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When it’s profitable, many would rush in. Normalisation will happen later.

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How many of us would jump at an opportunity to earn money? I meant the real ones, not some scams. I think the answer is all of us. Everyone want to grab opportunities which come along. Remember long time ago when many shops were selling handphones and the owners were earning tons of money. Well more shops were opened and soon, we could see only the serious ones remain. This is the same for bubble tea.

I was back in Ipoh before COVID-19 came and I brought my wife and my kids to a nearby bubble tea store. There were a few people inside and within that one hour which we were there, we counted nothing less than 30 cups were sold. Whether it was walk-in customers or the delivery riders. In short, the orders were non-stop even if I could not say the shop was busy every minute. Only 2 other tables were occupied.

After we have completed our afternoon drink, we went out and I walked to another shop which was just 3 doors away. There were no customers, not even one inside the shop. The three bubble tea barristas were chit-chatting. By the way, further down these two was another bubble tea store. As I drove past, I think this shop also does not have customers. What has happened? Well, that bubble tea craze may be past and now, only the major brand names with good products could continue to get normal profits. The rest may just waiting for their final day to come. This situation is not only in Ipoh. Oh yeah, the brand I had? Xing Fu Tang lah… coz the other two shops were unknown brands to me.

Article in edgeprop.my . There used to be over 30 bubble tea shops in SS15! Today, some have closed. Rental rates were said to be as high as RM12,000 per month. Right now, it is said that the owners are asking for just RM7,000 – RM8l000 per month. IQI Realty Sdn Bhd real estate negotiator Jacky Chong said, “For a ground floor unit facing a main road in SS15, the rent now can go as low as RM6,000 to RM8,000 a month compared with the previous highs of more than RM10,000 per month.”

Chatto co-founder and CEO Terence Lee said, “The challenge is to convert our walk-in customers onto delivery services but major food delivery companies are charging between 25% to 35% commission which is affecting our margins.” He also shared that some landlords offer up to 50% discount while there are others who provided none as well. The article is a comprehensive one. Do read it here: Article in edgeprop.my

Rental was said to be RM8,000. Assuming the shop hires 4 other staffs and pays them RM2,000 per month. We assume the utility bills come to just RM4,000 per month. (electricity, water, cleaning and other miscellanous). This is a total of RM14,000 even before the first cup of bubble tea is sold. If we assume every cup has a margin of 20% and the price for one is RM10, that’s RM2 per cup. To get to RM14,000 the shop needs to sell 7000 cups and over 30 days, every day the shop must sell over 200 cups. This is just to cover the costs… WOW…

Okay, in case you think 200 cups is a lot, remember my one hour there in Ipoh? It was already 30 cups. So, maybe 200 cups not that high either. When I was in Penang, in an hour in one of the bubble tea shop in Karpal Singh drive, we counted a total of over 50 cups. Assuming the whole day productive hours are only 6 hours out of the 10 hours the shops are open, this is still 300 cups. No wonder many of these shops are still around! Well, the profit is now normalised… Perhaps the stronger names remaining will continue to survive and perhaps even thrive because even a Gen-X like me drinks bubble tea every month. Plus I send my brother and sister some occasionally too.

Most of the time, I am TEALIVE fan lah but Xing Fu Tang is more delicious for me. It’s more expensive too. Happy understanding that when there are exceptional profits, many would jump in and more would join until the exceptional profits start to return to normal levels. Oh

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