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Bubbling excitement for bubble tea across South-east Asia has helped the industry grow to a whopping US$3.7 billion in 2021 — spent on both bubble tea and similar “new tea” drinks, according to a study published on Tuesday (Aug 16).
The report, jointly conducted by venture outfit Momentum Works and payments startup qlub, also found that Indonesia’s bubble tea industry ranked first in terms of market size among all South-east Asian nations — with an annual turnover of US$1.6 billion.
Thailand comes next in the ranking, with an annual turnover of US$749 million through some 31,000 bubble tea stores and other retail channels.
Vietnam comes close at US$362 million. Meanwhile Singapore, being the smallest nation in the region, comes in fourth with an annual turnover of US$342 million.
Despite the country’s size, Singapore consumers were found to have the highest purchasing power. The average price of a bubble tea order is nearly twice than that of other countries in the region. This makes it a great entry point for premium brands, the researchers wrote in their report.
At present, there are more than 60 active bubble tea brands in Singapore covering different tastes and price ranges. Singapore was also notably the first South-east Asian entry point for “premium brands” like Heytea.
It’s a well-known fact that Taiwanese and homegrown brands have been dominating the region’s bubble tea industry. However, that might be about to change as a slew of Chinese brands make their way into South-east Asian markets.
The bubble tea market in China, estimated to have an annual turnover of US$20 billion, has already seen some of its popular Chinese brands like Mixue, Chagee and Heytea segue into South-east Asia. These brands join earlier counterparts like Gong Cha and Koi.
Saturated market, increasing competition
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According to Momentum Works, the gross margin is estimated at around 60 to 70 per cent. However, despite the good product gross margin, few players have managed continuous profitability at a large scale. Nayuki for example, the first “new tea” brand to go public, has seen its market cap plunge over 70 per cent since.
“Many young people in South-east Asia want to open a bubble tea shop someday. Though there are high margins, bubble tea is a low-differentiation game with easily replicable products and a challenging supply chain,” said Sik Hoe Yong, chief operating officer of qlub.
However, he believes that consumers’ love for bubble tea is one that is unlikely to change anytime soon, though they are likely to vote for their favourite brands with their wallets.
Founder and chief executive of Singapore-based Momentum Works, Jianggan Li, also sees rising competition for existing local players. There is an emerging group of Chinese players who are good at branding, product/supply chain and cost management.
“It’s not difficult to observe and learn their play and strategy, but what’s more important is to ensure positive unit economics and good return on investment,” Li said.
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