The Chun Cui He milk tea and latte has been making rounds in the news for the past few weeks. Despite the steep price of $2.80, the beautifully designed bottles of coffee and tea that are exclusively sold at 7-eleven have proven to be popular. People have been grabbing these drinks off the shelves as soon as they were restocked, even if that meant staying up till ridiculous hours such as 1am.
Despite the craze over these drink, it wouldn’t be unfair to say that at $2.80 per bottle, Singaporeans are probably being overcharged for these drinks. In Taiwan, each bottle costs NTD 28-30. That is about SGD 1.10-1.30. That means we are paying more than double of that for the same drink in Singapore.
Why is that so?
The bottles of milk tea and coffee are shipped from Taiwan and then distributed to the 7-eleven stores around Singapore. The company importing these goods have to pay for the transportation. The drinks must also be kept chilled, hence there are extra costs to transportation.
Because the drinks have a shelf-life of 15 days, they must be transported quickly. All these delivery costs are then transferred to end consumers.
If these products have to be stored at a warehouse before they are dispatched to the different stores, it will also incur a cost.
The Chun Cui He brand is being sold at 7-Eleven stores right now. As such, the company may have to pay 7-Eleven “rent” for using their shelves to display their product.
In the grocery retail industry, brands typically pay a fixed cost for the display of items at the shelves of distributors (e.g. your 7-Eleven, NTUC, Cold Storage). Thereafter, distributors also charge a markup to end consumers from what they paid for the product.
Before the drinks even reached our shores, Singaporeans have already been raving online about them. This created anticipation for their product.
When there a craze for a product, a higher price can be set because there is low price elasticity of demand. Consumers are not price sensitive to the product (at least in the initial phase) and would (still) be willing to overpay for a product.
Furthermore, If the product turns out good, it also sets a preceedent for the value of it in the future. In other words, many people in Singapore have it in their minds now that the Chun Cui He drinks are worth $2.80 per bottle, even though it’s really not.
Read Also: Why Food Fads Don’t Last – An Econs Approach
Comparison With Another Taiwan Imported Good
To assess whether the costs above justify the extra $1.50-$1.70 we are paying for, we will compare the price of Chun Cui He drinks to another popular import from Taiwan: Gold Medal Taiwan Beer.
The 330ml can of beer costs NTD30 (or SGD1.30) in Taiwan, but the same can costs around $3 here. This means that Singaporeans are charged $1.70 more for the beer, which is the same difference in price as that of the milk tea.
However, when we take into account that alcohol is taxed heavily in Singapore while milk tea is not, it is easy to see that we paying a higher premium for the milk tea.
In conclusion, while there are cost reasons as to why the Chun Cui He drinks are significantly more expensive in Singapore, the high mark-up is largely due to the anticipated crazy demand for them. It might also be good for Singaporeans to remember that for $2.80, you can get milk tea at your favorite bubble tea stores without having to stay up and compete with others for a drink.
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