Growth Study: Kung Fu Tea
How Did Kung Fu Tea Become the Largest American Bubble Tea Brand?
A lot of people have a go-to bubble tea place. For some, it may be Coco. For others, it’s Gong Cha. For a large number of Americans, however, it’s Kung Fu Tea, the largest bubble tea brand in the United States. Many celebrities are Kung Fu Tea enthusiasts — from Usher to Jessi to the figure skating Shibutani siblings to even Hillary Clinton! How has Kung Fu Tea found so much success in the United States, a country that previously had no exposure or awareness of bubble tea? We’re going to dive deep into Kung Fu Tea’s story to understand the key behind its success and how it’s working to grow even more.
WHAT IS BUBBLE (OR BOBA) TEA?
Bubble tea is a tea-based drink that is infused with milk, served with chewy tapioca balls called “boba,” and sipped with its signature wide straw. The drink originated in Taiwan, where bubble tea was extremely popular in the night markets. Many Taiwanese-Americans living in the States missed being able to get the beloved bubble tea drink that was so easily available back in their home country. And when they did find a boba place, they were quickly disappointed when the drinks lacked the quality and authenticity that the drinks back in Taiwan had. This was exactly how the co-founders of Kung Fu Tea felt when they came to the United States, inspiring them to start their company.
Over the last few years, with more and more bubble tea companies venturing into the American market, the bubble tea industry has experienced rapid growth and an increase in popularity. According to GrabFood, Southeast Asians “drink an average of four cups of bubble tea per person per month.” Bubble tea orders increased by 3,000% in Southeast Asia in just 2018 alone. This April, after hearing that all stores would be closed due to the coronavirus pandemic, many Singaporeans rushed to buy their last cup of boba, resulting in long queues with over 40 people at many bubble tea shops. We’ve seen a similar thing happen in the United States, where the opening of new Kung Fu Tea locations like the one in Harvard Square attracts lines that are 30 to 40 minutes long. Last year, the global bubble tea market size was valued at $2.4 Billion USD and it’s expected to grow to $4.3 Billion USD by 2027. So how has Kung Fu Tea played a role in increasing the popularity of bubble tea in the United States and other countries? What has it done on its part to contribute to the $2 Billion valuation of the global bubble tea market?
BUREAUCRATIZED PRODUCTION
One way Kung Fu Tea — and many other bubble tea companies — has been able to appeal to many American consumers is its use of a bureaucratized production of its bubble tea drinks. A famous example of a company utilizing bureaucratized production for its products in order to boost sales is McDonalds, which figured out the most efficient and optimal method of preparing its burgers quickly while also maintaining that high quality. Starbucks uses a system of writing names and checking the boxes for which drink has been ordered in order to deliver their products efficiently. Bubble tea brands like Kung Fu Tea practice this production style as well: the barista prints out a label of the order and sticks onto a plastic cup that is passed to a colleague, who prepares the drink and covers the top with a plastic sealing film that the consumer then pokes through with the wide, fluorescent-colored straw. This whole process is extremely efficient and the ending (poking the sealing of the cup with your straw) is especially satisfying. This type of production makes it easy for Kung Fu Tea to appeal to consumers at malls and areas near high schools and universities who prefer drinks they can take on the go.
THE APP AND PARTNERSHIPS WITH LEVELUP AND POPDEEM
Another important way Kung Fu Tea has been able to grow its company so quickly is through its partnerships with LevelUp, a digital engagement platform, and Popdeem, a social marketing platform that allows brands to reward their customers for sharing local brand experiences. According to Mai Shi, the Marketing Manager at Kung Fu Tea, “Kung Fu Tea wanted to master the art of digital to provide our customers with a convenient experience that they’d love.” Their partnership with LevelUp and Popdeem helped them do that and more.
LevelUp was able to develop for Kung Fu Tea, “an on-brand viral digital solution that offers guests loyalty rewards and social integrations.” This was in the form of the Kung Fu Tea app, which includes visit-based rewards and focuses on purchase behavior to help Kung Fu Tea make well-informed decisions. LevelUp also assisted in distributing Kung Fu Tea’s menus in “Chase Pay, Yelp, and other digital channels,” which helped attract more customers. Their partnership with Popdeem further helped their goal of increased digital engagement, inviting many consumers to share their Kung Fu Tea experience on social media.
The results of these partnerships, which started in 2016, are impressive. In 2017, Kung Fu Tea saw 175% more monthly active users per location than brands in the same market that had an app but didn’t use LevelUp.
The increase in the number of app users resulted in an increase in visit frequency and orders. While only 17% of U.S. consumers visit a quick-service restaurant at least once a month, 90% of Kung Fu Tea’s customers visit at least once a month. Additionally, Kung Fu Tea’s average number of orders per location increased by 74% throughout 2017.
The Kung Fu Tea app has many features that improve the consumer experience. The app has a reward system where customers can work towards earning a free drink. Another feature is the “Refer-A-Friend” program, which allows customers to invite their friends to download the app, resulting in the friend getting a free drink and the original customer earning credit that could be used when ordering. Customers are also able to pay for their drinks through the Kung Fu Tea app, simplifying the whole transaction process for consumers. In 2018, Mai Shi led the team that created National Bubble Tea Day on April 30th, which is Kung Fu Tea’s birthday. Through this initiative, Kung Fu Tea offered free drinks to consumers who downloaded their app and, as a result, saw weekly sales increase by 63%, social media followers increase by 10k in 2 weeks, and website views increase by 70%. In just two and half years, Kung Fu Tea’s app gained 500,000 users. The advancement and marketing of the app has played a significant role in Kung Fu Tea’s ability to reach more customers and create a strong and loyal customer base.
SOCIAL MEDIA
We’ve saved the best for last! Kung Fu Tea is definitely on top of their social media game. You can tell that the company’s main target audience is young adults just from scrolling through their social media accounts.
Kung Fu Tea’s social media accounts expertly appeal to teenagers and young adults who are active on social media and already spend most of their time reading memes and watching Tik Tok videos. Kung Fu Tea’s Instagram page, which has 135K followers, is filled with bubble tea-related memes and other generally entertaining content that always relates back to boba. In 2019, the page posted bubble tea memes relating to K-Drama scenes, garnering a lot of likes as it appealed to many social media users who enjoyed that genre. Throughout that year, Kung Fu Tea’s Instagram page also posted content related K-POP such as “Blackpink members as boba: a thread” and “BTS members as boba: a thread,” strategically attracting the fan bases of K-POP groups and achieving over 30,000 likes and views on those posts. Most recently, Kung Fu Tea has also used Tik Tok as a part of their marketing effort, gaining over 130,000 followers and 4 million likes on the platform. Utilizing platforms like Tik Tok that already appeal to their target audience to market their brand and products is a smart move on Kung Fu Tea’s part — a move that many American companies have been too slow to implement themselves.
THE FUTURE
Considering how quickly Americans have become fond of bubble tea, it wouldn’t be a stretch to say that Kung Fu Tea only has room for more growth. The global bubble tea market is predicted to have an annual growth rate of 8.9% from 2020 to 2027, its market size increasing by almost $2 Billion USD by the end of that time frame. Currently, Kung Fu Tea has locations in the United States, Australia, Canada, Taiwan, Japan, and Vietnam, and is looking to open more. According to Darren Chen, Kung Fu Tea’s franchise sales manager, “The goal is to have about 500 U.S. stores and 100 international shops operating within five years.” With more and more internationally based bubble tea companies entering the American market, it will be interesting to see how Kung Fu Tea will perform with the increase in competition!
Originally published in the Asian Business Society online magazine.
