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How to Start a Milk Tea Business in the Philippines: Steps to Success

Last updated: February 15, 2024

Key takeaways:

  • Milk tea business is a cost-effective and scalable business in the Philippines.
  • You will need about PHP 50 000 to open a new milk tea shop; this amount covers the first month’s supplies.
  • If you require financing for your milk tea venture, you can consider Digido business loans. For example, you can borrow up to PHP 25,000 with a 0% interest to cover ingredients for the first month.

How to start milk tea business at home

There are more than 500 milk tea brands located all over the Philippines including big franchises and small family shops. A desire to join the milk tea business is obvious — but where to begin and how to stay competitive?

Is it overall affordable for a beginning entrepreneur? If you have more hows and whys on opening a milk tea shop in the Philippines than detailed answers, this guide is here to help.

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Why is Opening a Milk Tea Business in the Philippines a Favorable Idea?

The first question that might arise is the profitability of the milk tea industry. Sure, you can see milk tea shops on almost every corner of the Philippines — but that’s just a hint; we need raw facts and figures. Here they are:

  • It is In high demand

In today’s world, the emphasis on a healthy lifestyle is gaining momentum among both the youth and adults. As a result, the demand for non-alcoholic beverages is on the rise. With the increasing popularity of a balanced and wholesome lifestyle, the market for non-alcoholic beverages is poised for continuous expansion.

If we take a look at the recent statistics on the most purchased beverages in a week in Southeast Asia, tea, including its famous bubble tea variation, is the third most popular cold drink (1). And what’s inspiring is that the spending on non-alcoholic beverages is expected to grow by almost 50% by the end of 2028 (2).

While the high demand for tea creates a high level of competition as well, you can be sure you have your fair share of customers.

  • It is easy to prepare

The milk tea business does not require professional baristas, expensive equipment, and outstanding skills. In a nutshell, all milk tea recipes are based on a simple mixture of black tea, milk, tapioca pearls or boba (exactly the bubbles), and extra flavors or toppings.

Here is an example of the basic tapioca milk tea recipe:

Ingredients:

  • 3 tablespoons loose-leaf black tea
  • 4 cups hot water
  • ¾ cup quick-cooking tapioca pearls
  • Whole milk to serve
  • Simple syrup to serve

Recipe:

  1. Steep the tea with 4 cups of boiled water. Cool it down.
  2. Take 4 cups of water to boil and add tapioca pearls. Stir the pearls and wait for them to float to the top. Then, cook them for another 5 minutes. Rinse them and cool them down.
  3. Mix your ready tea with milk and syrup, and add tapioca pearls.

 

How to start milk tea business

  • It is scalable

Thanks to easy access to suppliers and an enormous customer base that includes locals and tourists, it is possible to expand your startup to a milk tea shop business with various business models — from small kiosks to delivery.

The Financial Side of the Milk Tea Business

Now, let’s consider the required investments and your potential profit. As the actual earnings and spending depend on many details related to a single particular enterprise, we will take the following milk tea business as an example:

  • Location: Manila
  • Type: Small tent outside the owner’s house
  • Ingredients used: black tea leaves, water, milk essence, syrups, and tapioca bubbles
  • Equipment used: a boiler, a shaker, scoops, cups, straws, and a refrigerator
  • Cup size: 200 ml

Suppose we purchase ingredients from Lazada (3) and a couple of local suppliers (4).

Now, let’s get down to counting. We will consider the cost of every 100 ml of tea for our convenience.

👉 Product and Supplies

Your approximate initial investment breakdown in terms of products and labor will look like this:

Item Price Amount per 100 ml cup Price per 100 ml Price per cup (200 ml)
Black Tea 600 gr pack PHP 245 2 gr PHP 0.82 PHP 1.64
Syrup 2500 gr bottle PHP 348 13 gr PHP 1.81 PHP 3.62
Milk Essence 1000 gr pack PHP 196 18 gr PHP 3.56 PHP 7.12
Tapioca Pearls 1000 gr pack PHP 125 160 gr PHP 6.25 PHP 12.5
Cup (1 item) PHP 1.08 PHP 1.08 PHP 2.16
Straw (1 item) PHP 1 PHP 1 PHP 2
Labor  PHP 2 PHP 4
Total PHP 16.52 PHP 33.04

The net cost of a single cup comes to PHP 33.04, while the average price starts from PHP 85 (5).

Suppose you sell about 50 cups per day. Then your revenue will amount to PHP 4,250 per day and around PHP 127,500 per month. This will require PHP 49,560 monthly expenses and will bring a PHP 77,940 profit.

👉 Equipment Prices

Besides products that you will have ro restock regularly, you will require one-time investments in the equipment. Again, prices may vary depending on the brands you pick and on your development strategy: for example, you can buy a simple kettle for a start and then invest in a top-notch milk tea machine.

Here is a list of the basic equipment set you could invest in the beginning:

Equipment Average price on Lazada (6)
Tea brewer PHP 2,939
Blender PHP 476
Milk frother PHP 570
Ice machine PHP 4,659
Refrigerator PHP 59,698
Total PHP 68,342

Note: If you are going to organize a milk tea business in your backyard, don’t forget you will still need a counter — it may cost about 3,000 to 6,000 PHP.

However, if you wish to dip your toes into the business first, without having large equipment expenses, there are more affordable alternatives. For example, if you are a milk tea vendor, consider using a pan and a stove instead of buying a tea brewer. Some even use a rice cooker to prepare tapioca pearls. A more cost-effective alternative to an ice machine is an ice chest or ice container. You can purchase a few of them and store them in a freezer. However, as your business grows, investing in an ice machine could become a more reasonable option.

How to start milk tea business at home Philippines

👉 Rent Prices

We started with the example when you set up your initial milk tea venture right outside your own residence. However, what if you want to open more shops or rent a separate space from the beginning?

Here are examples of possible rent prices for the milk tea business in the Philippines (7):

Location Lot size Rent price per month
Manila 5 sqm PHP 14,000
Calamba, Calabarzon 15 sqm PHP 15,000
Muntinlupa City 6 sqm PHP 6,000
Quezon City 23 sqm PHP 25,000

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Milk Tea Kiosks Franchises

In the Philippines, the concept of mobile milk tea carts and kiosks is gaining popularity due to its flexibility and lower cost. It allows you to serve milk tea anytime, without having to rent a physical store or deal with elevated electricity bills at your house. You can also adapt your schedule to the peak hours to get more profit.

There are various popular tea brands that offer new entrepreneurs franchising agreements. Let’s see some examples of the brands that offer investing in kiosks:

Brand Franchise Fee Investment
Moonleaf Tea Shop  PHP 200,000 to 300,000 PHP 488,000 to 788,000
Island Tea PHP 175,000 to 250,000 PHP 400,000 
Sugar Panda Milk Tea PHP 180,000 PHP 385,000
Frotea PHP 120,000 PHP 350,000

How To Start a Milk Tea Business: a Step-By-Step Guide

Now that you know the approximate expenses, let’s consider all the steps from drafting an idea to managing a continuous customer flow. Regardless of your business’s size and assets, you must create a detailed plan, register your startup, choose the best location if you want to rent, and prepare everything to start selling.

Milk tea shop business

Drafting Your Milk Tea Business Plan

A business plan will help you develop and scale your operations and will also become strong support if you decide to take a business loan from the government. There is no strict rule of how to create a plan, but in general, it includes the following:

  • General information about your business’s goals, problems it will solve, and the unique selling proposition.
  • Sales forecast, options for business promotion, and marketing goals
  • Production costs, including supplies, labor, equipment, maintenance, etc.
  • If needed, Financial details include initial investment plans for spending, loans, and collaterals.

The Department of Trade and Industry of the Philippines has developed a sample of the business plan that you can safely use for your milk tea venture or any other startup.

Getting Financial Support

With a ready business plan, you can request a loan or find an investor for your project. Here are some of the best available options:

  • Government loans with low interest of up to 2.5% interest rates for small businesses, with or without collateral
  • Business loans from Digido. Quick approval, minimum documents, and availability for everyone are the key features of Digido online loans.

Registering Your Business

Now, it is time to go official and register your business. This is how you do it:

  • Register the business name on the DTI website (8). You will need to pay the fee from PHP 200 to 2,000, depending on the scope of your company, plus an extra PHP 30 fee for a documentary stamp.
  • Apply to your local barangay to get the clearance. This must be done in person.
  • Get the permit from the Bureau of Internal Revenue (9).
  • Request a sanitary permit for a food business from the Bureau of Quarantine (10).

Best location for milk tea business

Learn How to Get
Business Loans in the Philippines: A Comprehensive Guide to Startup Loans

TAX obligations for a small businesses in the Philippines

A milk tea cart in the Philippines, like any small business, is subject to certain tax obligations. The tax treatment of such a business largely depends on its revenue. For small-scale businesses earning less than PHP 3 million annually, there are two main options:

1️⃣ 8% Income Tax Rate: This is a flat rate applied to the gross sales or receipts of the business.

2️⃣ Graduated Income Tax Rates (0% to 35%): This is a tiered tax rate based on the net income of the business:

  • Up to PHP 250,000: 0%
  • Over PHP 250,000 to PHP 400,000: 20% of the excess over PHP 250,000
  • Over PHP 400,000 to PHP 800,000: PHP 30,000 + 25% of the excess over PHP 400,000
  • Over PHP 800,000 to PHP 2,000,000: PHP 130,000 + 30% of the excess over PHP 800,000
  • Over PHP 2,000,000 to PHP 8,000,000: PHP 490,000 + 32% of the excess over PHP 2,000,000
  • Over PHP 8,000,000: PHP 2,410,000 + 35% of the excess over PHP 8,000,000

Setting Up Your Milk Tea Shop

There are a few factors that could make or break your business even at the initial stage. So before you start, you need to figure out the location and the identity of your future brand.
Best location for milk tea shop business
Having collected all the necessary permits, equipment, supplies, and money, you are ready to open your first shop.

  • How do I pick a location?

To attract a continuous customer flow, you can try renting a cart, a kiosk or a spacious in-shop. A general recommendation for finding the best location for the milk tea shop business is to look for a place with heavy traffic and crowds of pedestrians. Consider renting at shopping streets, malls, markets, metro stations, and public beaches.

  • How to start a milk tea business at home?

Alternatively, you can safely start a business right outside your house: all you need is a counter and a convenient space for your equipment.

👉 Catchy Name and Design

Think of a memorable name for your milk tea business, create a distinctive logo and a theme for your shop’s decor. It should reflect the personality of your business and appeal to your target audience. Ensure that your shop’s sign is visible to the passersby. Good visibility can attract walk-in customers.

Milk tea business in philippines

A pro tip from a milk tea shop owner: Make sure you locate all the equipment right outside. This won’t look reliable if you keep going inside to prepare a beverage and return with a ready drink. Also, don’t forget to create a nice sign with your brand name so that it is evident you are selling tea.

👉 Menu and Flavors

Offer a diverse and creative menu. Alongside popular flavors, introduce unique blends or seasonal specials to stand out from the competition. Your menu should be inclusive: provide options for different dietary needs, like dairy-free or sugar-free versions. Here’s a sample menu with some common milk tea flavors you might find in the Philippines:

Milk Tea Base:

  • Classic Milk Tea
  • Jasmine Milk Tea
  • Hokkaido Milk Tea
  • Okinawa Milk Tea
  • Wintermelon Milk Tea
  • Taro Milk Tea
  • Thai Milk Tea

Fruit-Flavored Milk Tea:

  • Strawberry Milk Tea
  • Mango Milk Tea
  • Lychee Milk Tea
  • Passion Fruit Milk Tea
  • Peach Milk Tea

Specialty Milk Tea:

  • Brown Sugar Milk Tea
  • Oreo Milk Tea
  • Matcha Milk Tea
  • Coffee Milk Tea
  • Chocolate Milk Tea
  • Almond Milk Tea

Toppings and Add-ons:

  • Pearls (Tapioca Pearls)
  • Grass Jelly
  • Pudding
  • Aloe Vera
  • Nata de Coco (Coconut Jelly)
  • Red Bean

Adjust your sugar level (e.g., 0%, 25%, 50%, 75%, 100%) or (e.g., Regular, Less Ice, No Ice)

Keep in mind that milk tea shops in the Philippines often allow customers to customize their drinks by choosing the sugar and ice levels, as well as adding different toppings and pearls. Additionally, new and unique flavors are frequently introduced to cater to the ever-evolving preferences of milk tea enthusiasts in the country.

Bonus Part: Tips For Running A Successful Milk Tea Business

We have also prepared valuable insights and useful links for your convenience, so make sure you save them:

  • Milk Tea Suppliers list includes the best partners to pick when you need equipment, ingredients, or supplies like straws and cups.
  • Franchises list. If you want to begin with the marketing support of the existing brand, you can purchase a franchise — the ones with the most reasonable conditions can be found by clicking on this link.
  • Business Plan Sample. Have no idea what the business plan should look like? Check out the ready sample created especially for a milk tea shop.

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Summary

Opening a milk tea shop business in the Philippines is a relatively cost-efficient and quick procedure. If you begin from scratch, you will need to purchase all the necessary products and equipment, like a large commercial boiler, a blender, and an ice-maker. Although it doesn’t require special cooking skills or enormous investments, you still need to be ready to work hard to prepare, set, and develop your milk tea shop. Be patient and persistent, and the profit will come. Good luck!

FAQ

  • Why is the milk tea business in the Philippines a good idea?
    Milk tea is one of the top popular beverages among Filipinos and tourists. It doesn’t involve much preparation and ingredients, and it is easy to scale a business in this niche.
  • How much does it cost to start a milk tea shop in the Philippines?
    The initial investment in products begins from approximately PHP 50,000 if you don’t need to rent a spot for your shop.
  • What equipment do I need for the milk tea shop?
    The basic equipment set involves a large tea boiler, a blender, an ice-maker, and a refrigerator.
  • What ingredients are required to make milk tea?
    The key milk tea ingredients are water, tea leaves, and milk essence. Depending on your menu, the extras might involve tapioca pearls, syrups, powdered flavors, and toppings, for example, Oreo cookies.
  • What other supplies do I need to purchase regularly for my milk tea business?
    Your regular spending will include purchasing disposable cups and straws.
  • What is the average profit from a single milk tea cup?
    Your profit may vary depending on your location and prices you set for beverages, but on average, it is approximately PHP 50 to 52 per 200 ml cup.

Authors

Digido Financial Writers Team is a team of experts in the field of finance and credit, specializing in writing articles for Digido blogs.
Anatolii Sibrenko
Author pages:
Anatolii Sibrenko was the Head of Product Marketing at Digido, where he orchestrated the marketing dynamics from August 2021 until January 2024. Anatolii Sibrenko is the Head of Product Marketing at Digido, where he has been orchestrating the marketing dynamics since August 2021. With a knack for innovation in product sphere, business development, and marketing analytics, he crafts and executes strategies that bridge the market with Digido's offerings.

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