Coffee Shop wars continue to brew across Vietnam

Although many people living or visiting Vietnam think that there are more than enough coffee shops to serve the public, local coffee shop chain “The Coffee House” thinks that Vietnam needs more of its brew and is planning to add 100 new retail outlets across the country in the next 18 months. 

According to Nguyen Hai Ninh, CEO of The Coffee House, his company plans to expand from 100 retail locations to more than 200 retail shops within the next 18 months and the company’s objectives will be to improve services and develop human talent.

To differentiate its company and products from competitors, The Coffee House is one of the few food and beverage companies to have their own delivery service and promises delivery to customers within 30-minutes.   

Nguyen said that delivery to customers is something that makes the brand stand out from competitors, and is an unavoidable trend in the food and beverage industry. As a result, the service will be expanded further in the future so that the company can reach more customers. 

The Coffee House, which was launched in August 2014, currently has 100+ retail outlets across the country. It operates in Hanoi, Ho Chi Minh City, Da Nang, Dong Nai, Hai Phong, and Vung Tau and serves 60,000 customers per day.

In February of last year, The Coffee House acquired Cau Dat Farms, in Da Lat, which grows and processes coffee for its stores. It also became a franchisee for “Ren’s Tea”, which is from Taiwan and specializes in bubble tea; and has opened 12 stores so far. It’s 2018 and 2019 the company’s expansion plans include opening more bubble tea stores since bubble tea continues to be a popular and trendy drink among young Vietnamese. 

In order to sustain the coffee industry in Vietnam, The Coffee House has said that it will also set-up a “sustainable coffee fund” that will support farmers in the Cau Dat area of Da Lat with technology and training to grow high-quality coffee. 

Market research firm Q&E has done continual studies of Vietnamese consumer trends related to coffee shops over the last five years, and in its most recent reporting noted the following:

From a Q&E Survey – Vietnamese Coffee Shops

·         Independent coffee shops are the most favorable choices

·         Females prefer chain shops while males prefer local shops

·         Vietnamese coffee (with milk) is the most popular drink

·         People who go to chain store order latte drinks more than other drinks

·         Atmosphere is the biggest reason to go for independent shops. Chain stores are chosen for brand and
taste. Local shops are for price.

·         The average price of coffee in both chain store and independent coffee shops is around 40,000 VND,
while the prices in local shops average 10,000 ~ 20,000 VND

Many local shops will have a difficult time in the next 2 ~ 3 years as retail rental costs continue to increase in the central business districts of most Vietnamese cities. 

Recent research from CBRE Vietnam shows the price of retail locations in Ho Chi Minh City’s district 1 area currently average $127 per square meter / per month. CBRE forecasts that retail prices will continue to increase in the future since only a few commercial / retail developments will come on line in 2018 and 2018 and the demand for retail space is increasing from both domestic and international brands.

In comparison, retail space in non-CBD districts currently average $36 per square meter / per month, but retail locations in outlying areas are unable to reach as many consumers as stores in the CBD. Non-CBD retail locations are attractive from a price perspective but on a daily basis they serve fewer customers unless the have a brand or character that is unique in the marketplace.