Why is bubble tea so expensive

Bubble Tea Industry Analysis 20

Market and Competitive Analysis for Bubble Tea Industry in Birmingham, UK

Name

Course

Instructor

Date

Macro-Environmental Factors

Porter’s Five Forces

Threat of New Entrants

In terms of capital needed to start a new bubble tea house in Birmingham, UK, it is not so expensive, and more bubble tea outlets that keep springing up in the UK, with outlets at festivals, events, and on high streets, as franchises especially are evidence to the average costs of starting one (Point Franchise n.d.).

Medium

Threat of Substitution

There are direct substitutes for bubble tea at most shops because consumers may prefer other coffee or tea-based drinks.

Shops have to pay attention to the substitute products with the potential to have attention particularly those influenced by market demand.

Shops have to differentiate their bubble tea products and the shop itself to create preference for them and to reduce the extent of the threat, considering that it cannot go away

Medium

Medium

Medium to High

Power of Buyers

Customers are price sensitive eve in Birmingham so competitors’ have to satisfy their price and quality concerns at once.

Switching costs from bubble tea shops and products to those which are more attractive to customers at lower prices and which still have high quality makes their power high.

Emphasis on quality of bubble teas and having shops that are quite attractive and welcoming in addition to proper customer service are differentiating factors for bubble tea shops and impact the influence they can have over the market and the competition there.

High

High

High

Suppliers’ Power

Bubble tea shops have to partner with suppliers whose bubble teas are of high quality just as they are affordable.

It is easy and not so costly to switch between suppliers, considering, for example, that there are several of them in places like the UK. Good examples of potential bubble tea suppliers in the UK include Bubblelicious Tea, Bubble Tea House Company, Boba Box, and BoboQ among others (Ri Web 2020).

Medium to High

Low to Medium

Competitive Rivalry

The bubble tea industry in Birmingham is highly competitive because a number of established shops already exist.

However, the bad distribution of bubble tea shops in the city, considering that most of them are located around the city center, or in China Town, there are opportunities for competitors, even for new ones, in the spaces around places like Birmingham City University and Aston University, where there could be many potential Asian and non-Asian customers, as both are target clients.

Even with the specialist shops such as Chatime in Middle Bullring which serves authentic Taiwanese bubble tea, Mee-Cha in Middle Bullring which serves bubble tea in addition to frozen yoghurt, Twist, Bubbleology Birmingham, Feng Cha, and T4 Birmingham among others, it is possible to become a huge competitor there (Chamberlain 2019). Even franchising opportunities for a new shop because current competitors are not so strongly holding the market.

High

PESTEL Framework for Competitive and Marketing Analysis of Bubble Tea Industry in Birmingham, UK

Political Factors

Economic Factors

Social Factors

Technological Factors

Ecological Factors

Legal Factors

Political elements such as the current state of the UK government and how it is interacting with foreign ones could impact such things as the supplies of the bubble tea to the shop.

The current Covid 19 global pandemic has forced customers to stay at home, making tea shops have to close down their operations. It has been a major threat and could threaten the survival of the bubble tea shop, therefore, it has to be sincerely considered. Considerations for opening a bubble tea shop should also have online delivery of the tea as an option because many customers could still fear to visit them (Butler 2020).

Bubble tea as a preference is rising among many UK consumers just like it is worldwide, making it a fast-developing industry and a potential competitive advantage for the business

Adverts for bubble tea have been found to have an impact on consumers who want to learn more about them, especially in major Asian markets where it is preferred.

More consumers and environmental groups rate shops that have greener ways of packaging, for example, those that avoid plastic cups in favor of recyclable ones.

New tax laws have to be factored into the bubble shop’s pricing.

Since Brexit, the political situation has been uncertain, and it affects the economy, thereby potentially affecting the shop too. There is a relative amount of political stability even in Birmingham which could allow the shop to run well.

Expected are the effects of inflation rates because the current pandemic plus political and economic situation in the UK has made the price of ingredients for bubble tea go up, which means that the costs will be high and profits could be low in the industry for a while.

With, for example, more non-UK, especially Asian among other foreign people moving into the UK, even foreign students to study in the UK, there are opportunities to sell bubble tea products to them. Students and UK people have tea habits which the shop can meet and satisfy, for example, how they want to be fast and to avoid long queues

Ads by the shop now are posted to promote and to update consumers about an outlet, thereby gaining popularity, and attracting new bubble tea lovers

Going green may not be so economical in the short-term but using environmental friendly packaging, despite being expensive, is now a trend among tea drinkers.

The kind of raw materials used to make bubble tea, a good example being tapioca balls which are used in it, have been recalled in the past by Singapore’s Agri-Food and Veterinary Authority for having been found to contain a harmful maleic acid which can cause kidney damage, so, the shop has to be founded using proper knowledge of the raw materials to ensure that such are avoided and that quality, healthy and affordable ones are used (BBC News 2013).

There are tax considerations, a good example being the new sugar tax which came into effect in 2018. Sugar tax which applies to non-alcoholic beverages in the UK has to be taken into consideration because the bubble tea shop also has to sell other drinks, apart from the milk-based drinks with at least 75% milk, and fruit juice, which are excluded from the UK levy (Arthur 2018). The bubble tea shop’s pricing for its products has to consider the levy.

Taking all these factors into consideration can help introduce a shop that meets the needs of those with afternoon tea habits and also those who want self-service kiosk systems as a means of diversifying the consumer traffic in Birmingham, in the streets and close to the universities.

Using self-service automation machines is also now common in bubble tea shops to let consumers order using a machine.

The fast developing bubble tea preference among tea lovers in the UK could help offset the rising costs by ensuring that the business has many consumers once it is operational.

Consumers are now opting for healthy lifestyles as they are changing their dietary patterns and urban lives, and bubble tea has some of these healthy aspects and benefits.

Tea drinkers want quality tasting bubble tea as it is an influential consumer decision-making factor at a shop or restaurant, therefore, the new shop has to ensure that it factors in quality, flavor preferences for hot and cold consumption, health, time of day best loved by tea drinkers, weather, convenience, and industrial players so as to have a proper product development and product positioning strategy (Industry Today, 2017).

Industry Trends and Disruption

Bubble tea originated in the 1980s from Tainan and Taichung, Taiwan, East Asia. Since then, recipes for bubble tea contain a tea base mixed with milk and tapioca pearls, and fruit jelly. It has gained popularity away from Asia and into Europe, particularly the UK and Italy, where there now are many bubble tea shops. Other recipes have ice-blended bubble tea versions mixed with fruit or syrup. The bubble tea market’s compound annual growth rate of approximately 8% over the next five years indicates that the market could be worth $8 billion by 2024 from the current $5 billion around the world, with the highest sales from shops and stores in North America, some parts of Europe as the UK, Italy, France, and Turkey, Asia-Pacific, South America and some parts of the Middle East (Market Watch 2020). The social media-friendly bubble tea which is unlike traditional teas has become a trend and it is fueled by its versatility and how it can be drank outside of a hot beverage, getting consumers excited, and generating high yields for sellers (Beverage Business World 2019). Greater preference for such teas and coffee over carbonated drinks could fuel the growth, an advantage for the shop.

Sector Regulation and Legislation

There are new tax laws for products like sugar to be considered by the bubble tea shop as it starts operating. Laws regarding business startup, including those about the details for registering the business, funding and funding sources, and applicable tax laws will be valued too. The business could prefer imports over local supplies for the products used to make bubble tea, therefore, its management has to know what laws apply for this, the pricing, and process. Food safety laws have to be followed, including the guidance for milk sellers and bubble tea shops on hygiene standards, testing milk, hygienic handling of the same, the facilities’ and building’s cleanliness and conditions such as appropriate layouts, ventilation, pest control, and hand washing facilities, which all enable good hygiene (FSA 2020).

Competitive Analysis

The bubble tea shop industry is quite competitive with a number of well-established players having recently opened more shops across the UK, even in Birmingham. Among the leading bubble tea companies in the UK which have stores even in Birmingham are Bubbleology, a tea chain which has opened more than 18 shops across the UK since 2011. Bubbleology applies the franchise business model in addition to a managed one. A demographic analysis shows that its primary consumers are aged between 18 and 34 years, meaning that it applies the strategic factors such as packaging, branding, and location to target potential clients. Bubbleology owns franchises across the UK, in places like Cambridge, Oxford, Sheffield, Manchester, Liverpool, Newcastle, Edinburgh, and it is planning on opening more stores in more locations (Beverage Business World 2019). There is a Bubbleology store at the Bullring shopping center, Birmingham too, offering branded bubble tea cocktails, which are vegetarian, and which allow consumers to choose from organic and soya milk options, in addition to create-your-own brews, milk and fruit teas, coffee varieties, skinny drinks (Bullring n.d.).

While Bubbleology is among the strongest competitors in the bubble tea industry in Birmingham, the shop also faces competition from Chatime UK, another large franchise operator for Bubble Tea in the UK. Chatime has about 22 sites across the UK and is rapidly spreading across the country. Chatime considers the authentic Taiwanese bubble tea it serves a regular drink just like it does other teas and coffee, and is committed to ensuring that customers keep enjoying high quality beverages at its stores. It is a Taiwanese company having been founded there in 2003, which makes it more legitimate as a bubble tea franchise (Bullring n.d). It also has a store in Bullring shopping center, Birmingham, therefore, it is considered a close potential competitor and source of new customers for the upcoming bubble tea shop. Customer reviews for both Chatime and Bubbleology indicate that competition is strong in the bubble tea market in the city.

Other close competitors with a market presence and share in Birmingham include Twist, a café which serves bubble teas alongside frozen yoghurts and taiyaki and whose flavors and combinations are customer-friendly. Mee Cha, another bubble tea and frozen yoghurt provider, indicates that it uses the best, high quality ingredients to win over customers as regulars. It competes on this basis, in addition to having good parking spaces, and additional recipes for other fruity slushes, bubble teas, and ice creams. T4 is another powerful competitor, especially for non-Asian customers, as it has the most. It is also possible for customers to make online orders through food delivery platforms like Uber Eats, which delivers bubble tea orders for Bubbleology, Chatime, and Caffe Chino, all in Birmingham (Uber Eats n.d.), and Hungry Panda. Mr. Egg has the most Asian customers as a competitor but a few shops, while Happy Lemon can also compete as it has quite many delivery orders on platforms like Hungry Panda.

HBubble tea is an easy to make drink, which makes it easily imitable. New shops can easily provide bubble tea to customers with their own recipes, which means that customers have to choose from the brands available, judging them on various influential factors. Among the key success factors the bubble tea shop should acknowledge as it becomes one of the competitors include the uniqueness of its drinks. Customers are curious about the new drinks they come across, and they want innovative recipes and tastes to be attracted and to stay long enough to become profitable.

Having analyzed the market and competitive positions for bubble tea providers in Birmingham, it is clear that customers value pricing by the shop too, which comes along promotions. They are highly likely to be attracted to those shops which promote themselves best, especially those with discounts for budget-conscious bubble tea enthusiasts. Recognition from new and existing consumers from this can make the store competitive. Since most shops in Birmingham have bad locations, and are not near highly targetable areas as the universities, it is crucial for the upcoming bubble tea shop to make location matter. Taking the store close to, for example, the international students, can be more attractive as a factor and source of competitive advantage. A highly competitive market controlled by established franchises as Bubbleology, Chatime, and Mee Cha requires a lot of insight and strategic moves, considering the key success factors, and ensuring that the competitive advantage is enough to make customers stick.

References

Arthur, R. 2018. Sugar Tax comes into effect in the UK, viewed 17 September 2020, < https://www.beveragedaily.com/Article/2018/04/06/Sugar-tax-comes-into-effect-in-the-UK>

BBC News. 2013. Singapore recalls Tapioca Balls used in ‘Bubble Tea,’ viewed 17 September 2020, < https://www.bbc.com/news/av/business-22685290>

Beverage Business World. 2019. Why is Bubble Tea taking the UK by Storm? Viewed 17 September 2020, < https://beveragebusinessworld.com/latest-news/why-is-bubble-tea-taking-the-uk-by-storm-25-02-2019/>

Bullring. N.d. Bubbleology, viewed 17 September 2020, < https://www.bullring.co.uk/dine/bubbleology>

Bullring. N.d. Chatime, viewed 17 September 2020, < https://www.bullring.co.uk/dine/chatime>

Butler, S. Sales of Alcohol, Tea, and Coffee soar in Shops since UK Lockdown, viewed 17 September 2020, < https://www.theguardian.com/business/2020/jul/21/uk-grocery-sales-covid-19-outbreak-local-shops>

Chamberlain, Z. Bullring Birmingham – Shops, where to eat, Opening Times and Parking, viewed 17 September 2020, < https://www.birminghammail.co.uk/whats-on/shopping/bullring-shops-opening-times-parking-12719376>

FSA. 2020. Food Hygiene Ratings – Gonuts Bubble Tea, viewed 17 September 2020, < https://ratings.food.gov.uk/business/en-GB/1008791/Gonuts-Bubble-Tea-Islington>

Industry Today. 2017. Bubble Tea Market Revolutionized the Beverage Industry Business and grows into Mainstream, Asserts MRFR, viewed 17 September 2020, < https://industrytoday.co.uk/agriculture/bubble-tea-market-revolutionized-the-beverage-industry-business-and-grows-into-mainstream--asserts-mrfr>

Market Watch. 2020. Bubble Tea Market 2020: Top Countries Data, Market Size, Definition, Brief Analysis of Global Industry with Forecast Growth by 2024, viewed 17 September 2020, < https://www.marketwatch.com/press-release/bubble-tea-market-2020-top-countries-data-market-size-defination-brief-analysis-of-global-industry-with-forecast-growth-by-2024-2020-08-12

Point Franchise n.d. Bubble Tea Franchising Opportunities, viewed 17 September 2020, < https://www.pointfranchise.co.uk/I-306-bubble-tea-franchise/>

Ri Web. 2020. Everything you need to know about Bubble Tea in the UK, viewed 17 September, 2020, < https://takeawaypackaging.co.uk/what-is-bubble-tea-everything-you-need-to-know/>

Uber Eats. N.d. Bubble Tea Delivery in Birmingham, viewed 17 September 2020 < https://www.ubereats.com/gb/category/birmingham-eng/bubble-tea>

Young, G. 2015. Mee-Cha Coffee Shop Bullring Review: Is this the Worst Coffee in Birmingham? Viewed 17 September, 2020, < https://www.birminghammail.co.uk/whats-on/food-drink-news/mee-cha-coffee-shop-bullring-9793663>