What is Starbucks' impression after 10 years of entering the Vietnamese market?

DNHN - While Vietnam is the largest coffee market in Southeast Asia in terms of both value and number of stores, the Starbucks branch rate per million people is a low 0.9%.

The year 2023 will mark the tenth anniversary of Starbucks' entry into the Vietnamese market. Due to differences in coffee prices, coffee culture, and coffee flavor, however, Starbucks' presence in Vietnam is not particularly significant.

According to Asia Nikkei, coffee has become an integral part of Vietnamese culture, and the country has more coffee shops than almost any other. Therefore, when Starbucks entered the market in 2013, it faced a different set of expectations than other American brands such as McDonald's and Subway. Vietnam before.

A Starbucks representative told Nikkei Asia that the company will celebrate 10 years of operations in Vietnam by opening its 100th location there. However, Starbucks declined to respond to a question regarding the company's profitability in the country.

While Vietnam is the largest coffee market in Southeast Asia in terms of both value and number of stores, the Starbucks branch rate per million people is a low 0.9%. greatest in the region

"Starbucks is not something that can be purchased and consumed every day. Owner of a coffee shop in Ho Chi Minh City, Nguyen Kim Ngan, told Nikkei, "I want to provide people with quality coffee that they can use every day."

Local Vietnamese coffee shops can protect this $1 billion market in part due to their competitive pricing. The unique flavor and coffee-drinking culture are the subsequent reasons why Vietnamese people enjoy drinking Vietnamese coffee.

While Starbucks charges up to $5 for a beverage containing a small amount of Arabica coffee and syrup, competitors sell every possible coffee substitute for as little as $1.

Starbucks's case is ambiguous in the eyes of Enma Bui, a coffee brand representative in Vietnam. On the one hand, she believes that the global giant's presence in Vietnam has increased interest in coffee, while on the other hand, Starbucks' sugary concoction dulls the taste buds.

"One customer approached me and requested a caramel macchiato similar to Starbucks. Enma Bui asked, "How do you persuade someone who is accustomed to such coffee cups to drink black coffee and appreciate its exquisite notes?"

Even while sitting and studying with a Starbucks cup in hand, working at a location of this brand is quite luxurious. However, for a market with a robust coffee culture, this is not something to display or brag about. In this marketplace, sitting and drinking coffee, conversing, working, and studying are our daily activities.

"I believe the population characteristics and coffee-drinking culture in Vietnam explain why world-famous coffee chains are not performing as expected. These brands believe they have performed well in other Asian markets and employ a similar strategy in Vietnam, which is trending towards luxury and high prices, according to Nathaniel Lim of Euromonitor Asia.

Tastes for coffee in Vietnam date back to the nineteenth century. In the 2000s, coffee consumption had become a national habit, dominated by Highlands Coffee and Trung Nguyen. In addition, because the industry has a relatively low barrier to entry, thousands of small coffee shops have emerged. The open economy of Vietnam at the time brought international influences closer to the country.

According to Euromonitor, Vietnam has up to 19,000 coffee shops, just fewer than the United States, China, and South Korea. Despite the size of the Vietnamese market, foreign brands capture a relatively small share.

Not many of the first international coffee chain companies to enter Vietnam will survive. After 15 years of expansion, Coffee Bean & Tea Leaf has only 15 locations, while Gloria Jean was forced to leave Vietnam in 2017.

Starbucks Asia Pacific director Emmy Kan told Nikkei, "We will take a cautious, indigenous-cultural approach to sustainable growth," but declined to explain why the company has so few branches in Vietnam.

Vietnam currently has the fewest Starbucks locations in Southeast Asia. Singapore, located directly above, also has 146 stores.

According to a representative of a national coffee brand, coffee in Vietnam is a social activity. People prefer to dine at a restaurant followed by a visit to a coffee shop for a drink, and this behavior eventually becomes a habit. In addition, they prefer a coffee shop that overlooks the street, sometimes located directly on the street or sidewalk, rather than Starbucks.

Two decades ago, Vietnam valued coffee as a profitable export and a daily habit. In recent years, it has taken on the characteristics of a professional craft, with drinkers becoming increasingly aware of the liquid in their glasses and of their participation in a culture.

Exporting coffee remains profitable. According to the US Department of Agriculture, Vietnam exports 25 million bags of nuts annually, second only to Brazil. These 60kg bags primarily contain robusta coffee.

Domestic demand is also extremely robust. According to data from Euromonitor, Vietnam's coffee market expanded by 13% between 2021 and 2022.

How long will it take Starbucks Vietnam or any other international chain to reach this level of expansion? Whether or not they can capitalize on this opportunity is uncertain.

Emmy Kan, president of Starbucks for Asia-Pacific, stated, "We will take a cautious, locally-relevant approach to achieve sustainable growth."

Mai Hoa (t/h)