International coffee shop chains continue to seek opportunities in Vietnam by adapting to local needs and promoting the strength of their global brand.
In mid-June Starbucks continued the expansion of its chain in Vietnam by opening its fifth outlet in Hanoi, on the ground floor of The Garden Shopping Centre in The Manor residential urban area in Nam Tu Liem district. “We look at Vietnam and we see so much potential,” Ms. Patricia Marques, General Manager at Starbucks Vietnam, was quoted as saying at the opening ceremony. “It’s such a vibrant and exciting market.” The Seattle-based coffee brand now has 20 outlets in Vietnam three years after setting foot in the country.
Starbucks is one of many international brands investing in expanding their coffee shop chain in Vietnam, a market regarded as one of the most dynamic and appealing in the world for F&B retailers. A survey conducted by Financial Times Confidential Research in 2015 on 1,000 consumers in the five largest economies in ASEAN, except Singapore, however, determined that Vietnam is the only country in the region where Starbucks is not high on the list of most-visited coffee shop chains. Receiving support from loyal customers and winning more new customers in a market that is also one of the world’s largest coffee-growing countries and which boasts famous local coffee brands has been no easy journey and even the most experienced enterprises need to follow specific business strategies.
Vietnam has long had a coffee and tea drinking culture so it was always going to be a sustainable market for international players. Coffee Bean and Tea Leaf (CBTL) noticed the market’s potential and was of the first international franchise chain to arrive, in 2008, according to Ms. Trang Tran, Marketing Manager of CBTL.
Coffee shops used to be thought of somewhere people go to spend some free time with their family and friends. Now, with more choice out there, people have become loyal to a specific brand because of its menu or their own personal preferences, finding it matches their lifestyle and is suitable for business networking and meetings. “Players who can catch on to that changing trend, who know who they are, and who deliver on their commitments will be successful in the long run,” Ms. Trang told VET. CBTL now has 15 stores in Vietnam: 13 in Ho Chi Minh City and two in Hanoi.
Vietnam is not only one of the leading countries in producing coffee but also a major consumption market. Coffee shops are everywhere, Ms. Marques has noted, in the cities and in the countryside. “It was easier to establish the business in an existing coffee culture like Vietnam,” she told local media recently. “In other Asian countries you need to convert the tea drinkers first, but here you are just another player.” “Product localization” is a major task for international brands like Starbucks but it also has other plans besides creating suitable products for Vietnamese people. There are in fact two Vietnamese-style items on the menu at Starbucks - Asian Dolce Latte and Dolce Misto - which are inspired by “ca phe sua da” (iced coffee with milk), done the Starbucks way.
South Korea’s Caffè Bene also opened a new store in Mac Dinh Chi Street in Ho Chi Minh City’s District 1 early this year, bringing to five its outlets in the city. As the popularity of Western-style coffee shop chains booms, Caffè Bene is also taking advantage of the popularity of South Korean culture, with K-Pop and K-star taking off around the world, as a springboard to quickly spread its brand identity and target young consumers. The chain used an image of K-star Lee Jong Suk on its opening day in August 2014, which was seen as a smart move to stir up excitement. “The brand has impressed since entering the market and it was a good start and it differentiated itself,” a branding expert said.
Caffè Bene Vietnam has set customer feeling as its greatest concern. Besides its unique quality appreciated by customers all over the world, Caffè Bene Vietnam is devotedly focused on every detail in its outlets, according to Mr. Ho Minh Hoang, CEO of Caffè Bene Vietnam. All employees regularly serve at outlets so that they can fully understand customers and better develop products and services. The company is also seeking opportunities to expand to Hanoi, Da Nang and Can Tho this year.
Vietnam is emerging as a market of some potential for coffee shop chains and both local and foreign enterprises have an opportunity to secure greater market share. “I believe there is ample space in Vietnam for both local and global brands to satisfy the demanding Vietnamese consumer,” said Mr. Martin Roll, CEO of the Martin Roll Singapore, Business, Strategy & Brand Marketing Consulting Company. “Consumers always want to have choices, including access to global brands and what they can offer that local brands cannot offer.” Generally, he explained, consumers mix and match their choice of brands, so although they may be loyal to one brand they always seek variety every now and then.
Changing consumer behavior is one of the most important factors significantly impacting on retailers in general and F&B retailers in particular. Vietnamese consumers take more notice of food safety and hygiene nowadays and this may create major advantages and opportunities for global brands, according to insiders. A survey conducted by the Vietnam Standards and Consumers Association (VINASTAS) and released in July found that 30.04 per cent of 253 surveyed coffee vendors sold coffee with low caffeine levels (under 1 gram per liter). The survey samples were randomly purchased at different coffee vendors, including luxury coffee shops, teahouses, hospital cafeterias, mobile coffee carts and sidewalk cafés, etc. Based on the standards of the Specialty Coffee Association of America, a 150ml cup of coffee must have an average of 8 to 8.5 grams of coffee beans.
In recent years Vietnamese people have become increasingly aware of the importance of quality in the food and drinks they consume daily, so local players will need to work harder to stay competitive alongside international brands, according to Ms. Trang. “In terms of branding exposure, we identified ourselves as premium coffee shops located in central districts and high-end commercial and office buildings,” she added. “We adhere to an international set of standards in terms of hygiene regulations, supplier screening and selection processes, food quality control protocols and so forth when it comes to our operations.” CBTL’s business strategy for 2017 is to maintain its core Southern Californian values and services and at same time continue the expansion of its chain throughout Vietnam’s major cities.
As expanding the market segment is a concern for the business system, Starbucks Vietnam has made a great effort to expand its market size and compete with other brands. “In this competition the quality of products and services is the decisive factor,” said Ms. Marques. Customers will choose brands and products they believe are suitable for them. Every market has its own characteristics and the development of Starbucks in each market is different. “But adapting completely to the Vietnamese taste would take away our uniqueness,” she was quoted as saying, adding that many of Starbucks customers are used to the taste of Starbucks’ drinks in other countries.
Adhering to international standards in the local market is a challenge. “In doing this we are subject to costly operational expenses in terms of sourcing our products to ensure the best quality and practices,” Ms. Trang said. “That being said, we do not compromise our product quality. And that is our heritage.” Other difficulties are high retail rental costs and the limited number of CBD areas compared with developed countries like Singapore, South Korea and Japan.
It’s generally agreed that traditional coffee shops and modern global coffee shop chains can co-exist in Vietnam. One does not exclude the other as consumers want variety over time, according to Mr. Roll. “I think the Vietnam market will continue to attract global brands and there will be fierce competition from local coffee shops and local coffee chains,” he said. “In a modern, connected world, brands travel across borders as consumers seek new experiences, so brands will also cross into Vietnam, and potentially Vietnamese brands will expand outside of Vietnam.”