Coffee drinkers vote ‘local flavour’
Coffee has become a cornerstone of Vietnamese culture and a popular export item for decades. While foreign brands find it increasingly difficult to enter the lucrative market, domestic chains are more successful in catering to local tastes and have even begun to implement Fair Trade practices.
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Growing domestic chains
Vietnam is said to be one of Southeast Asia’s youngest markets for coffee shop chains. However, five years after first entering Vietnam, the number of Starbucks coffee houses has reached only 34, much lower than in other countries, like Thailand (330), Indonesia (320), and Malaysia (190).
According to a FT Confidential Research survey on the most visited coffee chains in Southeast Asia in 2015, Vietnam was the only country where a very low proportion of respondents (6 per cent) selected Starbucks, while the US coffee brand led the ranks.
Speaking to VIR about its strategies for the Vietnamese market, Patricia Marques, general manager of Starbucks Vietnam, said, “Our strategy is to be consistent in everything we do. We plan to expand our stores to many more locations and bring Starbucks to new neighbourhoods in the future.”
However, Starbucks announced last month that it is planning to close 150 locations next year, and the speed of launching new coffee shops in Vietnam seems to have slowed down recently. Additionally, other foreign brands such as Singaporean NYDC, Australian-owned Gloria Jean’s Coffees, South Korea-based Caffe Bene and Hollys Coffee are scaling down or closing their businesses in Vietnam.
Meanwhile, dozens of home-grown Vietnamese coffee shop chains are rapidly expanding their networks in a market that analysts say local operators understand better than international names.
“We aim to open as many as 700 outlets across Vietnam over the next five years, at an average speed of 10 new stores a month,” confirmed Nguyen Hai Ninh, CEO of The Coffee House, the youngest competitor, established in 2014.
In early 2018, The Coffee House announced its acquisition of Cau Dat Farm in Dalat to start growing coffee itself, and Ninh said he would export coffee in the next five years.
Cong Caphe, a coffee shop brand which is very popular in Hanoi, has already started expanding overseas. The chain opened its first shop in Seoul last month and plans to open two more in the Republic of Korean capital. In Vietnam, Cong Caphe has grown to more than 50 locations since 2007, and intends to add one or two stores a month through to 2020.
Another popular chain in Vietnam succeeding in terms of outlets and brand awareness is Highlands Coffee. After being acquired by the Philippines-based Jollibee Foods Corporation in 2012, the chain has expanded from 60 locations in 2014 to more than 200, located mainly inside shopping centres.
Coffee was introduced to Vietnam by the French in the 19th century. From an unfamiliar and luxurious beverage aimed at a small segment of urban high-income earners, coffee has gradually become a popular drink serving Vietnamese people from all walks of life and is now considered a staple of Vietnamese culture. Traditional coffee shops such as Giang, Lam, Nhi, Dinh, and Nhan with their pure filter coffee cups are still enticing both local consumers and tourists.
Nguyen Cuc, the owner of Quat Cafe in Hanoi, said her family has been serving coffee for nearly 40 years. “Our coffee is treated by roasting, grinding, and blending, its taste is strong, which suits those who like to enjoy pure coffee. Although new style coffee chains are mushrooming the city, we still have a number of loyal guests who have been coming to Quat Cafe for decades,” Cuc said.
Domestic coffee shop chains with a more professional services, have been successfully setting standards suitable for the kind of customers they cater to.
Fair and direct trade
In the global coffee industry, Direct Trade and Fair Trade coffee have become popular concepts and a trend that many coffee brands follow to ensure stable development.
In a departure from traditional industrial methods, some brands have chosen to support local farmers by adopting an origin-based marketing approach – the development of geographically-specific brands for premium, single-origin varieties. This has led to the emergence of new coffee brands that choose to implement a closed-loop process of production, “from farm-to-table” or “from the farmer-to-your cup.”
They choose a stable production area with high-quality coffee and work to ensure the benefits of coffee farmers and the environment, while at the same time offering distinctive products to the market. Their projects contribute to poverty reduction in remote areas that are home to ethnic minorities. Oriberry in Hanoi, The Married Beans in Dalat, L’Amant in Pleiku, and Hoian Roastery in the central province of Quang Nam are outstanding examples for this sustainable development solution. They have been co-operating with local coffee farms, working directly with the farmers and paying a higher price for every kilogramme of coffee.
“We introduce a product only when it is original enough to represent the place it comes from. That is how we make Oriberry and the farmers themselves feel proud of their products,” Dao Tran Phuong, CEO of Oriberry Coffee, said about the high-end coffee beans grown in six remote areas – Son La, Dien Bien, Thai Nguyen, Quang Tri, Dak Lak, and Lam Dong provinces.
“I believe that this is a positive trend and a good way to elevate the reputation of Vietnamese coffee across the world,” said Ho Duy, founder of Dalat-based The Married Beans. The Dalat specialty coffee brand is co-operating with 30 farmers in the Central Highlands province of Lam Dong.
