The rise and fall of coffee houses in Vietnam

08:38 | 23/11/2018 Trade

(VEN) - Cafe chains have mushroomed in Vietnam in recent years, but many have also failed due to improper business strategies.

the rise and fall of coffee houses in vietnam
Cong Caphe has set up shop in the Republic of Korea’s capital - Seoul

Cafe chains

The cafe market in Vietnam is experiencing its most vibrant development period ever with the involvement of such famous names as the Coffee Bean & Tea Leaf, Starbucks, McCafe, Highlands Coffee, Caffe Bene, Phuc Long, Urban Coffee Station, Passio, The Coffee House, and Saigon Café.

According to Euromonitor, a market research company, the cafe chain model is one the fastest growing business models in Vietnam in recent years with an annual growth of 32 percent. Coffee producers say their coffee bean sales to cafe chains in Vietnam have increased up to 300 percent yearly.

An Institute of Applied Marketing (I.A.M) survey showed that 65 percent of Vietnamese drink coffee seven times a week. The country’s population of over 90 million, 65 percent of them young people, is one of the biggest advantages for cafe and coffee development, the survey said.

Nguyen Hai Ninh, Founder and CEO of The Coffee House said his company plans to open about 700 cafes across Vietnam in the next five years, some 10 facilities monthly.

The Cong Caphe has opened more than 50 facilities since its launch in 2007 and plans to open one to two more cafes each month until 2020. Cong Caphe has also opened its first branch in the Republic of Korea’s capital - Seoul. Recently, Trung Nguyen International (King Coffee) announced plans to open about 1,000 cafes.

Fierce competition

While many cafe chains have succeeded, others failed. The NYDC, for example, ultimately closed in 2016 after almost 10 years of operation in Vietnam. Gloria Jean’s Coffees from Australia closed in 2017, after a decade of operation in the country.

Most recently, The Coffee Bean & Tea Leaf with 15 cafes suffered losses of VND144 billion after eight years of operation in Vietnam.

Nguyen Phi Van, a franchise economist and the first person to bring Gloria Jean’s Coffees to Vietnam said using the same model as that of the parent company was the reason for the chain’s failure. After this initial failure, although it allowed franchisees to keep only the core elements of the brand and make changes in accordance with specific markets, Gloria Jean’s Coffees’ business still did not improve due to high property rent and increasingly fierce competition from domestic and foreign rivals, she said.

Meanwhile, Highland Coffee - the largest cafe chain in Vietnam, which has been acquired by Jolibee (the Philippines), has been successful in combining European-style services with Vietnamese values, and offers a varied menu at reasonable prices. Other brands including Passio, Urban Coffee Station and Phuc Long have also been successful due to their flexible business models.

Thao Duong