In 2023, Starbucks marked its 10-year operation in Vietnam by opening its 100th shop in the country. It created a new space when reopening Starbucks New World, the first Starbucks shop in Vietnam.

The US-based coffee house chain has been following a cautious and locally appropriate approach in Vietnam. To date, the number of cafes opened in the largest Southeast Asian café market is considered relatively modest compared with other countries. In Singapore, a small market in the region, it has nearly 150 shops.

After a decade of operation, Starbucks still declines to speak about the possibility of making a profit when doing business in Vietnam.

Meanwhile, other cafe brands such as The Coffee House and Phuc Long Coffee and Tea have attracted young customers. The Vietnamese market has imported international trends, such as third wave coffee which focuses on distilling the natural flavor of coffee beans.

Meanwhile, the Vietnamese brands Highlands Coffee, Trung Nguyen Legend, Ca Phe Cong and Gemini Coffee remain favorites which makes it difficult for foreign brands, including famous ones such as Starbucks to scale up their business.

More recently, once-famous brands have fallen into the hands of large Vietnamese brands and have been growing. This has created a more equal battle between domestic and foreign brands.

In 2021-2022, Masan spent hundreds of millions of dollars to own 85 percent of Phuc Long shares. The strategy pursued by Masan is to conduct an M&A (merge and acquisition) and make big investments to compete with foreign chains.

Masan’s CEO Danny Le sais that the group eyes strong Vietnamese brands in the market and thinks about bringing Vietnamese brands to the world. In the coffee-tea sector, Phuc Long is considered a strong brand like Starbucks. 

Vietnamese brands can also cement their positions in processed coffee.

For Vinacafe Bien Hoa (VCF), the M&A deal by Masan, with the instant coffee brand with the largest market share in Vietnam in 2021, led to Masan hold a controlling stake in VCF in comparison with foreign funds, namely Hongkong GaoLing Fund (which is now holding 23 percent), FTIF – Templeton Frontier Markets Fund (1.6 percent) and Barca Global Master Fund, L.P (1.5 percent).

The decision to take over VCF also helped Masan and Trung Nguyen to compete with foreign groups in the processed coffee market in Vietnam.

Meanwhile, in China, G7 Trung Nguyen ranks fourth in market share after Nestle, Starbucks and Saturnbird.

Analysts say that many Vietnamese long-lasting brands have become faded in a flat world amid the increasingly fierce competition from multinationals in the home market. However, there are also brands which have been growing since the day they were put under management of Vietnamese thanks to good administrative system, powerful financial capability, and a large distribution network.

Vietnamese power

VCF has made public a business plan scenario for 2023, which shows that the first instant coffee producer in Southeast Asia projects a net profit of VND500 billion at maximum.

This is not a low target if noting that the demand in the domestic and international markets is sliding amid difficulties after Covid-19, the US-Ukraine conflict, as well as uncertainties in the global financial market. High interest rates also create difficulties for enterprises.

After being taken over by Masan (MSN) owned by billionaire Nguyen Dang Quang (Masan indirectly owns 99 percent of shares), VCF has been growing strongly, with profits soaring from VND200 billion to VND320-720 billion the following year.

In recent years, Vinacafe Bien Hoa, a subsidiary of Masan Beverage belonging to the Masan Group, jumped into the energy drink market, competing directly with Red Bull from Thailand.

Masan competes in the three largest beverage sectors in Vietnam, including energy drink, bottled drinks and coffee. One report found that the bottled drink market was valued at VND6.5 trillion in 2022.

Vinamilk, the nation’s biggest dairy producer, is expected to expand its business into the beverage sector thanks to good administrative capability and a large network.

Vinamilk is ranked the sixth dairy brand in the world by Brand Finance. In 2022, it was valued at $2.814 billion, an impressive increase of 18 percent compared with 2021. Particularly, Vinamilk and Abbot hold the same market share of 20 percent in the milk powder market.

Meanwhile, King Coffee has ampn ambitious plan to enter the Chinese market. It is present in the US, South Korea, Singapore, Australia and India.

Manh Ha