble tea spots were populating the heartlands and creating ubiquity; it generated a positive reinforcement loop that kept the drink at the top of consumers’ minds.
As competition escalated and price wars erupted, the business reached a saturation point before the bubble finally burst at the end of 2002. From then till 2004, many shops across Singapore folded.
One of the businesses that outlasted the pressure was Each-A-Cup. Founder Chua Keem Long is certain that it was quality standards that allowed his company to tide through the collapse back then. “Everyone was focused on franchising, and there was not enough training. When staff were not trained well, the drinks went bad,” says the 69-year-old Mr Chua, who started the business in 1999.
To be sure, Each-A-Cup suffered too. Its 51 outlets in August 2001 took a hit and dwindled to 15 by the end of 2003. Although the business chalked up losses in the hundreds of thousands for a number of years, those remaining outlets managed to sustain themselves.
Today, the company has about 40 outlets in Singapore, half of which are operated by franchisees. It also has a presence in Malaysia, Indonesia and Brunei. Till this day, Each-A-Cup has never taken its eye off quality standards and training, says Mr Chua. Most of its ingredients are sourced from Taiwan, the home country of bubble tea, where Mr Chua spent years in the F&B industry and other businesses.
The thought of supplies coming from anywhere else leaves him scandalised. “Bubble tea is from Taiwan. The best suppliers are in Taiwan. How can you source from anywhere else?” he asks in all incredulity.
This connection to the birthplace of bubble tea seems almost venerable. So perhaps it is apt that it was the entrance of Taiwanese brands Koi in 2007 and Gong Cha in 2009 that brought on the second wave of the bubble tea boom in Singapore.
While the two heavyweights dominated the classic Singaporean queues, other bubble tea shops were stirring as well. A key difference this time around was the speed of creativity in the bubble tea business.
Homegrown brand Woobbee, which began in 2010 and recently opened its fourth outlet at one-north, patiently grew its office crowd following through the years.
It prides itself on consistently delivering the taste of fragrant tea well-balanced with milk, while using natural raw sugar. Importantly, the company has been quick to adapt to consumer trends – such as the health movement – and bold enough to roll out new concoctions.
One of its best-selling flavours is Herbalmint Milk Tea, made from none other than Pei Pa Koa, the traditional Chinese herbal remedy for coughs.
“Bubble tea is flexible and easy to work with – you can take out anything and add anything,” says Benjamin Lim, the shop manager of Woobbee.
This explosion in variation of bubble tea is crucial to its success. Because consumers are able to choose and customise their drinks to such a great level of detail, it gives rise to “consumer sovereignty”, as business professor Ang Swee Hoon puts it.
Consumer sovereignty is when consumers have the choice and power to buy what they want, which in turn affects what goods and services are made.
The marketing expert at the National University of Singapore (NUS) said that few food products give consumers so much sovereignty. Food is usually “fixed” – they come as they are. But bubble tea is designed in a way that gives consumers the power to control what they drink.
A typical bubble tea order is composed of four parts: flavour, topping, sugar level and size. On top of this, a standard bubble tea menu lists about 40 flavours, five toppings, four sugar levels and two sizes. Which other food or beverage can boast this many permutations?
Beyond the drink
Perhaps one of the most valuable lessons from the bubble tea business is that consumption isn’t just about functionality or achieving utilitarian goals. “Consumption could also serve more experiential or hedonistic goals, but also, importantly, symbolic goals,” says Leonard Lee, a professor at NUS that researches consumer psychology.
So crucial is the bubble tea experience that drinkers can, over time, develop certain quirks – like a sensitivity to the pearl-tea ratio.
“How can I drink bubble tea to ensure that I finish the bubbles and the tea at around the same time?” asks one drinker on online forum Quora.
A fellow user volunteers his method:
“Imagine your cup is divided in 4 regions.
Punch your straw right through the middle.
Before every sip, slide your straw up, then point it to the next number.
2 * 3
As you sink the straw, make spiralling motions to stir the boba bubbles. You don’t have to reach the very bottom of the cup, but just enough to suction in a few bubbles at a time.”
A Facebook post that came up with a lighthearted mathematical solution to the question inspired a data visualisation engineer at Airbnb to come up with his own visual simulation on how to optimise each sip of bubble tea.
The Medium article, which considered factors such as cup dimension and volume of ice, reached hundreds of thousands of readers from different parts of the world mainly because of social media, the author Krist Wongsuphasawat said in an email. It has even been referenced at data visualisation talks. It’s clear that the popularity of bubble tea goes beyond its taste. On a higher level, it has even become somewhat part of the Asian identity, perhaps explaining how it has captured so much mindshare.
And culture and identity are things that people care about and will defend when they come under attack, says Charlene Chen, a consumer psychologist at Nanyang Technological University.
In 2017, the New York Times published a feature article about bubble tea becoming mainstream. Readers criticised it for describing the drink as strange and alien, and especially took the news outlet to task for the use of the word “blobs”.
“It highlights otherness rather than uniqueness, defines familiarity through a non-diverse lens, and for me evokes the unpleasant feelings of being the kid in a non-diverse neighbourhood bringing ‘weird’ lunches to school,” said one reader. The article drew so much flak that the next day, the NYT ran an editorial with the headline: “Our Readers Call Us Out Over Bubble Tea. They Are Right.”
Milking the business
Part of what helped turn bubble tea into an everyday drink is its price point. Just a few dollars more than a cup of teh-c and a few dollars less than a cup of Starbucks for a quality drink that comes customised.
But with each cup being priced so affordably, just how lucrative can the business be?
Bubble tea shop operators say net profit margins range from 20 to 30 per cent. Koi Singapore, for one, turned in a revenue of S$45 million in 2017, and yielded a margin of 23 per cent, according to regulatory filings.
“In the F&B industry, it’s a known fact that selling drinks gives the highest profit margin,” says Gerald Hee, the managing director of Taiwanese chain Jenjudan in Singapore.
Woobbee’s Mr Lim says the biggest expenses in running the business are rental and labour costs. But as a good benchmark, “the cost of goods and labour shouldn’t be higher than 25 per cent of gross revenue”.
Even after more than two decades of being in Singapore, bubble tea has found new avenues for growth. Ivan Chua, Each-A-Cup’s business development manager and son of the founder, says that ever since its outlets got onto food delivery platforms, staff have been struggling to cope with the volume of orders. Data that Deliveroo shared with The Business Times showed that bubble tea is the most popular item in the beverage category, with users ordering 385,000 cups in 2018. Bubble tea has been available on the platform since November 2016.
Its rival foodpanda said bubble tea orders account for about 5 per cent of total orders now. (In comparison, the most ordered item on foodpanda – fried chicken – takes up about 30 per cent of total orders.) There are more than 100 bubble tea shops on its platform, while there are around 200 bubble tea shops on Deliveroo.
Meanwhile, GrabFood told Business Insider that bubble tea was the second most commonly ordered food item in Singapore in 2018, overtaken only by fried chicken. In South-east Asia, users ordered bubble tea once a week on average.
Now that bubble tea has established itself as a lifestyle drink, more brands are daring to invest into the “cafe concept” to let customers sit down and relax over drinks. It’s almost a throwback to the days of the bubble tea hut.
When Gong Cha made a comeback after leaving Singapore in 2017 – its previous master franchisee RTG Holdings decided to cease operations after a disagreement with the parent company, then started Liho – it opened its first outlet at SingPost Centre, complete with seating and digital ordering kiosks. Meanwhile, Koi launched Koi Signature at Jewel Changi Airport, a dine-in concept store with an exclusive menu and desserts.
For Mr Tan, bringing The Alley to Singapore also represented the chance to do something different. The Alley Luxe, a 1,000 sq ft store which opened at Orchard Cineleisure two weeks ago, is the chain’s first premium concept in the world.
The drinks there are about 10 per cent more costly on average, but the store, with its black and marble design tinged with gold, is able to comfortably seat about 30 people. Customers can also order European pastries from popular local bakery Bakery Brera and buy branded merchandise.
It’s a big hit in terms of rental costs, but Mr Tan is certain that it will pay off. “We want to position ourselves as a lifestyle brand,” he says.
More drinks are in the pipeline, which will be “very much different in terms of flavour, taste and aesthetics”, he promises. In the true spirit of bubble tea, each drink has to be scrutinised by the R&D centre at The Alley’s headquarters, and it will be three to six months before any of them go to market.
The third wave – and second burst?
Jenjudan’s Singapore operators began chasing the Taiwan company for the master franchise three years ago. Having felt the effects of a fad firsthand, Mr Hee knew that bubble tea was something else.
In 2017, he and his partner introduced to Singapore another Taiwanese brand called Le Castella, known for its jiggly Japanese sponge cake. People queued up to six hours just for a piece of it. But within a year, everything died down.
“I’ve experienced a fad, and when it drops, it drops really bad,” he says. With Jenjudan, he sees stability and room to grow. The company is opening another outlet in August, likely at Orchard Gateway, and eyeing entry into Indonesia.
It makes sense for international chains such as Tiger Sugar and Jenjudan to expand. But homegrown brands want a bigger slice of the pie too.
It has been a taxing journey for the founders of Bober Tea, which opened its first outlet at Bishan MRT almost a year ago. The pair travelled Taiwan and realised there were more ways to get creative with bubble tea; co-founder Joseph Oh spent up to five hours every day trying to perfect each flavour, often vomiting after drinking too much.
The effort is paying off. After spending S$250,000 on starting the business, Bober Tea now sells an average of 600 cups a day and would have broken even within these few months if it had not invested in expansion.
Mr Oh and his partner, Eugene Yap, sold the master franchise licence for Manila two months ago and are currently meeting interested parties for a franchise in Kuala Lumpur.
Part of Bober Tea’s appeal is how in tune it is with the millennial crowd. Its aesthetic cups of bubble tea, with its rounded base, have been dubbed “Instagram-worthy”; it has a take-home version in the form of a sleek and portable bottle at no extra charge; and it is known for its milk caps, a smooth layer of cream made with Hokkaido fresh milk that floats on top of the tea. The shop has even given away 5,000 metal straws to surf the environmentally conscious wave, and stationed itself at trade fairs and exhibitions.
With Singapore well into the beginnings of a third wave of bubble tea – the first was its entry, the second was brought on by Koi and Gong Cha in 2010 – some are wondering how long this exuberance can last.
Marketing expert and author Jacky Tan says the bubble tea market is thriving much more than it was a few years ago because of a higher barrier to entry, driven by demand for the best brands. Back then, there was hardly a difference in the taste of drinks across shops, causing shops to compete on price, which led to a slippery slope of thin margins and eventual closure.
Winners in this third wave would be the ones that can differentiate themselves well, says Mr Tan. “Brand differentiation creates an invisible barrier to entry. Without it, you are inviting more competition on your products and services.”
Bubble tea brands have, no doubt, caught on. Koi and The Alley look like they’re gunning for a lifestyle concept; Tiger Sugar and Jenjudan specialise in brown sugar drinks; and Each-A-Cup has a health-conscious edge, having revamped its menu in 2015 to categorise drinks according to health benefits. Many bubble tea shops have come up with loyalty programmes too.
Experts that BT spoke to are not expecting a second bubble burst. Still, some consolidation is inevitable, and brands will have to find their niche, they say.
In the meantime, Mr Chua, the 20-year bubble tea veteran, has some pearls of wisdom to offer.
“The bubble tea business will keep on going. It won’t be like the last time anymore because now it’s stable; everybody knows how to drink bubble tea. New players coming in is even better – more people will drink. The sky is so high!” he says with a toothy grin.