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Wrong direction

Released at: 06:50, 25/07/2014

Wrong direction

A change in brand positioning without a change in service quality may well result in Highlands Coffee losing its popularity.

by Huyen Thanh

    The decision by Highlands Coffee to sell 49 per cent of its business division in Vietnam to Jollibee was believed to be a preparatory move in a confrontation with Starbucks. The local coffee chain also announced changes to its brand positioning and its menu, in anticipation of a showdown. After a decade of operations, Highlands now provides a menu of Vietnamese food and drinks targeting a wider range of customers, in a bid to compete with foreign rivals such as Starbucks.

    When it first began, Highlands became known as a coffee brand for businesspeople and high-income earners. Its most competitive advantage in the market place has been café location, with high-income earners coming to enjoy good drink in a comfortable atmosphere. It now has some 62 cafés in Vietnam and 20 overseas. The Vietnamese market, however, has been saturated by the arrival of other major brands such as The Coffee Bean and Tea Leaf, Trung Nguyen, Gloria Jean’s and now Starbucks, which threatens Highlands’ position.

    Mr John Culver, President of Starbucks in China and Asia Pacific, told the media that Ho Chi Minh City is just the first point of call for the brand in Vietnam and it will open hundreds of cafés in major urban areas throughout the country, including Hanoi. Marketers agree that Vietnam has deep coffee culture, which makes the fight for customers extremely complex. Meeting local tastes is an issue Starbucks is keenly aware of in Vietnam. With similar culture and price, Highlands needs to reposition its brand to compete and survive.

    The local coffee chain has already changed its strategy from targeting high-level customers to targeting every-day customers. Its menu caters to different customer groups with various drinks and all-day dishes (breakfast, lunch and dinner), which have traditional tastes. Its prices are competitive, in the range of VND29,000 ($1.35) to VND65,000 ($3.00). Besides expanding its menu it also offers discount vouchers via online group-buying websites to attract more customers. Different groups of customers did indeed begin to visit Highlands to enjoy its food and drinks after the change in strategy. This success is a reflection of the long-term vision of Mr David Thai, General Director of th eViet Thai International JSC, the owner Highlands Coffee, who believed that Vietnamese customer would change their mind after initially being keen to taste a Western style cafe, with Highlands striving to meet traditional values while providing international-standard services.

    Experts believe, however, that Highlands’ services have failed to meet international standards. Mr Hoang Tung, Founder and Manager of Pizza Home Hanoi, said that speed of service is a weakness of the local coffee brand. Changing its image or innovating its menu and prices and offering vouchers are clearly insufficient in meeting customer demand. “The service is so bad at Highlands Coffee that it diminishes the brand in the eyes of customers,” said Mr Tung.

    The challenges are growing for Highlands to meet the needs of customers because its lower prices and great location are simply not enough for it to succeed in its brand repositioning in such a competitive market.

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