Bubble Tea Company Business Plan
Product and Services
The products that Pearl Tea sells include bubble tea in several flavors. Bubble tea does not actually have bubbles in it. The name likely came from either the fact that the beverage looks like it has bubbles in it or people mistakenly thought the word “boba” was bubble. What looks like bubbles are little tapioca balls about the size of a pearl. The tea originates in Taiwan where the word “boba” is slang for pearl. The tapioca balls are made by boiling raw tapioca pearls until they are soft. Then they are stored in a simple syrup where they become sweet and chewy. Bubble tea is made by adding chilled beverages such as fruity tea, smoothies or milk-based tea or coffee to the tapioca balls and shaking.
Pearl Tea is unique because all it will sell is bubble tea in several different flavors. There ae many different types of fruit juice, smoothies, teas and coffee that the “bubbles” can be added to and the result is a delicious, refreshing beverage that is fun to drink. Five years ago when shopping at a mall, a person might have seen a lone bubble tea cart or kiosk pop up, but then go out of business because no one knew what the mysterious drink was. However, over the past 5 years, bubble tea has become more and more popular and more and more bubble tea businesses have opened and are successful. The plan is to get in on the craze before the market is saturated with bubble tea businesses.
Bubble tea is a product. Pearl Tea will purchase the tapioca pearls and make them into boba on site every day. They will also purchase the fruit juice, teas, and coffee products to mix with the boba. Making the boba on site will provide a high quality product rather than purchasing them already made and not knowing how long ago they were made or how they were made.
Various bubble tea businesses around the greater Los Angeles area sell their bubble tea for an average between $3 to $3.50 per 16 oz beverage. Pearl Tea will offer some drinks with premium juices such as pomegranate juice, guava juice and mango nectar at a slightly higher price of $4 per 16 oz beverage. Other more common juices such as pineapple, orange, grapefruit or cranberry will cost $3 per 16 oz beverage. Coffee and tea beverages will cost $3.50 per 16 oz beverage because they are milk based, which adds another dimension and, therefore, another price point.
Huntington Beach is a popular place to go to spend the day at the beach in Southern California. Many entrepreneurs have opened fast food and beverage businesses near the beach to accommodate the crowds that come to the beach especially in the warm weather months, which is a good portion of the year in Southern California. Currently, Pearl Tea is looking at locations for lease that are within walking distance of the nearest beach. A relative of one of my partners in this venture owns a little shop where bubble tea is one of the items on the menu. That partner worked for the relative throughout her childhood, so she is well experienced in making bubble tea. She taught the rest of us all she knows about the product, which is why we decided to go into this joint venture.
Marketing Plan
A. General Market
Bubble tea is a fast food beverage. A comparable business is Orange Julius. Even though Orange Julius has now merged with Dairy Queen, they are still present in shopping malls. Orange Julius was known for its unusual beverage, and shoppers could purchase one at the booth or mall unit without sitting down and ordering from a menu. Another similar business is Jamba Juice. Pearl Tea is a quick delivery beverage business. Like Jamba Juice or Orange Julius, Pearl Tea is offering an unusual beverage alternative to the typical sodas, coffee or tea and they are not offering it as a food accompaniment. The focus is narrow, but that is the way a niche business works: it focuses on one product that is not offered everywhere.
While there is some sugar in bubble tea, it can be made low fat and low calorie depending upon what type of juice, coffee or tea the customer chooses. Min, Green, and Kim (2016) of Food Science and Nutrition list the calories of the various components of bubble tea such as the tapioca pearls, which have 78 calories in a serving. However, other aspects such as syrup and jellies that are typically added to the beverage can have over 200 calories per serving (Min, Green, & Kim, 2016, p. 41)The juices Pearl Tea uses offer healthful benefits such as anti-inflammatory and anti-carcinogenic properties. Doctors and nutritionists warn against drinking soda because it is so unhealthy. Bubble tea is a more nutritious alternative. Allied Market Research (2019) says, “The addition of fruits. . . along with the benefits of tea supplements the [market] growth. However, addition of preservatives, artificial color, and excess sugar to this tea hamper this market growth. Moreover, the availability of substitute products, such as coffee, and trend of coffee consumption restrain this growth. However, introduction of new flavors with regards to this tea presents a major opportunity for market expansion” (Allied Market Research, 2019). Pearl Tea will not use preservatives, artificial flavors or excess sugar. Pearl Tea will only use 100% juice and high quality products that do not add harmful ingredients to the product. That is one way that Pearl Tea is different from its competitors.
The bubble tea market is segmented based on the types of flavors it offers and its geography. Allied Market Research (2019) says that the flavor market segment is based on types of tea used such as oolong, black, green or white teas. Other market segments include coffee, fruit and chocolate based bubble tea. These flavors have the added components of cream, milk, and, of course, the tapioca pearls (Allied Market Research, 2019). Geographically, bubble tea is sold in North America, Asia and Europe.
The growth potential of each of these segments is limited only by customer preference in that if some juice flavors do not sell well, they will be eliminated, which could eliminate a market segment. However, if the flavors do not sell well, there is no reason to continue to purchase the juice, tea or coffee to make that flavor. Another limitation might be the cost of the ingredients since Pearl Tea will use only high quality ingredients. Yet, the base ingredients are relatively inexpensive and the $3-$4 price tag for the beverages include a good profit margin on each beverage sold.
Because bubble tea is a unique beverage in the United States and a rising trend, there is plenty of market growth potential. Opportunities include the fact that bubble tea outlets are competition for fast food places that usually only serve soda or sweetened fruit drinks and the numerous coffee shops that now exist. Bubble tea is relatively healthy also, so the trend of healthier eating also helps the growth potential of bubble tea products. Bubble tea is a new trend so there is not a lot of competition and interest is picking up. Threats include the coffee addiction that American seem to have and the trend toward banning plastic straws. One of the necessities for bubble tea is to have a large straw to suck the pearls up with the beverage. However, alternative types of straws are already hitting the market, so that is not an insurmountable obstacle.
A Five Forces analysis shows that competition in the industry is not currently high, but the potential of new entrants wanting to capitalize on the bubble tea craze is high. The power of suppliers is high because the ingredients are common, and there are many food and beverage suppliers. The power of customers is high because bubble tea is refreshing and healthier than many other beverage choices. People are trending toward healthier food, so bubble tea is an alternative that many customers may choose. The threat of substitute products is also high because there are many types of beverages that compete for market share already. Bubble tea is another niche product with the potential for market growth as it becomes more popular. The drivers of change are the increasing importance of eating a healthier diet throughout one’s life to prevent health issues later in life.
Pearl Tea does not anticipate any political issues, but there may be legal issues such as zoning and inspections. If there is a plastic straw ban in place, that will be an issue that Pearl Tea will deal with by doing the socially responsible thing: using alternatives to plastic straws such as paper straws or offering or selling reusable metal or wooden straws along with the drinks that can be retained by the customer to use again on future purchases of bubble tea.
B. Customer Analysis
Most of Pearl Tea’s customers will be young people. Bubble tea is popular among adolescents who have not yet acquired a taste of coffee or tea. Bubble tea has coffee and tea based beverages but they have other ingredients that temper the bitterness in caffeinated drinks that many young people do not enjoy. Other age demographic segments such as children and adults also like bubble tea.
Besides the actual product, Pearl Tea will also sell quality, affordability and ambience to its customers. Pangkey, Lapian, and Tumewu (2016) of Jurnal EMBA say, “Some of the criteria that can influence customer perception in choosing bubble tea shop are price, flavour, store atmosphere, sales promotion and experience. . . . Also some people will concerned about the price of the product. Nowadays, the ambiance also becomes one of the main focus in the food and beverage industry to attract customers” (Pangkey, Lapian, & Tumewu, 2016, p. 324). The décor of Pearl Tea will be beachy since the location of the first shop will be near the beach. The beach theme also works with the name of the business because pearls are found in oysters which are found in the ocean.
Pearl Tea solves the problem of customers having limited choices when it comes to healthy beverages. It also solves the problem of having beverages at the beach. Sometimes people forget to bring water or other beverages with them when they head to the beach. They may also plan to purchase food and beverage from vendors at the beach. Pearl Tea solves those problems. Customers will not be difficult to attract or retain as long as they are offered a delicious beverage that fulfills their expectations at a reasonable price. That is what we aim to do at Pearl Tea.
Pearl Tea will sell its products on the open market from the shop leased from one of the partners’ relatives located in Huntington Beach. They will advertise on Facebook and other social media, radio, and on signage in and around the business. There will also be promotional strategies such as a punch card where the customer buys a dozen beverages and gets the the thirteenth one for free. The products will be priced in the $3 to $4 range depending on the cost of manufacturing the product. If it appears that the cost of the base ingredients is higher than anticipated, the prices will increase. If there is a demand for one particular item, its price may also increase.
Operational Plan
In the busiest season for beach goers, the shop will open when the sun comes up which is around 7:00 a.m. The staff will have to be there at least an hour earlier to prepare the tapioca pearls. However, as the website for Bubble Tea Supply (2017) says, “Bubble tea is very easy to make and prepare. . . . The preparation of the tapioca is as simple as cooking pasta, spaghetti, rice or ramen noodles. If you can boil water, you can prepare the tapioca. . . . Bubble tea may be prepared ahead of time to serve in a high volume situation. That leaves a quick pour-n-shake or pour-n-blend for your staff” (Bubble Tea Supply, 2017). Once the pearls or boba are prepared, the rest of the opening preparation is to make sure there are enough juices, teas, and coffee available for serving anywhere from 500-1,000 bubble teas per day. The shop will be open until sundown, when most beach goers leave the beach. Some may stop to get a beverage on their way home, so the shop will close just after dark, around 7:00 pm.
Two staff should be able to handle even a huge rush since the preparation of bubble tea is quick and easy. One person would open the shop at 7 a.m. and work until 3 p.m. when the rush should be over, The other person would come in at 11 a.m. when the rush is likely to start, and leave at 7 p.m. after cleaning and locking up the store. Supplies would be delivered twice per week probably on weekdays so that there would not be an interruption on the busiest days. Staff should be able to put deliveries away and keep the shop clean while preparing beverages for customers.
