Tea franchises expand overseas

Market saturation has forced a Taiwanese beverage franchise to limit local expansion and focus overseas, one industry expert said yesterday.

"The domestic market has been shrinking for several years, while the overseas market still shows promise for at least the next three years," said George Yeh (葉積陵), overseas marketing manager at Easy Way Co (休閒小站).

Pearl tapioca milk tea (珍珠奶茶) shops have been popular throughout Taiwan for several years. Pearl tapioca balls are made from a starch extracted from sweet potato, mixed with cassava root and brown sugar. The pearl tapioca that goes into the store's concoction has a slight tea taste and is chewy.

Setting up its first pearl milk tea shop in Taichung in 1992, Easy Way currently has about 500 stores around the nation, 30 shops in China and 73 franchisees in eight countries including the US, Japan, Australia, New Zealand, Singapore, Malaysia, India and the Philippines.

With strong competition and the public's interest in pearl milk tea fading, future prospects look bleak for Taiwanese looking to make a quick buck.

"If you opened a new tea shop in 1996, you could break even in three months, while now it might take more than a year," Yeh said.

However, in foreign markets, pearl milk tea is still very attractive to overseas Chinese as competition begins to grow.

"That's why we've decided to speed up our global expansion," Yeh said.

But joining the express beverage club doesn't come cheap. The international franchise fee charged by Easy Way is US$6,500 -- including two-weeks of training -- and an initial investment will cost around US$200,000.

"Generally speaking ... you can expect to break even within one and a half years," Yeh said.

The opportunity to be your own boss is proving popular with native Chinese who establish shops abroad in or near Chinese communities.

Meanwhile, one local competitor has already decided to gradually retreat from the market.

"We used to own eight pearl milk tea stores, but we decided to close them starting in 1998," said Chuang Yuan-min (莊遠明), vice president of TenRen's Tea Co (天仁茶業).

TenRen's Tea, a veteran tea retailer in Taiwan, closed its last local pearl milk tea shop in 1999 but still owns 12 shops in the US and Canada.

Chuang explained that due to the relatively low capital investment and skills required to start a pearl milk tea booth, "competition triggered price wars causing profits to drop significantly."

Trying a new angle, the company changed its business strategy and launched its first of three "Cha for Tea" (喫茶趣) restaurants last year. In addition to offering meals, desserts and drinks infused with tea, the restaurant also sells dried tea leaves.

"By the end of next year, we plan to open five restaurants in Taiwan and we plan to take the idea abroad as well," Chuang said