The Battle of the Coffee Chains in Viet Nam

Inside a Phuc Long tea and coffee outlet in Hanoi. Photo by VnExpress/Tuan Tu.

In this November 2019 blog post My Starbucks Story: Made in Viet Nam I told the story about how I reached out to Starbucks in 2005-06 to offer some unsolicited (and free!) advice about entering the Viet Nam market.

Fast forward to 2020. As a recent articled pointed out Starbucks remains in third place in revenues behind two local coffee and tea competitors “despite recording double-digit growth last year.” Its 2019 revenue was 780 billion VND ($33.6 million), a year-on-year increase of 32%, not too shabby. However, the 2019 revenue for the Highlands Coffee and The Coffee House was 2.2 trillion VND ($95 million) and 863 billion VND ($37.2 million), respectively. It’s obvious who the key player is with The Coffee House and Starbucks a distant second and third.

To its credit Starbucks, which entered the market here in January 2013 and now has 46 stores nationwide, remains the dominant foreign coffee chain, and is one of the survivors in a very competitive market. Both Gloria Jean’s Coffees (Australia) and New York Dessert Coffee (Singapore) left. (I never went to the latter and wasn’t impressed with the former.) Revenues for The Coffee Bean & Tea Leaf, another US-based company, decreased by 30% last year to 71 billion VND ($30.6 million).

There’s also a beverage chain by the name of Phuc Long (PL), a HCMC-based company that opened its first store in Hanoi in 2018 and now has 47 in that city out of 70 nationwide. PL’s revenues rose nearly 65% over 2018 to 779 billion VND ($33.7 million), thanks to this expansion. (Note: Phuc Long has been around since 1968.)

What can Starbucks do to improve its position? Having lived in Viet Nam for 15 years and consumed countless cups of coffee in many kinds of coffee shops, I have a few ideas. The problem is my special introductory offer expired 14 years ago. If you’ve been to a Starbucks and its competitors in Viet Nam, what would you suggest? What adjustments should it make in order to attract more customers? Hint: Think localization.

Shalom (שלום), MAA

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