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The Business of The Bubble Tea Craze

The battle over bubbles is brewing in nearly every corner of the globe.

In Malaysia, we see it in the “bubble tea street” of Subang, where competitors have no qualms about stationing themselves right next door to each other, and the stretch of eager customers spanning the length of several shoplots make their appearance every night without fail.

We see it in the mushrooming of bubble tea outlets all over the country, from independent boutique outlets to the arrival of franchises from some of the most internationally recognized chains worldwide.

But what exactly is it about these fragrant drinks laden with chewy tapioca pearls that lends to such a flourishing (if not saturated) industry?

A Brief History of Boba

Also known as “Boba”, bubble tea holds its origins in Taiwan - the purveyors of tea and all-around spokesperson of chewy desserts. The Taiwanese love anything “QQ”. A term for a texture both springy and chewy, and curiously ubiquitous in everything from meatballs to noodles to desserts.

The origin of the drink itself is hotly debated between two Taiwanese tea houses, but both essentially stem from adding Taiwanese desserts called “fen yuan” or “starch balls” into iced tea.One theory even traces it back to our local favorite - cendol!

Exploring it’s Revival

See, bubble tea isn’t something new to Malaysians. Just about a decade ago, the bubble tea business was a relatively good one...just without the high-quality ingredients we know today. Bubble tea then was primarily made from vividly colored powders so artificial it’s a wonder it didn’t raise health concerns.

Oh, but it did! With concerns of chemical PCBs, DEHP and maleic acid over the years, tapioca pearls getting recalled from shelves wasn’t uncommon.

Today, the global bubble tea market is expected to grow at a CAGR of 7.40% from 2017 to 2023. So how then did the bubble tea business manage to spring back into the scene?

The Answer: Franchising and Innovation

The answer then ties back to Taiwan. Among the majority of the outlets sparking a change in the boba scene include The Alley, Tiger Sugar and Xing Fu Tang - all legendary franchises from Taiwan with a multitude of outlets globally. Popping up into the scene all at once, the market for bubble tea boomed and saw a revival so quick you wouldn’t even have time to finish chewing your pearls.

Image credits: Xing Fu Tang MY

On the other hand, disruption is often thought of as a single turnpoint innovation, but according to the brilliant writer behind “The Disruption Machine” :

“What most industries experience as disruption is typically not a sudden change from one source, but the accumulated impact of a range of interacting factors.”

Though the revival of the industry isn’t exactly due to disruption per se, we can still base it off of this concept. In the case of bubble tea, it’s the accumulated innovation of multiple bubble tea joints looking to cater to the more quality-conscious consumer.

Because as prosperity and purchasing power of Malaysian consumers continue to grow year on year, the more well-off simply aren’t looking to drink fluorescent powders anymore.

Image credits: JLD Dragon MY

What you get instead are stir-fried brown sugar pearls, barista-quality milk, frothy cheese layers, DIY bubble teas and even tapioca pearls made in-house. It certainly helps that new concepts of the drink aren’t too difficult to conceive either, with possibilities for innovation round every bend.

How do I apply this to my business?

Many SMEs may find the capricious journey of the bubble tea market to be relatable. Perhaps you may suddenly find yourself irrelevant in an oversaturated market, or simply unable to progress further.

Business advisors can help. They’re the best choice when you’re faced with specific goals you can’t seem to meet or faced with hurdles which need a little help to overcome. Mahzan Sulaiman is a Malaysian business advisory and accountancy firm with a sole purpose of helping SME businesses unleash their potential. Tell us what you need help with here!

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