‘The next sushi’: Sharetea’s growing stake in $2bn bubble tea market

Australian bubble tea business Sharetea has set its eyes on growth, with at least 20 new franchised stores planned for the rest of 2022 and a focus on owning the market firmly in view.

Founded a decade ago, the business has grown from a single store in Sydney to approximately 90 along the eastern seaboard of Australia, soon to be 110.

The bubble tea market has been growing for years, and is poised to be worth US$3.4 billion by 2027, according to data from Fortune Business Insights.

“The bubble tea market is growing very, very fast,” Sharetea general manager Arsallan Mangal told Inside Retail. 

“Our consumers, being from a younger demographic, are beginning to skew away from juice and coffee, and toward our products. It’s about the experience of it – when you have a bubble tea it’s not just about the drink. 

“There are toppings and multiple flavours involved, so there’s a level of customisation that customers go through when making their tea.”

Plus, according to Mangal, Australia has become more multicultural, and international foods have been normalised, the product’s market grows. Some of the business’ highest performing stores are where more Western customers are trying bubble tea for the first time.

“We’re kind of in that place where sushi was around 25 to 30 years ago,” Mangal said.

“Sushi was a bit of a unique experience, you had to go to a dedicated restaurant. Now, every single shopping centre in the country has sushi, and it’s a very normalised product across the board.”

Despite coming out of the first few years of the Covid-19 pandemic on the front foot, the journey was far from easy, Sharetea founder and chief executive Anthony Mu told Inside Retail.

“We almost doubled our head office team [during the pandemic], and focused on giving our franchisees extra support,” Mu said.

That support came in a few flavours: reducing the cost of goods for franchisees, wearing the rising freight costs itself to ensure its stores were stocked, negotiating new revenue agreements with landlords, and lowering franchisee fees.

The benefit came, however, from where the business’ stores were located. Most Sharetea stores are located in smaller retail centres and strips, so when customers first started abandoning shopping centres due to health concerns, Sharetea was only slightly impacted.

“Smaller centres still suffered the burnout of Covid-19, but not as bad as the drop in foot traffic the larger centres saw,” Mangal said. 

“We could focus on supporting our stores and keeping them afloat, and they were still able to generate revenue.”

Now, with trade more stable, the challenge is increased supply chain costs. Mu said that international freight is currently costing the business far more than it was before Covid, and that local freight costs are still high: though these costs are still not being passed on to their franchisees.

And yet, with a rising cost of living crunch impacting spending around non-discretionary retail, Mangal believes the business’ product will continue to bring customers through their doors. 

“The thing is, you really can’t make bubble tea at home,” Mangal said. 

“The quality of the product just dissipates. People can’t really go home and boil their own Tapioca pearls and create their own drinks. 

“In my opinion, people will still want to have that experience, and we try to avoid major price increases in our products.”

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