Starbucks claims robust Vietnam revenues

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Starbucks in vietnamStarbucks CEO Howard Schultz has announced that the coffee house giant’s first outlet in Ho Chi Minh City posted better revenues than expected after opening in February, yet sales figures were not made public.

In a country with a coffee culture that dates back to the 19th century, however, converting customers will prove to a bitter feat demanding inventive strategies. The two-story store opened in HCMC’s downtown District 1 with anticipated fanfare, adding local handicrafts to the interior décor along with a new drink, the Asian Dolce Latte, in order to appeal to the sugary preferences of the Vietnamese coffee drinker.

Yet as the world’s second largest exporter of coffee, Vietnam is a pronounced connoisseur of the bitter beverage, where heavily caffeinated cups are coupled with globs of sweetened condensed milk, making for a dissimilar experience from that of Starbucks. The Southeast Asian nation ranks just behind Brazil in global coffee exports, shipping 25.47 million bags of Robusta coffee beans in 2012 against 17.67 million bags in the previous year, according to International Coffee Organisation.

The Seattle-based coffee chain, which operates over 3,300 stores in Asia, is likely to successfully convert Vietnamese consumers with its signature environment, local coffee drinkers believe, playing to the prestige attached to the Western modernity its brand commands.

“It’s not a ‘this or that’ coffee question. It’s Starbucks versus other ‘hang out spots,’” George Nguyen, a Vietnamese coffee goer told Inside Investor.

“I think people love the brand more than the coffee or the experience,” he added.

BF-AF002_STARBU_NS_20130517181203
Click to enlarge

To the Vietnamese, Trung Nguyen (or Central Highland), the largest coffee brand in the country with over 1,000 outlets, has become emblematic of the hobnobbing while-away the day social spot. In entering Vietnam, Starbucks has pitted itself against the household name brand, which is sold everywhere from street-side stalls to posh cafes.

Trung Nguyen CEO and local coffee entrepreneur Dang Le Nguyen Vu has confidently told off media in previous months that he does not fear Starbuck as consumers will stick with a brand they know, deriding Starbucks’ ability to wow away the Vietnamese.

“Starbucks no longer has the personality it had when it first started,” Dang Le Nguyen Vu has told Bloomberg.

Local consumers also take note of the dying hype the US brand has tried to galvanise.

“Starbucks lands in Vietnam: First with a bang, then a whimper,” one HCMC-based commenter told Inside Investor via Twitter, adding the initial buzz has already begun to fade.

Yet, Starbucks has successfully penetrated other markets thought to be challenging, such as Japan. Schultz is also an aggressive expansionist: The company aims to double the number of its stores in Thailand to 320 and possibly venture into Myanmar in the next couple of years.

In terms of profits, coffee consumption can grow in Vietnam as consumers rise into the middle and affluent class, seeking out other options to test their taste buds with beyond their comfort zone. According to the Wall Street Journal, Vietnam consumes just 2.6 pounds of coffee per capita compared to the US’s 8.8 pounds.

Built on the back of Vietnam’s surging growth, the Starbucks experience could yet prevail.

“Starbucks doesn’t sell coffee. Starbucks sells an experience,” one US English teacher in HCMC observed.

And in a country where traditional social norms hamper equitable economic empowerment, Starbucks could have found that inventive idea to charming a new crowd.

“At the HCMC Starbucks, all of these managers are women. This is an inspiration to my female students,” the English teacher said.

 

 

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Reading Time: 3 minutes

Starbucks CEO Howard Schultz has announced that the coffee house giant’s first outlet in Ho Chi Minh City posted better revenues than expected after opening in February, yet sales figures were not made public.

Reading Time: 3 minutes

Starbucks in vietnamStarbucks CEO Howard Schultz has announced that the coffee house giant’s first outlet in Ho Chi Minh City posted better revenues than expected after opening in February, yet sales figures were not made public.

In a country with a coffee culture that dates back to the 19th century, however, converting customers will prove to a bitter feat demanding inventive strategies. The two-story store opened in HCMC’s downtown District 1 with anticipated fanfare, adding local handicrafts to the interior décor along with a new drink, the Asian Dolce Latte, in order to appeal to the sugary preferences of the Vietnamese coffee drinker.

Yet as the world’s second largest exporter of coffee, Vietnam is a pronounced connoisseur of the bitter beverage, where heavily caffeinated cups are coupled with globs of sweetened condensed milk, making for a dissimilar experience from that of Starbucks. The Southeast Asian nation ranks just behind Brazil in global coffee exports, shipping 25.47 million bags of Robusta coffee beans in 2012 against 17.67 million bags in the previous year, according to International Coffee Organisation.

The Seattle-based coffee chain, which operates over 3,300 stores in Asia, is likely to successfully convert Vietnamese consumers with its signature environment, local coffee drinkers believe, playing to the prestige attached to the Western modernity its brand commands.

“It’s not a ‘this or that’ coffee question. It’s Starbucks versus other ‘hang out spots,’” George Nguyen, a Vietnamese coffee goer told Inside Investor.

“I think people love the brand more than the coffee or the experience,” he added.

BF-AF002_STARBU_NS_20130517181203
Click to enlarge

To the Vietnamese, Trung Nguyen (or Central Highland), the largest coffee brand in the country with over 1,000 outlets, has become emblematic of the hobnobbing while-away the day social spot. In entering Vietnam, Starbucks has pitted itself against the household name brand, which is sold everywhere from street-side stalls to posh cafes.

Trung Nguyen CEO and local coffee entrepreneur Dang Le Nguyen Vu has confidently told off media in previous months that he does not fear Starbuck as consumers will stick with a brand they know, deriding Starbucks’ ability to wow away the Vietnamese.

“Starbucks no longer has the personality it had when it first started,” Dang Le Nguyen Vu has told Bloomberg.

Local consumers also take note of the dying hype the US brand has tried to galvanise.

“Starbucks lands in Vietnam: First with a bang, then a whimper,” one HCMC-based commenter told Inside Investor via Twitter, adding the initial buzz has already begun to fade.

Yet, Starbucks has successfully penetrated other markets thought to be challenging, such as Japan. Schultz is also an aggressive expansionist: The company aims to double the number of its stores in Thailand to 320 and possibly venture into Myanmar in the next couple of years.

In terms of profits, coffee consumption can grow in Vietnam as consumers rise into the middle and affluent class, seeking out other options to test their taste buds with beyond their comfort zone. According to the Wall Street Journal, Vietnam consumes just 2.6 pounds of coffee per capita compared to the US’s 8.8 pounds.

Built on the back of Vietnam’s surging growth, the Starbucks experience could yet prevail.

“Starbucks doesn’t sell coffee. Starbucks sells an experience,” one US English teacher in HCMC observed.

And in a country where traditional social norms hamper equitable economic empowerment, Starbucks could have found that inventive idea to charming a new crowd.

“At the HCMC Starbucks, all of these managers are women. This is an inspiration to my female students,” the English teacher said.

 

 

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