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Departure of NYDC a warning for coffee chains

Released at: 13:14, 28/07/2016

Departure of NYDC a warning for coffee chains

Photo: Duc Anh

Singaporean coffee and dessert chain closes its last outlet, in HCMC, amid an increasingly competitive environment.

by Ha Anh

The Singaporean coffee and dessert chain NYDC has fully withdrawn from the Vietnamese market after seven years due to fierce competition from both local and foreign rivals.

New York Dessert Coffee (NYDC) published the closure of its last store at the Metropolitan Tower in District 1 of Ho Chi Minh City on its Facebook page without any official statement from its parent company in Singapore.

The parent company, Singapore’s SUTL Group, has not been available for comment over the last few days while NYDC promised on its Facebook page that it would return sometime in the future.

NYDC closed three of its other outlets in May, all in Ho Chi Minh City. The outlet in District 1 was next to a major rival, The Coffee Bean & Tea Leaf (CBTL).

With investment from Singapore’s SUTL Group, NYDC arrived in Vietnam in 2009 and young people were quickly attracted to its modern drinks menu and tasty American desserts such as cheesecakes and mud-pies.

The SUTL Group, which also brought KFC to Vietnam, hoped it could replicate the success of KFC. It planned to open 20 stores in office buildings and malls over a five-year period, with each costing $250,000 to $300,000.

SUTL’s ambitions, however, quickly faded as NYDC failed to compete with local and international coffee chains such as The Coffee House, Urban Station, CBTL, and, most recently, Starbucks.

Though NYDC and SUTL did not detail the reasons behind the withdrawal, industry insiders believe its expensive menu and locations were among the issues. “The business model of NYDC is less competitive,” said Ms. Nguyen Ha Linh, developer of the Cong Caphe chain. “Smaller and newer brands are much more flexible in competing.”

Vietnam has seen a flood of coffee shop chains over the last decade, both local and foreign and primarily franchises. Most attract young Vietnamese with money in their pockets.

But success depends on various factors, according to Mr. Rachan Reddy, General Manager of IFB Holdings, the manager of CBTL in Vietnam. “I think the biggest reason for success or failure is listening to customers and well executing and delivering what the customer wants,” he told VET. “It’s not easy. If you fail at doing this your business will eventually fail.”

For whatever reason, the withdrawal of NYDC sends a warning to foreign players looking to establish franchises in Vietnam. Despite the country being one of the hottest franchising markets in Southeast Asia, careful planning and perfect execution are required if a brand wants to do well. 

Mr. Reddy believes that “Vietnam’s coffee chains are still very healthy,” and Ms. Linh said that “big brands like Starbucks will not follow NYDC’s move,” at least not soon. “Listen to the customer and learn to develop trust in your own judgment,” was Mr. Reddy’s advice to young Vietnamese startups in the coffee chain business.

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