Mad about tea -- How to sell bubble tea profitably

The tea-drinking craze is back, but its not Oolong or Pu Erh were talking about. Its those mostly-
pastel milky drinks served with a spoonful or two of black pearls that made their rousing debut a
decade ago but saw their attraction dwindling after that. Now, bubble tea, as it is fondly called, is
making a comeback, with outlets mushrooming across the country.
Bubble tea generally refers to milk tea, which comes in a variety of flavours and is accompanied by
chewy pearls, which are usually made with tapioca.
Bubbles actually refer to the froth at the top of the drink, not the pearls, explains Chia Jee Kin, co-
partner of Yippee Cup, a homegrown bubble tea caf and restaurant.
Want to jump on the bubble-tea bandwagon? There are three ways to do it: take up a franchise, make
your own tea or work with a supplier. Here are some tips from bubble tea merchants.
Take up an existing franchise
With two partners, Amy Wong, 28 opened a Chatime kiosk in Subang Parade Shopping Centre,
Subang Jaya, with a start-up capital of RM400,000. I had dreamed of starting my own business.
Initially, I couldnt figure out what to sell and deliberated on starting up my own brand, but that
requires innovation. When I was introduced to the Chatime franchise, I saw the opportunity. There
are many Chatime outlets in Subang Jaya but Wong believes there is enough demand to sustain her
business in the mall.
Rohani Ali, 38, was working in a local bank when she fell in love with bubble tea. She loved the brand
Each-a-Cup as its tea is not too bitter or sweet.
So, she teamed up with partner Angie Ng, 47, who was looking to start her second business, and set
up a franchise. I decided on a Each-A-Cup franchise as I found its structure to be efficient and
systematic.
All I had to do was pay a RM10,000 deposit and find a suitable place. I picked AEON AU2 Shopping
Centre in Setiawangsa, Kuala Lumpur, as the rent is reasonable and there are many potential
customers in the form of local residents and office workers, as well as shoppers. The set-up cost,
including renovation and rent, was RM120,000. All materials are supplied by the franchisor.

Bring in a franchise
Bubble tea brands from Taiwan seem to be de jour. Many young entrepreneurs have acquired the
master franchise (the rights to sub-franchise within a certain area) for popular Taiwanese brands.
Billy Koh, 28, is the local master franchisor for Gong Cha. I was checking out different businesses
and considered Japanese convenience stores at one point but that kind of business is only profitable
in the long run. I wanted to start a trend and I loved Gong Cha. A friend and I emailed the
distributors in Taiwan and we met up with them last year, says the ex-chemical engineer, who had
been in marketing as well.
He did not take out a bank loan as he raised funds from his partners, family and his own property
investments. Gong Chas master franchise licence was obtained for RM2 million and he opened his
first outlet in April with a start-up capital of RM200,000.
The distributors in Taiwan allowed me to pay the RM2 million in instalments. I plan to sub-
franchise Gong Cha next year.
He chose the Subang Jaya location for its proximity to colleges and offices. Two weeks later, he
opened his second shop in The Gardens Mall, catering for professionals. All raw materials such as
pearls and tea, and equipment, including sealing machines, syrup dispensers, ice machines, plastic
cups and straws, are imported from Taiwan.
Bryan Loo, 26, is the master franchisor and managing director of Chatime, another Taiwanese
bubble tea brand. Looking for a product to sell, he and his father spent three months checking out
trade and franchise exhibitions, locally and in Taiwan, before zooming in on beverages.
I didnt want anything that would involve a kitchen, as that would involve too much work. Beverages
seemed straightforward and easy. I also eliminated coffee as there were already too many coffee
outlets.
Loo chose Chatime as it is one of Taiwans top five bubble tea companies by market share. It is the
only public-listed bubble tea company in Taiwan and is available in 17 countries. Chatime has a
good research and development programme and is constantly introducing new products, he says.
The initial operating costs for a Chatime franchise is about RM250,000, which includes equipment
and training but not renovations and rent. The ice-cube maker is the most expensive [equipment] at
RM28,000. But only franchisees who sell more than a thousand cups a day will buy it, explains Loo.
Create your own brand
The final option is to start your own bubble tea brand. Tan Chin Nee, 31, is considered a veteran in
the bubble tea industry, having started Yippee Cup ten years ago. Tan had just returned to Ipoh from
her studies in Taiwan and longed for bubble tea but could not find any. So, in 2000, she started
Yippee Cup in a kiosk at a cost of RM19,000.
I had worked part-time in a bubble tea outlet in Taiwan, so I had some ideas about suppliers and
how to obtain the ingredients and equipment, she says.
In 2003, she moved to Petaling Jaya and started a stall in a shop in SS2. Four years later, she
expanded the business, serving drinks and food in a full-fledged shop.
In 2009, Tans husband, Chia Jee Kin, became a co-partner. We spent RM300,000 on renovations
and equipment, including the sealing machine, water filter, tea brewer, mixer, manual shaker and
sugar-dispensing machine, says Chia. Our target customers are tea lovers born in the 1980s and
1990s. This group has the highest disposable income.
The entrepreneurs say beverage is the more profitable business in the food and beverage industry,
with margins ranging from 30% to 50%, net of overhead expenses. This depends on location and
rent. In general, pastries and beverages enjoy relatively higher margins, says Loo. Return on
investment is fairly impressive, with most entrepreneurs estimating that their business would break
even in eight months to 1 years.
Standing out in the crowd
The current trend is to offer freshly-brewed tea, unlike the powdered tea that was commonly used a
decade ago. Pearls are also replaced regularly to keep their form and prevent them from hardening.
We use the traditional way of brewing tea leaves in large pots. We brew a fresh pot every four hours
so that the tea remains at the optimal temperature and doesnt become bitter, says Koh.
Yippee Cups Chia uses a combination of powdered tea and natural high-grade tea leaves that do not
contain colouring. He notes that there is a misconception that powdered tea has more additives and
is therefore unhealthy. This depends on your suppliers. Our exclusive supplier has 30 years of
experience in making bubble tea powder. They have a detailed breakdown of the ingredients and the
amount of additives used is very much below the limits set by the Taiwanese health authorities.
The entrepreneurs believe the tea-drinking trend is here to stay as the industry is versatile and
innovative. There are up to a thousand tea flavours now and new flavours are always being
introduced, says Chia.
With the heightened competition, the entrepreneurs need to stand out from the crowd. Most of them
distinguish themselves through their tea: Some offer stronger brews while others serve healthier
pearls or unique flavours. Each-A-Cup master franchisor Clement Low offers a greater variety of
drinks than his peers.
Besides bubble tea, we offer ice-blended smoothies, cappuccinos and yoghurt drinks. We will soon
launch another range called Each-a-brew, where each cup is brewed individually. This will be the
first of its kind in Malaysia.
Other challenges faced by the entrepreneurs include maintaining the quality of their drinks, hiring
good employees and keeping employee turnover down, and securing locations with a large customer
base.
New marketing techniques should also be explored to keep fans interested in your product. Loo of
Chatime works with technology companies to market his drinks.
We are collaborating with phone manufacturer HTC now and will also do so with YES 4G network.
This [route] seem like an interesting way of marketing our drinks, he says. Chatimes Wong delivers
her tea to offices and households near her outlet during off-peak hours.