Coffee chains race to establish global presence
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Vietnamese coffee chains are moving to establish themselves in foreign markets as part of expansion plans as well as a strategy to deal with increased domestic competition.
Tea and coffee chain Phuc Long has just announced plans to open its first store in California in July.
TNI King Coffee last month launched its first store in the U.S. It has already opened its first outlet in South Korea with a partner.
Highlands Coffee, one of the biggest Vietnamese coffee chains, has started branching out to other markets since 2011. It now has 39 franchised outlets in the Philippines.
Cong Ca Phe has six outlets in South Korea and two in Malaysia, while E-Coffee opened its first store in Laos last year.
The branching out decisions of these brands have happened in the wake of heavy competition in Vietnam’s café chain industry.
In 2019, Highlands Coffee saw its revenue rise 32 percent year-on-year to VND2.2 trillion ($95 million), after having risen at roughly the same rate in 2018. It was followed by popular competitors like The Coffee House, Starbucks and Phuc Long.
In terms of outlets, Highlands Coffee ranks top with 437 at the time of publishing, followed by Trung Nguyen E-Coffee with 414, The Coffee House with 180, Phuc Long with 82 and Starbucks with over 60.
Opening coffee chains in foreign markets, particularly the U.S., is a strategy that Vietnamese chains have been thinking of and preparing for the last 10 years, said branding expert Vo Van Quang.
“They used to have concerns of going from a small country to a big one, but now they have overcome that fear because they see a lot of potential in entering a huge market,” he said.
One of the biggest advantages for Vietnamese coffee chains in the U.S. market is that consumers there are not as particular as European ones.
“They used to have concerns of going from a small country to a big one, but now they have overcome that fear because they see a lot of potential in entering a huge market,”
“Most Americans do not have high standards for coffee. They consider it only as a necessity to help them stay awake to work,” he said, adding that in other markets like France or Japan consumers are more difficult to please.
Another major advantage is that Vietnamese food and drinks have already established trust in the U.S. as a delicious and healthy alternative to fast food.
“With two million Vietnamese in the U.S., there are now Vietnamese restaurants in every state. Pho and banh mi have become popular dishes among locals there,” said Quang, referring to the iconic Vietnamese noodles soup and sandwich.
These types of dishes can be included in the menu of coffee chains to increase their competitiveness, he added.
The potential of foreign markets has had Vietnamese coffee chains thinking big.
TNI King Coffee, for example, plans to launch an additional 19 outlets in the U.S. by the end of this year and targets to hit 100 stores there by next year.
“Opening the first store in the U.S. markets is a strong development step for TNI King Coffee in the global market,” said founder and CEO Le Hoang Diep Thao.
The company had earlier talked about having 1,000 stores in South Korea, but mentioned no specific time frame.
Branching out to other markets is a sensible move as local coffee chains have been fighting within a small market in recent years, Quang said, adding: “Recent moves by Phuc Long and King Coffee show that coffee chains have adopted a bigger vision to grow larger abroad.”
Questions & Answers
Q.What is driving Vietnamese coffee chains to expand into foreign markets?
What is driving Vietnamese coffee chains to expand into foreign markets?
Vietnamese coffee chains are expanding abroad to pursue growth opportunities and as a strategy to counter the intense domestic competition within Vietnam's café chain industry. They have adopted a bigger vision to grow larger internationally.
Q.Which foreign market are Vietnamese coffee chains particularly targeting, and why?
Which foreign market are Vietnamese coffee chains particularly targeting, and why?
Vietnamese coffee chains are particularly targeting the U.S. Market. This is due to its huge potential, less discerning American consumers regarding coffee standards, and the established trust in Vietnamese food and drink among U.S. Consumers.
Q.How are the major Vietnamese coffee chains currently performing in terms of outlet numbers?
How are the major Vietnamese coffee chains currently performing in terms of outlet numbers?
Highlands Coffee leads with 437 outlets, followed closely by Trung Nguyen E-Coffee with 414. The Coffee House has 180, Phuc Long 82, and Starbucks has over 60 outlets in Vietnam.
Q.What are TNI King Coffee's expansion plans for the U.S. Market?
What are TNI King Coffee's expansion plans for the U.S. Market?
TNI King Coffee plans to open an additional 19 outlets in the U.S. By the end of this year, aiming for a total of 100 stores there by next year. They see opening their first U.S. Store as a strong development step.
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