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Why is bubble tea, with brands like HeyTea, Gong Cha, KOI, and others, becoming more expensive in Singapore?
What are the factors that contribute to the price increases of bubble tea in Singapore?
SINGAPORE – Bubble tea has surged in popularity across Singapore in recent years, becoming a staple in the city-state's diverse appetite for food and beverages.
However, along with its growing popularity, bubble tea prices have also been on the rise. Over the past five years, prices among some of the top bubble tea brands in Singapore have increased by more than S$1 for a standard medium-sized pearl milk tea.
What are the factors driving the price of bubble tea higher, and why do consumers continue to patronise bubble tea stores despite increased prices?
Why is bubble tea so popular?
Originating from Taiwan in the 1980s, bubble tea, also known as pearl milk tea or boba tea, has seen its popularity explode worldwide.
According to a research report released in August 2022 by venture builder Momentum Works, Southeast Asians spent a total of US$3.66 billion (about S$4.92 billion) on bubble tea in 2021. The Singapore bubble tea market, being the region's smallest in terms of population but with higher spending power, had an annual turnover of US$342 million (about S$460 million) in 2021.
Bubble tea's appeal lies in its diverse range of flavours and toppings, as well as the distinctive chewy tapioca pearls, or "bubbles", that give the drink its name. The ability to fully customise the drink's ingredients allows for a more personal drinking experience.
Bubble tea has become a cultural phenomenon among youths with the rise of social media platforms, such as TikTok and Instagram.
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Why do Singaporeans love bubble tea?
Bubble tea's popularity in Singapore is undeniable, with over 60 bubble tea brands islandwide as of 2022. According to the National Library Board, the first bubble tea shop in Singapore, a cafe called Bubble Tea Garden, opened in Marina Square in 1992.
"There are many reasons to love bubble tea. It's like a perk-me-up drink after a tiring day at work. Sometimes, it's a catch-up with friends over BBT, and sometimes, it's a reward after a workout," said 29-year-old social media manager Amber Lim, a bubble tea fan.
For others, like 34-year-old digital consultant Lee Wan Theng, drinking bubble tea has become a daily routine that's hard to break, despite its continuous price increase over the years.
"The ability to tailor it to my tastes – eliminating sugar, forgoing ice, adding or omitting milk, and choosing from various toppings – really made it stand out," said Lee, who said she was introduced to the drink by her Taiwanese mother in her childhood.
Factors influencing the prices of bubble tea in Singapore
There are several factors that contribute to the increasing prices of bubble tea in Singapore. According to the "Bubble Tea in SEA" report by Momentum Works, which analysed the cost breakdown of operating a bubble tea store, about 80 per cent of a bubble tea's store's expenses can be attributed to raw ingredients, storage, delivery, location rental and labour.
Furthermore, the report's analysis showed that costs were highly correlated with supply chain, store, and headcount efficiency. Price movements in any of these factors, which can be impacted by economic and market conditions, are likely to result in higher bubble tea prices for consumers.
Supply chain and raw materials
Bubble tea players in the region have different methods and requirements for handling raw materials and distribution channels, depending on the types of products used and the range of product offerings. Brands that offer more diverse product ranges are likely to source from multiple suppliers, further influencing their costs and requiring more efficient supply chain management to keep bubble tea prices low for customers.
Store location and type
A store's location and type are significant factors that can affect bubble tea prices. This is due to the costs of rental, which vary by location and type of store. Analysis by Momentum Works showed that premium bubble tea brands were using a combination of takeaway kiosks and premium storefronts with seating areas to optimise space efficiency.
Health awareness
Christine Tan, a lecturer specialising in marketing and digital communications at Nanyang Polytechnic's School of Business Management, echoed the report's findings. According to Tan, higher health awareness among consumers is one of the main drivers for bubble tea's price increase in Singapore over recent years.
"Consumers are more health conscious now, which definitely leads to an increase in food costs. Five or 10 years ago, consumers were less conscious about what went into their drinks or what was behind the label. Many bubble tea operators were using relatively cheaper ingredients, such as creamers, sugary syrups, and teabags," said Tan.
Due to the increased consumer demand for healthier options, Tan said that many bubble tea operators now opt for natural and better-quality raw ingredients such as premium tea leaves, real fruits, healthier toppings, and sugar alternatives.
Cost of innovation
Another driver of bubble tea's price increase in Singapore is the cost of product innovation among bubble tea companies. Tan noted that the intense market competition in Singapore, coupled with consumer demand for more innovative menus, is pushing bubble tea operators to create a "very strong point of difference for their brand",
"Coming up with innovative menu items, expanding into cafe concepts, and offering limited-edition collectables and branded merchandise to capture market share will cost money. In exchange, they would have to charge higher," said Tan.
Technology adoption
In addition, Tan cited the adoption of technology among some brands as another reason for the increase in prices. An example of this would be PlayMade, which made use of operational technology such as self-service kiosks at their outlets.
"Eventually, it will cost them less because they can lower the cost of manpower, but I think the initial investment cost will play a part, and that cost will inevitably be passed to consumers," said Tan.
What is the most expensive bubble tea in Singapore?
Among the numerous bubble tea offerings in Singapore, some establishments have gained a reputation for pricier products. Such brands are categorised by the premium locations of their outlets and signature drinks. Their offerings may include special teas made with rare and premium ingredients, artisanal toppings, or limited-duration seasonal drinks. Examples of bubble tea brands in this niche are HeyTea and Signature KOI.
For comparison, here's a quick look at the prices of various bubble tea brands in Singapore as of March 2024:
Brand | Price Range (Medium-sized) | Brand | Price Range (Medium-sized) |
HeyTea | S$3.30 – S$11.70 | LiHO Tea | S$2.30 – S$6.50 |
Signature KOI | S$4.10 – S$9.90 | Gong Cha | S$3.90 – S$7.20 |
Chicha San Chen | S$5.00 – S$9.70 | Mixue | S$2.50 – S$4.00 |
Tiger Sugar | S$4.20 – S$7.50 | R&B Tea | S$2.80 – S$5.20 |
PlayMade | S$2.90 – S$7.90 | Each A Cup | S$2.40 – S$5.90 |
While mass-market brands have a price advantage over other competitors, analysis from the Momentum Works report indicated that the mid-market segment is the most competitive in Southeast Asia, with most bubble tea brands vying for a share of this segment categorised by their location at mid-end malls and offices.
Is bubble tea really worth it?
Whether bubble tea is worth its price depends entirely on an individual's lifestyle choices and budget considerations. One area of consideration, however, is its health factor.
The high sugar content in some drinks has prompted the Singapore government to make it compulsory for freshly made drinks to include Nutri-Grade labels on their menus. The healthiest drinks are graded with an 'A', while beverages with the highest sugar or saturated milk content are given a 'D'.
Despite its apparent health impact and steady price increases over the years, bubble tea remains immensely popular in Singapore. For many, such as Tan, a cup of bubble tea is seen as an affordable luxury.
"I'm not so price-sensitive when it comes to bubble tea. If I go to my preferred bubble tea shop tomorrow and they increase the price by 50 cents, honestly, I probably might not notice," said Tan.
She added that with the price increase, "brands become more innovative in their product offerings". "At the end of the day, I get more value as well," Tan said.
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