The rise of the bubble tea market in Malaysia

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The rise of the bubble tea market in Malaysia


KUALA LUMPUR: It’s almost noon, a long line was forming in front of a store in the SS15 business district, Subang Jaya.The outlet has not yet closed its shutters, but it hasn’t bothered people. They knew that if they persisted, the reward for their patience would come soon – in the form of a chilled milk drink sprinkled with black pearls.

There are more than 15 bubble tea shops within walking distance from each other.

Big Taiwanese brands like The Alley, Daboba, Chawanjia, The Black Whale, Xing Fu Tang, and JLD Dragon have claimed their presence here, while local establishments have also mushroomed to peddle their concoctions to the queuing crowd.

A queue begins to form outside of Xing Fu Tang in SS15, Subang Jaya, before the store opens.

Native to Taiwan, boba iced milk tea – fluffy tapioca “pearls” mostly starch-based – has taken over much of Asia, the United States, and Europe.

The Malaysian beverage craze started in 2010, when Taiwanese bubble tea giant Chatime opened its first outlet in Kuala Lumpur, paving the way for other brands to enter the market.

With priority given to marketing and product aesthetics, consumers were encouraged to post the drinks on social media, making them snowball.

How long can this craze last? Are businesses sustainable?

Those in the industry are optimistic about their prospects. Local brands, in particular, say they are on the market for the long haul.

However, it is important for businesses to monitor consumer behavior in order to detect any signs of loss of interest, so as not to be caught off guard.

One of the bubble tea brands that took Instagram by storm, Xing Fu Tang opened its first Malaysian outlet at SS15 in March.
The proliferation of stores around Xing Fu Tang in the months following its opening is surprising.

The competition will intensify as more bubble tea companies enter the same street, rising rents along the way.
Besides SS15, other commercial districts are also seeing the invasion of boba. Two examples are the suburb of Mount Austin in Johor Bahru, which contains around 30 bubble tea coffees, and the Cheras Traders Square in Kuala Lumpur, which has seen the influx of more than 10 brands.
Based on keyword research it is estimated that there are around 1,000 keyword searches related to the bubble tea franchise in Malaysia per month, and the number is increasing.
A bubble tea fan recalled spending two hours in a queue to take advantage of The Whale Tea’s opening promotion at a mall.
Long queue or not, I’m always ready to wait for a brown sugar boba drink, so I wasn’t too upset by the two-hour wait,” said another boba tea fan.
While some cafes add different drinks to the menu to stand out, the bestsellers are repetitive.”
In 2018, the Malaysian bubble tea market was valued at US $ 49.8 million and is expected to grow at a rate of 6.9% from 2019 to 2026, according to market analysis company Straits Research. Noting a constant influx of investments and the subsequent adoption of new flavors, he anticipates an increase in demand for the drink.
Despite strong competition at SS15, Xing Fu Tang has not seen a drop in sales, according to Cheong.
Point-of-sale sales are now reaching 4,500 cups per day, far exceeding their initial expectations of 1,000 cups. He remains optimistic that Xing Fu Tang can maintain the numbers by staying true to its brand identity while introducing new items.
Different brands offering almost the same menu and the same store design baffled him. Such duplication among players can only persist for some time,
sales reached 2,800 cups per day when it was first opened, and the company had reached break-even within nine days of operating.
Local establishments may find themselves at a disadvantage vis-à-vis international brands with strong pockets.
Founded in 2017 in Johor Bahru, all Chatto cafes are designed in Japanese minimalism. Japan is a country famous for its tea.
Pin Tea stands out by using fruit tea instead of the popular milk tea. Their boba is also balls of fibers extracted from algae instead of the usual starchy tapioca pearls.
The objective of the local players is to build a reputation and show that they can also offer high-quality drinks and experience and conquer all the major cities of Malaysia.
The first Pin Tea store opened its doors last August in SS15, right next to The Alley, a major player in Taiwanese bubble tea. It was not a declaration of war, nor a whiplash, according to Tan.
Chatime, on the other hand, prides itself on being one of the few bubble tea companies in Malaysia to obtain halal certification from the Federal Islamic Development Department of Malaysia (JAKIM). This can allay the doubts of the country’s Muslim majority as to whether the drink violates religious prohibitions.
The market is now heading towards the end of a secondary boom, he observed, where groups of imitators and speculators are trying to ride the bubble tea wave after seeing the success of the early innovators.
The final phase would then be depression when the readjustment process moves towards the end and only the most suitable players remain in the game.
For most players, however, the dream of bubble tea is still alive.
Xing Fu Tang and Chatto each aim to have 40 coffees by the end of the year, Pin Tea wants to have 10 more outlets in the next 12 months, and 2D has five or six franchise outlets on the cards.

Many players in the bubble tea market see the business as a fashion, that the stores will only last five to ten years. We are trying to change that perception by making our outlets more sustainable, so in 20 years you will see the same Chatime in the same place, ”said Aliza, CEO of Will Group.

 

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