Bursting 'bubble Tea' Shops

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EXCLUSIVE REPORTS

From the November 19, 2004 print edition

Bursting 'bubble tea' shops battle Starbucks

Allison Wollam

Houston Business Journal

Micki Immanivong is constantly on the lookout for suitable sites to open more "bubble tea" houses and sell the latest beverage craze.

But when she finds a likely location, the owner of Tropioca Tea and Coffee Bar on Milam Street frequently encounters opposition from an existing Starbucks operation.

"It definitely does limit us," says Immanivong. "We can get the prime locations as long as we beat Starbucks to them, but that's hard to do."

More than 140 Starbucks locations in the Houston area face rising competition from nearly 30 vendors of Asian bubble tea -- a concoction of black tea, milk, sugar and marble-sized black tapioca balls served in a clear cup and sucked up through a straw.

And a growing consumer thirst for the trendy drink has Starbucks taking defensive measures.

Immanivong says her bid to open a store in Sugar Land Town Center was rejected because the java giant already occupied space in the center.

Immanivong is now headed downtown with a location at Main and Walker in the Commerce Towers. And she hopes to give Starbucks a run for the money in the near future with a bubble tea house in the Galleria area, along with another run at Sugar Land.

Finding prime locations is doubly difficult because Tropioca Tea and Coffee Bar and Starbucks serve many of the same clientele -- aficionados of gourmet coffee blends.

"We like to go into higher-end areas where people are willing to spend a little extra for gourmet drinks," Immanivong says. "It makes it extremely hard to compete with them in the same market."

Starbucks officials could not be reached for comment.

Far from smoothie

Starbucks might present the most formidable hurdle, but bubble tea brewers also have encountered bittersweet opposition from other national brands.

Immanivong's first foray into Kingwood was foiled because the center already was occupied by a Jamba Juice store with exclusive rights on all smoothie-type products.

Davin Huang, owner of Teahouse Beverages, says he was forced to rename some of the drinks served in his shop at Westheimer and Shepherd. The changes were made in response to pressure from a Smoothie King around the corner.

Huang took the incident in stride.

"We didn't mind too much because we serve drinks that are much different from the drinks being served at Smoothie Kings," he says.

Matthew Whitley, owner of T Spot Drinks in Rice Village, says he had to make several calls before securing a location for his tea house.

"I would call and they would say that they couldn't put me there because they had already leased to these other retailers," he says.

A retail leasing broker notes that the Starbucks coffee clash with tea house invaders is not a recent development.

Kenneth Katz, a principal with Wulfe & Co., says Starbucks has asked for exclusives in regard to tea and tea-based products for a number of years.

"They definitely consider tea concepts as competition," says Katz.

Tea housing boom

The popular potable giving Starbucks the competitive shakes originated on the island of Taiwan in the 1980s.

"Bubble tea" also bears a variety of other frothy names, from "tapioca ball drink" to "boba" to "pearl milk tea."

The tea house craze and tapioca bars made their way into Houston's multi-cultural Bellaire community several years ago. Now the trend is spilling into stylish neighborhoods such as Midtown.

Immanivong caters to an increasing stream of curious first-time customers in her Tropioca Tea and Coffee Bar.

"The Asian community has always been familiar with this product, but we moved into Midtown where the population mix is changing and more people of all cultures are trying out our drinks," she says.

In fact, Immanivong is taking the fad a step further by serving tapioca beverages laced with coffee, green tea, fruit smoothies and milk shakes in an effort to appeal to the mainstream market.

Whitley of T Spot Drinks says retailers have a level playing field in the Houston market for now because there isn't one strong brand name or total saturation of tea houses.

"Houston is a big market and I've seen many people come in here and introduce it to their friends," Whitley says. "People are looking for an alternative to coffee and many people are giving us a try."

Huang also operates a Teahouse location in the Hong Kong City Mall, at 11201 Bellaire Blvd., and is planning to open a new location near University of Houston's downtown campus at 104 Main and Commerce.

Huang of Teahouse Beverages says the competition is getting more fierce.

In true entrepreneurial fashion, Huang is pursuing an expansion strategy on several fronts.

With openings at multiple locations in the works, Huang also has sold three licenses for new shops, with two more licenses pending.

"It's all about the location and the quality of your products," he says. "This is a hot business right now."

awollam@bizjournals.com • 713-960-5936