Bubble Tea / Boba Milk Tea
Usually, when you find something slippery and gooey in your drink, it’s time to call for the manager to complain, but not when you are drinking Bubble Tea! Gooey and slippery balls are exactly what you are looking for.
Boba Milk Tea, or more commonly known as Bubble Tea, is composed of a tea base, usually Black or Jasmine Green Tea, a milk/creamer component and tapioca/boba on the bottom of the cup. While Boba Milk Tea refers to a specific drink, Bubble Tea is a more general categorical description of a line of beverages offered in a typical tea bar, such as tea, slush, smoothies, juices, and more.
What exactly is Boba? Boba is basically tapioca. When perfectly cooked it turns into a brown ball with a certain degree of transparency on its outer walls. It is chewy and slippery: soft and gooey on the outside, and chewy within. Boba by itself is not sweet; it is rather tasteless. When serving Boba, it is best to soak it in honey or sugar syrup to keep it soft and flavored. It can be added to a variety of drinks, both hot and cold.
Market Trend
Boba originated from Taiwan two decades ago. A small retailer dared to add boba to his Bubble Tea menu and revolutionized the beverage industry in Taiwan. Today, the trend has spread from Taiwan to other Asian countries and eventually reached North America.
Penetration On The West Coast
With its Asian roots, it is natural that the penetration of Bubble Tea is most evident in the Asian/Asian American community. While other Asian communities were not as familiar with this product as their Chinese counterparts, other Asian/Asian American communities are becoming more aware of this new beverage concept. In the greater Los Angeles market, most Asian restaurants now offer variations of Bubble Tea products to their beverage menu.
East Coast Market
Because the East coast lacks the more concentrated and organized Asian communities that the west coast enjoys, the penetration of Bubble Tea is relative low in comparison. However, it is notable that the larger chain stores are strategically establishing their locations in the East Coast cities such as New York, Boston, Orlando, etc. Most of the Bubble Tea bars on the East Coast are located in Asian communities, with a growing number of new stores operated by non-Asian owners located in non-Asian communities.
Mainstream Market
With rapid growth in the West Coast, the Bubble Tea bars are mostly concentrated in a handful of regions, creating near-saturation in these areas, in particular, Los Angeles. Yet, there are still much potential and room for growth.
This new beverage concept had long caught the attention of media. Reports from news media such as CNN and ABC, magazines and newspapers such as Time and the LA Times, and TV shows like “The View” helped to create overall awareness of this product. As the result of media attention, more and more Caucasian and non-Asian customers are embracing this trend and becoming more willing to try the drinks.
With 50% conversion rate, half of first time customers become repeat customers and those who are not accustomed to the taste of Boba often enjoy jelly as a substitute and the overall conversion rate is remarkably high.
Investments
Comparing to running a restaurant, the establishment and operation of a Bubble Tea bar is relatively uncomplicated. With its lower initial investment and high profit margin and its ready appeal, entrepreneurs are showing great interests in establishing Bubble Tea bars or adding Bubble Tea to their existing product offerings.
Consider a typical store with 1500 square feet, the initial investment including construction, equipment, rent, raw materials, etc. ranges from $120,000-$150,000. Not considering the fixed cost of monthly rent, tax, insurance and employee salaries, the average margin per 16oz beverage is a whopping 700%. For a typical 1500 square feet establishment, with a daily sale of 500 cups at $3/cup, a store could restore its initial investment in two years. The high profit margin attracts entrepreneurs to establish their own business in areas such as Colorado, Texas, Georgia, New Jersey, Florida, New Mexico, New York and other states with low market saturation.
Fad?
Since its first arrival in the US market, many critics had pronounced Bubble Tea to be a fad and predicted its early demise. However, evidence shows that Bubble Tea is here to stay.
While coffee still dominates the market, tea is quietly gaining more followings. Specialty coffee shops are now carrying more tea products to satisfy the needs of their customers. The increasing acceptance of tea products opens the doors for the introduction of Bubble Tea to the mainstream consumers. With proper marketing tactics and positioning, Bubble Tea will play an important role in shaping the beverage industry.
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