Bubble tea ‘bubble’ may burst soon, says economist

There are at least nine bubble tea shops in SS15, four within a stone’s throw from each other on the same road. (Facebook pic)

SUBANG JAYA: An economist predicts cheaper prices for bubble tea, also known as milk tea, following the mushrooming of bubble tea vendors and shops in the area, but says its popularity will be short-lived.

Carmelo Ferlito from think tank Institute for Democracy and Economic Affairs said he was not surprised at the booming popularity of bubble tea – a 1980s Taiwanese tea-based drink.

“Whenever an innovator – in this case, the first bubble tea shop – is successful, it will be followed by imitators whose success will signal other potential entrepreneurs of opportunities for profit,” he said.

But he said the arrival of new players in the industry, as in SS15 which has at least nine bubble tea shops, would gradually extinguish the competitive advantage of the initial innovator.

This, in turn, would benefit customers, he said, as the entrance of new players would see prices go down by the “mitigation of upward pressure on prices coming from the growing demand for the new product”.

“The question at the moment is: what will affect the prices more: the rising demand, as the product is now ‘fashionable’, or the additional supply?” said Carmelo, who lectures in economics at Inti College Subang.

“This is difficult to predict, but I foresee an initial upward dynamic, followed by cooling prices when more suppliers come into play, and a further downward movement when the product will be ‘out of fashion’.”

The demand will naturally cool off and the market will adjust, he added, keeping alive only the strongest or more reputed players and clearing out those that came at the height of the “bubble tea fever”.

This will take the shape of a small “bubble tea crisis”, but the market will naturally adjust itself to align supply to demand when the bubble tea phase loses popularity.

“I am not a fortune teller, but for bubble tea, the ‘bubble’ might not be too long,” he told FMT.

Bubble tea, also known as Boba, is a popular drink among Malaysians.

The drink features tea, milk or sugar. Toppings include the trademark chewy tapioca balls known as pearls or boba, fruit jelly, grass jelly or agar jelly. Ice-blended and milk-less versions are also available.

Bubble tea comes in various sizes and variations, but the largest cups are usually capped at RM10.

Asked when the bubble tea phenomenon would start losing popularity here, Carmelo said it was difficult to say for certain.

“In economics we can see trends and tendencies, but exact time predictions are not as clear,” he said.

“Being a food product, I do not foresee a long-term bubble, like it could be for housing or industrial initiatives”.

He proposed that bubble tea vendors and future entrepreneurs in the industry open shop far away from popular bubble tea areas such as SS15 or Subang Jaya.

Bubble tea is also popular at nearby Bandar Sunway. SS15, meanwhile, has been dubbed as “Bubble Tea street”.

Checks by FMT found nine bubble tea shops in the SS15 area, four of them within a stone’s throw from each other on one road. All were packed with university students.

These shops are located near Inti, the Sri Kuala Lumpur private school, small-time education institutions in the area and student lodgings.

Bubble tea first became popular in Taiwan in the 1980s, but the originator is unknown.

It is said that the oldest known bubble tea was made of a mixture of hot Taiwanese black tea, small tapioca pearls, condensed milk, and syrup or honey.

Bubble tea is not without controversy here though. In 2011, then-health minister Liow Tiong Lai said a Taiwanese “Strawberry Syrup” product commonly used in bubble tea was found to contain a cancer-causing plastic additive.

The products were eventually recalled by the manufacturing companies.