Consumers in Southeast Asia spent $3.7 billion on bubble tea in 2021

The study, jointly conducted by venture outfit Momentum Works and payments start-up qlub, found that Indonesia's bubble-tea industry ranked first in terms of market size among all Southeast Asian nations, with an annual turnover of $1.6 billion.

This was followed by Thailand with an annual turnover of $749 million through its more than 31,000 bubble-tea stores and other retail channels.

Singapore, being the smallest nation in the region, came in fourth with an annual turnover of $342 million, just behind Vietnam at $362 million.

Despite the country's size, Singapore consumers were found to have the highest purchasing power, as the average price of a bubble-tea order is nearly two times that of other countries in the region, making it a great entry point for premium brands, the report said.

At present, there are more than 60 active bubble-tea brands covering different tastes and price ranges in Singapore, which was notably the first Southeast Asian entry point for "premium" brands like Heytea.

While the region's bubble-tea industry is one that has been long dominated by Taiwanese and home-grown brands, that might be about to change as a slew of Chinese brands are making their way into Southeast Asian markets.

The bubble tea market in China, estimated to have an annual turnover of $20 billion, has already seen some popular Chinese brands like Mixue, Chagee and Heytea segue into Southeast Asia, joining earlier market entrants like Gong Cha and Koi.

However, despite the good product gross margin across the industry — estimated at around 60 per cent to 70 per cent — few players have managed continuous profitability on a large scale, according to Momentum Works.

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 Southeast 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 from 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 a good return on investment," Mr Li said.

Yong Hui Ting

The Straits Times

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