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New kid on the block

Released at: 23:23, 10/10/2014

New kid on the block

A South Korean-based player has now joined Vietnam's coffee shop market and is confident of success amid strong competition.

by Huyen Thanh

The recently-opened Caffe Bene coffee shop in District 1, Ho Chi Minh City, welcomed 15,000 customers in its first two days; a promising start for a new entrant in the country’s coffee shop scene. From South Korea, Caffe Bene has already been a familiar face around the world for ten years but is new to Vietnam. The chain used an image of K-star Lee Jong Suk on its opening day; a smart move to stir up excitement. “The coffee brand impressed upon entering the new market,” said Mr Hoang Tung, Founder/Manager of Pizza Home. “It was a good start and it differentiated itself.” 

As the popularity of Western-style coffee chains booms in Vietnam it is a good time for Caffe Bene to enter the local coffee market and expand its brand across Asia. The brand also takes 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. Other South Korean food brands such as Lotteria, BBQ Chicken and Mr Pizza have already found favour among local consumers. 

Caffe Bene now has 1,540 stores in 13 countries worldwide. Brands, when expanding to new markets, need to define who their rival is and how they are different. Caffe Bene named Starbucks as its rival in local media, so it needs to be different. According to Mr Truong Tuan Anh, Deputy Director of Caffe Bene Vietnam, the key factors in differentiation are price, location, products and marketing, though he also said that Starbucks was not actually its rival. Its price level is lower by VND5,000 ($0.22) compared to Starbucks. The South Korean brand is confident of opening 300 more stores in the country within the next five years, while its “rival” also has its sights set on opening hundreds of new stores in the future. 

In terms of products, Caffe Bene and Starbucks have no particular strengths. Both, though, focus on differentiation. This clearly expresses the marketing strategy of the South Korean brand. “The company will pour a lot into its marketing strategy, especially its Star Marketing strategy [using famous pop singers and actors],” Mr Tuan Anh said. “The strategy will noticeably increase its brand identity among Vietnamese consumers.” However, Mr Tung from Pizza Home believes the Star Marketing strategy is only good in the short term. Establishing a wide retail network is needed for the brand to promote its image among local consumers, who would then choose its products. What the two coffee brands share is a strength in the value of emotion. 

With plans to establish 300 more stores by 2018 to quickly spread out in the market, Caffe Bene is confident but some question the feasibility of such efforts. Mr Tung said that it’s very ambitious because competitors like Starbucks and McDonald’s are also planning to expand at the same time. Caffe Bene’s plan, he said, needs to address three questions about strategy. Firstly, whether growth in the market is strong enough to absorb such a huge number of new stores. Secondly, whether incomes are increasing enough to allow people to afford the prices of the brand’s products. And, lastly, whether the popularity of South Korean culture will continue to grow or be replaced by another culture. 

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