Starbucks Struggles to Dominate Vietnam’s Coffee Market
Starbucks, the American coffee giant, has had a rocky journey in Vietnam, a country known for its strong coffee culture. Despite entering the Vietnamese market a decade ago, Starbucks has failed to capture the hearts of locals, who prefer their traditional coffee over the expensive and limited offerings at the international chain.
According to market research firm Euromonitor International, Starbucks currently holds only 2% of Vietnam’s $1.2 billion coffee market. With just 92 stores in the country, Starbucks’ presence is limited compared to its competitors. For reference, neighboring South Korea has 36 Starbucks stores per million people.
One major obstacle for Starbucks in Vietnam is the locals’ preference for traditional, cheap street coffee. Vietnam is teeming with coffee shops, both small stalls and trendy cafes, where locals can enjoy a cup of coffee for a fraction of the price offered at Starbucks. The traditional Vietnamese coffee, brewed with a filter and often served with condensed milk, is known for its strong flavor and aromatic qualities.
Starbucks’ limited menu also fails to entice Vietnamese coffee enthusiasts. Locals find the offerings at the international chain lacking in both variety and taste. The popular Java Chip Frappuccino and Pumpkin Spice Latte that are beloved by Starbucks fans around the world don’t resonate with the Vietnamese palate. Instead, locals prefer unique drinks like egg coffee, which combines robusta coffee with egg yolk, yogurt, or even fruit.
Moreover, the high prices at Starbucks make it inaccessible to many Vietnamese citizens, especially considering that the average monthly salary in Vietnam is around $345. With a medium-sized drink at Starbucks costing about 90,000 Vietnamese dong, many locals find the price tag prohibitive.
Despite these challenges, Starbucks has outperformed its international rivals in Vietnam. Other international coffee chains, such as The Coffee Bean & Tea Leaf and Gloria Jean, have failed to establish a strong presence in the country. Additionally, Starbucks merchandise continues to attract collectors, showcasing the brand’s enduring popularity.
Starbucks remains committed to its long-term investment in Vietnam, although it has not disclosed whether the venture is profitable. With the local preference for traditional coffee and the abundance of affordable options, Starbucks will need to adapt its offerings to cater to the unique tastes of Vietnamese consumers if it hopes to conquer the country’s coffee market.
Thuong Le BBC Vietnamese service
25 minutes ago
Photo credit: Getty Images
picture explanation,
Starbucks first opened in Vietnam 10 years ago
Tuan Le (26, female) likes to go to Starbucks located in the center of Ho Chi Minh City, Vietnam.
Tuan Le and his friends dress up and take selfies in the cafe.
Tuan Le, who thinks Starbucks is classy, said, “Starbucks photos make my Instagram look better.”
Tuan Le is a fan of Starbucks, but he doesn’t like coffee. Being able to take pictures at Starbucks is the biggest attraction there.
“Coffee makes my teeth yellow,” he said. “I prefer smoothies or bubble milk tea.”
It has been 10 years since the American Starbucks entered Vietnam. During this time, it was revealed that Vietnamese people love coffee, but they don’t really like Starbucks. And people like Tuan Le who go to Starbucks to take pictures don’t really like coffee.
According to global market research firm Euromonitor International, Starbucks accounted for only 2% of Vietnam’s total coffee market, worth $1.2 billion in 2022.
In particular, the expansion of the Starbucks branch in Vietnam has slowed down. There are currently 92 Starbucks stores in Vietnam, which is less than one per million people. On the other hand, there are 36 Starbucks stores per million people in Korea.
“Starbucks’ presence is still limited by consumers’ preference for the taste of local coffee,” said Nathanael Lim, an analyst at Euromonitor International.
Starbucks told the BBC it would be committed to making long-term investments in Vietnam, but did not comment on whether it would be profitable there.
But Starbucks still outperformed its international rivals. Another US chain, The Coffee Bean & Tea Leaf, has only 15 stores in Vietnam.
Australia’s Gloria Jean left Vietnam in 2017, while China’s Mellower Coffee recently announced it would close after four years.
All of these companies would have faced the same challenges as Starbucks. For reference, Vietnam is the second largest exporter of brewed beer in the world.
Photo credit: Getty Images
picture explanation,
Cheap traditional coffee is common on the streets of Vietnam
First, Starbucks coffee prices are expensive in a competitive market like Vietnam. From food stalls to hip cafes, there are at least 10 coffee shops on the busy street.
Vietnam, in particular, is a far from luxurious country, with street coffee vendors pushing carts serving coffee on cheap little plastic tables. Some even provide newspaper mats for guests to sit on the floor and enjoy their coffee.
Second, the Java Chip Frappuccino and Pumpkin Spice Latte that are popular in other countries don’t seem to be very popular in Vietnam.
“The menu at Starbucks is not diverse,” said Trang Do, a game artist based in the coastal city of Da Nang. He drinks at least three cups of coffee a day, but rarely goes to his local Starbucks.
“I had a cappuccino there when it opened,” Trang Do recalls. “But it wasn’t smooth or tasted like coffee.”
Because of this, Trang Do prefers traditional Vietnamese coffee. “This traditional Vietnamese coffee is stronger and more fragrant,” he said. “The method of making Vietnamese coffee with a filter helps to extract more coffee, and the coffee tastes better when you’ll let the hot water drip slowly while brewing the coffee at its best,” he says.
Photo credit: Getty Images
picture explanation,
drip Vietnamese coffee
To make Vietnamese coffee, a tin filter called a ‘pin’ is placed on top of a cup, and hot water is poured over the coffee. It takes about 10 minutes for the coffee to go down to the cup below. This drink can be drunk hot or cold, and may or may not contain condensed milk, which is the main coffee of Vietnam.
French colonists introduced coffee to Vietnam in the 19th century. However, the first coffee plants were arabica species, which were not well adapted to the hot and humid climate and soil of Vietnam at the time.
A few years later, the French brought Robusta plants that could also grow well in Vietnam. That is the coffee that is popular in Vietnam today.
Robusta has more caffeine than regular coffee and has a stronger aroma and bitter taste.
Starbucks, on the other hand, uses 100% Arabica beans. Starbucks told the BBC that it “uses only Arabica beans for a flavor that can be subtle and complex”.
However, 97% of the coffee that Vietnam consumes each year (about 200,000 tons or 2kg per person) is of the Robusta variety.
Tridang, a marketer, likes to take older customers to Starbucks because of the cafe’s “younger” feel.
However, he explained the reason why he hardly ever drinks coffee at Starbucks, “because it’s not bitter and has a mild aroma, so it doesn’t suit my coffee taste.”
And Starbucks doesn’t have the locals’ favorite menu. The most popular accompaniment in Vietnam is condensed milk, but there are many more unusual options.
Egg coffee, launched in Hanoi in the 1940s, is that. In the midst of a severe milk shortage, Nguyen Van Giang, the resourceful bartender at the Sofitel Legend Metropole Hotel, used eggs instead of milk at the time.
Photo credit, Cong Coffee
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Workers at Cong Coffee in Vietnam
Today, some local Vietnamese brands mix traditional Robusta coffee with egg yolk, yogurt and even fruit to win new customers.
Cong Coffee, a popular local chain store in Vietnam, said, “The most popular drink is coconut coffee mixed with coconut cream, condensed milk and ice.”
Graphic designer Tram Nguyen claimed that “coffee is a source of national pride in Vietnam”.
“Coffee is something very special and I always mention it whenever I talk about Vietnam. I am very proud of Vietnamese coffee, and I love milk coffee.”
Photo credit: BBC Vietnam
picture explanation,
Tram Nguyen prefers to drink coffee at a local coffee shop
Coffee lover Tram Nguyen tends to find new coffee spots almost every day.
“I only went to Starbucks once because I wanted to try luxury coffee, but I never went back because I thought it was a waste of money I was spending.”
The price of coffee is the biggest reason Vietnamese hesitate to go to Starbucks. A medium drink at Starbucks costs about 90,000 Vietnamese dong (about 5,000 won). Considering that the average monthly salary in Vietnam is around $345 (450,000 won), the price of coffee is prohibitively expensive in this country.
Highlands, one of Vietnam’s first and most successful coffee house chains, also became a luxury chain, but eventually switched brands and lowered prices. Currently, it has more than 600 stores across the country.
Starbucks merchandise, on the other hand, attracts collectors willing to spend money. Tridang also boasted more than 40 Starbucks doublers and cups, now worth a few thousand dollars.
But unlike 10 years ago, young Vietnamese who want a cup of coffee have many options to choose from.
Tram Nguyen said, “Starbucks coffee is nothing special to me. It’s too flashy and I don’t like the taste.” “Because I can enjoy good quality coffee at half the price of a coffee shop in Vietnam.”
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