For coffee chains to survive, investors need to prepare for the long term
According to IPSARD, Vietnamese consume 0.5 kilos of coffee a year per capita, a low level compared with Brazil with 5-6 kilos and Europe with 10 kilos.
But the trend are changing. Since 2015, coffee consumption has been increasing rapidly with roasted coffee accounting for 2/3 of total consumption and instant coffee accounting for 1/3 thanks to the continued expansion of coffee chains.
When foreign coffee chains such as Gloria Jeans, The Coffee Bean & Tea Leaf, Starbucks and McCafe arrived in Vietnam, some analysts warned that they would dislodge Vietnamese cafes out of the home market. However, some Vietnamese coffee brands now have the upper hand in the market after realizing the disadvantages of foreign chains.
Vietnam is a highly promising market for coffee chains, but not all investors can succeed here.
However, no one can say for sure if Vietnamese coffee chains will be at an advantage forever. To run coffee chains, investors need to prepare for the long race. Meanwhile, Vietnamese businesses do not have advantages over foreign ones in corporate governance skills, resources and management experience.
Hoang Tung, CEO of Pizza Home, said some brands debuted with original and creative products, but they later failed because rivals copied their models and competed directly with brands at lower prices. If the product core is not stable and if they cannot improve regularly to adapt customers’ demand, they will fail.
Tung noted that foreign coffee brands are designed to operate well in developed countries, but it is difficult to find suitable workers for the chains in Vietnam.
Howard Schultz, CEO of Starbucks, admitted that up to 30 percent of workers left the workplace, which made it difficult to operate the chain. It is difficult to find skilled workers in the F&B (food & beverage) sector because Vietnamese consider the work as parttime or temporary jobs, not major jobs for the long term.
The CEO of The KAfe admitted that the rapid expansion of the chain (it now has 20 shops with 500-600 workers instead of two shops as previously) has caused difficulties in the chain management.
Tonkin Coffee, a French company valued at $1 million after opening eight shops, also faced crisis because of hot development.
According to Nguyen Phi Van, president of Retail & Franchise Asia, 80 percent of franchise contracts are successful.
However, there are also failures. NYDC which closed shops is a typical example. Gloria Jeans Coffees also has cut the number of its shops from 11 to 3.
