Singapore's bubble tea market soars to US$3 billion

SINGAPORE: Bubble tea lovers in Southeast Asia spend US $3.66 billion a year on the beverage and similar new tea drinks, with Singapore having the highest spending power despite its smallest population among the region's six key markets.

This was found in a study that provides insights into the business dynamics behind bubble tea.

The report also found that the average price of bubble tea in Singapore is double that of other countries in the region, and that the average price of bubble tea is double that of other countries in the region.

According to a news release on Tuesday, there are currently more than 60 active brands of bubble tea chains, making it a great entry point for premium brands.

The largest market in the region is Indonesia, with an estimated US $1.6 billion annual turnover. Thailand came in second, with US $749 million through more than 31,000 bubble tea stores and other retail channels.

Vietnam is third with US $362 million and Singapore fourth with US $342 million.

The study found that Taiwanese and homegrown brands have dominated the Southeast Asian bubble tea market.

Recently, many Chinese brands have entered the region, it added. The bubble tea market in China is estimated to have an annual turnover of US $20 billion. Chinese brands that have made their way into Southeast Asia include Mixue, Chagee and HEYTEA, all of which have outlets in Singapore.

The study found that few bubble tea stores are profitable despite the high margins.

The bubble tea industry has a good gross margin of 60 per cent to 70 per cent, according to the release. Few players have managed continuous profitability at a large scale. Nayuki, the first new tea brand to go public, had a market cap plunged by more than 70 per cent since it was listed on the Hong Kong stock exchange.

It said that nine out of 10 bubble tea stores lose money.

Pricing is not the only factor that affects customer purchasing decisions, according to the study.

It said that customers are influenced by the product selection at stores, as well as the ease of access, which means the number of stores a brand has.

Brands are also offering more health-conscious options to cater to customers, through custom sugar levels and healthier alternatives like brewed fresh fruit tea.

While Singaporean consumers are more health conscious, it is not the same across other markets it added.

Last week, it was announced that Singapore will soon require food and beverage outlets to include nutrition labels on their menus to indicate drinks that contain higher levels of sugar and saturated fat. Bubble tea outlets are included in this.

Advertising prohibitions will apply to such drinks. The measures are part of an effort to help consumers make more informed, healthier choices, Health Minister Ong Ye Kung said.