Virtual Edition

Vietnamese-owned coffee chains show strong rise

Many foreign coffee chains have failed to secure their positions in the market, but Vietnamese owned chains have reported revenue growth in recent years. But not all of them have made high profits.

According to VIRAC, a market analysis firm, Highlands Coffee led the market in 2018 in number of shops in Vietnam. Its 240 shops brought turnover of VND1.628 trillion. The second position belonged to The Coffee House with 140 shops and revenue of VND669 billion, followed by Starbucks with 45 shops and VND593 billion.

Phuc Long, which was once well known for tea-made drinks, has become more famous for coffee and reported total revenue of VND473 billion in 2018, an increase of 39 percent over 2017. All the large coffee chains in Vietnam saw a turnover increase in 2018, but 5 of 10 companies owning the chains incurred losses. 

While Highlands Coffee, The Coffee House, Starbucks Vietnam and Phuc Long made profit, though modest (Highlands Coffee made post-tax profit of VND99 billion, The Coffee House VND2 billion, Starbucks VND27 billion and Phuc Long VND3.6 billion), The Coffee Bean & Tea Leaf incurred a loss of VND29 billion and Trung Nguyen VND24 billion. This was attributed to increased operation costs.

Vo Van Quang, a branding expert, said coffee chains now have to spend big money to expand their network to improve their competitiveness, so the limited profit was understandable. Despite cutthroat competition, more brands have joined the market. In June 2018, Arya Consumer brought Wayne’s Coffee from Sweden to Vietnam, opening the first shop in HCMC. To date, the brand has eight shops in HCMC and is going to open another two in early July in Hanoi. Le Kim Anh Nguyen, marketing director of Arya Consumer, said the chain plans to open 50 shops throughout the country by May 2020.

The presence of new brands, say analysts, shows that the Vietnamese market is fertile. Many newcomers have turned up and many have left, which means that there exists room for new brands. To succeed, they need to define their targeted market segment and retain loyal customers. The strong point of foreign owned coffee chains is that their coffee meets international standards in quality, while the weak point is high operation cost.

Meanwhile, Nguyen Ngoc Vuong Linh, marketing director of Tra Ca Phe Viet Nam, which owns The Coffee House, said the competitiveness of Vietnamese owned companies lies in the deep understanding about the tastes of customers, which is different from other Asian markets. When comparing Vietnamese and foreign owned coffee chains, Nguyen Huu Long, the founder of Shin Coffee, said foreign chains target medium- and high-income earners, so their selling prices are relatively high.

Source: VNS