VIETNAM: Global coffee giant Starbucks seeks to expand its brand in cafe-clogged Vietnam

Record ID: 502434

  • Title: VIETNAM: Global coffee giant Starbucks seeks to expand its brand in cafe-clogged Vietnam
  • Date: 23rd July 2014
  • Summary: HANOI, VIETNAM (JULY 23, 2014) (REUTERS) STARBUCKS-HANOI OPENING BANNER PEOPLE STANDING FOR OPENING CEREMONY SCISSORS CUTTING RIBBON STARBUCKS DOORS OPENING AND EMPLOYEES RUNNING OUT AFTER RIBBON CUTTING CEREMONY CHALKBOARD READING (English): "HANOI STARBUCKS COFFEE" PEOPLE ORDERING COFFEE DRINK BEING MADE PEOPLE WALKING BEHIND COUNTER STARBUCKS COFFEE CONTAINERS (SOUNDBITE) (English) PRESIDENT OF STARBUCKS CHINA AND ASIA-PACIFIC, JEFF HANSBERRY SAYING: "It is unique and special and there is a long and deep coffee history and heritage in Hanoi, and many things in Hanoi happens over coffee. We talked to people and we talked to our partners here. We understand just how important coffee is in people 's everyday lives." WOMAN CARRYING COFFEE CUP COFFEE GLASSES ON SMALL STOOLS PEOPLE SITTING AND DRINKING LOCAL COFFEE GLASSES ON STOOLS VARIOUS OF PEOPLE SITTING INSIDE A TYPICAL VIETNAMESE COFFEE SHOP (SOUNDBITE) (Vietnamese) A NEWLY GRADUATE, NGUYEN DUC MINH, SAYING: "Having more types of coffee such as Starbucks certainly make the coffee scene more interesting, but to me, I prefer Vietnamese traditional coffee. The street side coffee is more down to earth, and it suits my wallet too" PEOPLE SITTING OUTSIDE DRINKING COFFEE PERSON MAKING LOCAL COFFEE COFFEE VARIOUS OF PEOPLE SITTING INSIDE LOCAL COFFEE SHOP (SOUNDBITE) (Vietnamese), COFFEE SHOP OWNER, 54, NGUYEN VAN TINH SAYING:" "I am not concerned about the competition because we have a number of regulars, some have been having coffee here for the last 61 years, or like these two gents behind me, drink a lot of coffee and have been coming here for 40 or 50 years. That is why we do not care about competition" VARIOUS OF PEOPLE SITTING ON THE STREET DRINKING COFFEE GLASS OF COFFEE ON A TRAY PEOPLE QUEUING INSIDE STARBUCKS STARBUCKS MUGS ON DISPLAY VARIOUS OF PEOPLE SITTING INSIDE STARBUCKS STARBUCKS COFFEE SHOP EXTERIOR
  • Embargoed: 7th August 2014 13:00
  • Keywords:
  • Location: Vietnam
  • Country: Vietnam
  • Topics: Business,General
  • Reuters ID: LVAASYPW703I7JAJYIIDKRE9YYQO
  • Story Text: With more coffee shops per square mile than possibly anywhere on earth, opening a cafe in Vietnam's capital might not seem good business sense.
    Vietnam's entrenched coffee culture means Starbucks is delving deeper into what could be one of its most challenging markets yet. The brew is sold cheaply in the simple cafes that line almost every city street, or in the more sophisticated outlets run by local chains Trung Nguyen and Highland Coffee, in which the Philippines' Jollibee Foods Corp has a stake.
    Jeff Hansberry, president of Starbucks China and Asia-Pacific, said on Wednesday (July 23) Starbucks was seeking growth in Vietnam by offering "meaningful service" with "passion and care".
    However he side-stepped questions on the company's ambitions for Vietnam, and how exactly it intended to compete. The three Starbucks Hanoi cafes add to the eight that have been open since February 2013 in the economic hub, Ho Chi Minh City.
    "It is unique and special and there is a long and deep coffee history and heritage in Hanoi, and many things in Hanoi happens over coffee. We talked to people and we talked to our partners here. We understand just how important coffee is in people 's everyday lives."
    Vietnam's economy, however, has lost some of its edge. Once seen as Asia's next emerging market daring, Vietnam is now mired in bad debt, inefficiency and weak retail spending that rose 12.6 percent in 2013, its slowest growth in four years.
    A stream of bankruptcies since 2011 continues, with 18,000 closures and 50,000 businesses suspending trade in the first five months of this year, according to official data.
    Many small firms are denied loans, squeezing credit growth at 3.5 percent in the first half of 2014, well short of the central bank's 12-14 percent target for the year.
    While the middle class is expanding, times are hard for most Vietnamese, adding to Starbucks' challenges.
    The thousands of streetside cafes in Hanoi offer shoe-shines, free wi-fi and traditional drip-filtered iced coffee for just 10,000-15,000 Dong (47-71 U.S. Cents) compared to Starbucks prices, which start at 55,000 Dong (2.59 US Dollars) for a black coffee - about half the average minimum daily wage - to 85,000 (4 US Dollars) for an Asian Dolce Latte. These prices are slightly higher, or the same as, offerings from Highland Coffee and Trung Nguyen.
    Though one customer felt Starbucks did bring something to the coffee scene but preferred to keep their coffee cheap and "down to earth".
    "Having more types of coffee such as Starbucks certainly make the coffee scene more interesting, but to me I prefer Vietnamese traditional coffee. The street side coffee is more down to earth, and it suits my wallet too", said newly graduated Nguyen Duc Minh.
    For some of these traditional cafes, Starbucks is no rival.
    "I am not concerned about the competition because we have a number of regulars, some have been having coffee here for the last 61 years, or like these two gents behind me, drink a llot of coffee and have been coming here for 40 or 50 years. That is why we do not care about competition," said Nguyen Van Tinh, 54, who runs a small streetside coffee shop, a business that grew from the mobile coffee stall his grandfather started in 1926.
    On opening day, queues extended out of the door of Hanoi's first Starbucks.
    Starbucks main competitors are local chains with large export businesses, like Highland Coffee, with 50 outlets in five cities, and Trung Nguyen, which claims 13 billion cups of its coffee have been consumed worldwide since its start-up in 1996.
    It has shops in eight cities, including Singapore, and exports to 60 countries.
    Coffee was brought to Vietnam by former colonial power France in the 19th century and the country's coffee industry took off in the 1980s, with boom growth annually.
    Vietnamese consume roughly two million bags of coffee a year and the Southeast Asian nation is the world's second-largest coffee exporter.

    (1 US dollar = 21,200 Vietnam Dong)
  • Copyright Holder: REUTERS
  • Copyright Notice: (c) Copyright Thomson Reuters 2016. Open For Restrictions - http://about.reuters.com/fulllegal.asp
  • Usage Terms/Restrictions: None
Register