As boba interest grows, Reno-Sparks businesses work to stay afloat

Kyle Stenberg, co-owner of Biggest Little Boba Shop, mans the counter inside the downtown Reno business on Wednesday, May 27.

Kyle Stenberg, co-owner of Biggest Little Boba Shop, mans the counter inside the downtown Reno business on Wednesday, May 27. Photo: Kaleb M. Roedel / NNBW

By Kaleb Roedel

Wednesday, June 2, 2021

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A few months ago, when Kyle Stenberg and his four business partners started making plans to open the Biggest Little Boba Shop in downtown Reno, they knew there would be no shortage of bubble tea drinkers in the region.

The Taiwanese milk tea drink has exploded in popularity in recent years, with bubble tea shops popping up all over the country — as well as several across greater Reno-Sparks — to meet the demand.

What the Biggest Little Boba Shop owners couldn’t predict, however, was a massive shortage of their key ingredient: boba, the dark, chewy pearls made of tapioca found in the tea-based beverage.

The scarcity of tapioca balls, which are imported from Taiwan, has been brewing for months due to a bottleneck in the Asian-U.S. shipping chain that is impacting various industries, big and small.

“We freaked out a little bit,” Stenberg said regarding the boba shortage. “We were a little bit late on learning about it because, while experimenting and perfecting our recipes, we hadn’t needed to order a large shipment of boba.”

That changed as the Biggest Little Boba Shop neared its mid-May opening inside the Arlington Towers in downtown Reno.

Right when the new bubble tea shop needed a healthy stock of its top-billed ingredient, the ability to obtain it was harder than ever.

“We pretty much opened and we have a small supply of boba, which we had ordered before the global shortage,” Stenberg said. “And then we had to make a much larger order for our actual opening so that we wouldn’t run out of stock, and we found that pretty much every single U.S. supplier has absolutely no boba, and they’ve been out of stock for the last month.

“And they have no foreseeable future when they’re going to be back in stock.”

ANTICIPATING GROWTH

Due to overflowing demand, Stenberg said he and his business partners are paying 3-5 times the normal price of the tapioca pearls; as such, they’re working a majority of the shifts at their shop until supplies are steady and they can afford to hire more employees.

A look at one of the bubble tea beverages offered by the Biggest Little Boba Shop. Photo: Kaleb M. Roedel / NNBW

 

“Our plan was to hire right away and try to train up employees and get the shop systemized,” said Stenberg, noting the company recently hired two part-time employees. “But based on the amount that we’re making, we’re pretty much going to have to work the shop ourselves for a little over half the number of (business) hours in the week. Which is tough, because that wasn’t our plan. It’s harder to perfect all the other stuff that goes into the shop, like our systems and cash management and our payroll systems and our training.

“We have to put that on hold because we spend a lot of our own time working in the shop.”

Currently, the business is waiting on a “very large” online shipment from a Taiwanese supplier, said Stenberg, adding that the boba would take more than 45 days to arrive.

In the meantime, Stenberg and crew are visiting every Asian market in the Reno-Sparks area and constantly scrolling through every boba supplier website.

“We’re just trying to find anyone that has anything left in stock and immediately buying what we can when it’s available,” he said.

Stenberg said the shop has been averaging about 60 transactions a day, which requires about one bag of boba, or 6.6 pounds of the chewy pearls. He said the shop’s short-term goal is to hit about 100 transactions a day, with its sights set on eventually doubling that mark.

“I think the annual demand will go up,” said Stenberg, who moved to Reno from California with his business partners. “I think Reno is sort of moving in the same direction as California, with an increasing Asian population, and a lot of Californians are coming over. We estimate there are going to be boba shops all over the place in 5-10 years and we wanted to get in early on it.

“It’s just going to continue to get more and more popular.”

‘YOU HAVE TO BITE THE BULLET’

Like boba shops, companies that manufacture organic tea products are also navigating the challenges of a snarled supply chain.

In this 2018 photo, Kunall Patel, co-owner of Davidson’s Organic Teas, inspects ingredients prepared to be manufactured into tea products at the company’s facility in Sparks. Courtesy: Davidson’s Organic Teas

 

Kunall Patel, co-owner of Davidson’s Organic Teas in Sparks, said the company has not only been impacted by backed-up freight shipments, but also the fact that their tea and spices are sourced from a country that is currently the epicenter of the global COVID-19 pandemic: India.

“They have been the worst hit so far with undemocratic lockdowns and no social distancing and no vaccination access whatsoever,” Patel said. “So, they’ve been hit hard over there from a farming agricultural standpoint, so sourcing ingredients has been tremendously challenging the last 12 to 18 months.”

Davidson’s has seen its pre-COVID wait time of three months for purchased ingredients double and sometimes triple to six or nine months, Patel said. Not to mention, shipment costs have done the same thing.

“We’re used to seeing container shipment costs come to the U.S. at a cost of maybe $2,000 or $3,000, at most,” Patel said. “Now, since the pandemic, it’s been more like $8,000 to $12,000. But you have to bite the bullet and still continue to bring in ocean containers of ingredients for our needs.

“We run a business that relies heavily on imports.”

Patel said Davidson’s is going through a “cash flow crisis” as it continues to purchase ingredients that are slow to arrive, limiting the amount of products it can manufacture and sell from its 50,000-square-foot facility in Sparks.

Numbers-wise, he said the company saw overall production in 2020 drop 30% to 40% compared to 2019.

Patel said 60% to 70% of the company’s revenue comes from B2B sales to restaurants, grocery stores, hotels and the like, with the remainders coming from direct-to-consumer sales. While Davidson’s final 2020 revenue figures were not available, Patel said the company was probably down less than 25% in sales compared to 2019.

Despite the sales decline, Patel said demand has returned closer to pre-pandemic levels and is continuing to grow.

“Just like any of the food categories, I think we’ve seen an increase overall in tea orders because people are staying at home and drinking more tea,” Patel said. “Tea is an item that is not supported by events or hospitality industry as much. It’s supported more so by consumers drinking tea at home. At-home consumption of tea has really picked up.”

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