From the story of a Shanghai coffee shop, think about the Vietnamese coffee market
Ranked second in the world in coffee exports, with a sharp coffee culture formed over many decades, combined with the entrepreneurial spirit of Vietnamese businesses, will the path of Vietnamese coffee development be successful? as vast as the dominance of domestic coffee chains over foreign competitors.
A wave of coffee shop booms is sweeping China, especially Shanghai – the heart of the mainland’s economy. Young Chinese people open their own stores and realize their dream of being their own boss.
New habits, new opportunities
According to a survey by research firm Rising Lab of China’s Yicai Group, Shanghai ranks first in the world with 6,913 independently operated coffee shops, excluding coffee vending machines in convenience stores and food chains. Eat fast. Big cities in the world are far behind, Tokyo is next with 3,826 shops, London has 3,233 shops, while New York has only 1,591 shops. Calculated by the number of coffee shops per capita, Shanghai has 2.85 coffee shops for every 10,000 people, equivalent to Tokyo. London reached 3.69 bars in this index.
The new habits of Shanghai residents also create opportunities for leading beverage chains. Starbucks opened Reserve Roastery, a large coffee shop complete with its own roasting equipment, in Shanghai in 2017. Another American chain, Blue Bottle Coffee, opened its first mainland store earlier this year. now.
Results published in 2021 by auditing firm Deloitte show that the average Chinese drink 9 cups of coffee per year, not equal to the average of Americans (329 cups) or Koreans (367 cups). However, China’s coffee market is expected to expand to 180.6 billion yuan ($26 billion) next year.
What prompted the rush of coffee shops opening in China? Nikkei Asia answers: The answer to that question belongs to young people who are full of ambition, trying to make the “Chinese dream” come true. That’s being self-employed and running a coffee shop. Song Weizhe, born in 1993, is one such young person.
Quitting her job at an interior decoration company, Song worked at a cake shop. He was fascinated and discovered the seductive scent of coffee in the fragrant aroma of the bakery when he took his first sip of coffee in his life. This experience made Song decide to open his own restaurant in 2017 when he only had 30,000 yuan ($4,300) in his pocket. The shop is called Post Café in Shanghai with the motif of a post office in China. This shop used to be a newsstand with an area of only 1 square meter.
Post Café started to get attention from people in the giant country because it was the smallest coffee shop in the world. The restaurant is so famous that there are always long lines of people waiting to buy. But the lease for the location expired, Song temporarily closed Post Café and still had the dream of opening three coffee shops and having a coffee truck throughout the city.
Another example of the entrepreneurial spirit of young Chinese people is Han Yulong, founder of the startup chain Manner Coffee. Starting with a 2 square meter cafe in an alley behind a shopping district in Shanghai, Han has successfully expanded his business across the country. In 2021, the company received investment from China’s largest food delivery application, Meituan, and ByteDance group, which operates two short video sharing applications, TikTok and Douyin. Manner Coffee is currently worth over $1 billion and is the only unicorn of the coffee shop industry in China. The whole mainland is eagerly waiting for the day Manner Coffee officially goes public (IPO).
The few win, but…
The unemployment rate among young people aged 16-24 in China hit a record level of 19.3% in June 2022. Many university graduates who cannot get the job they want have to swallow their tears and accept jobs outside the office.
The income gap is widening due to skyrocketing real estate prices, and young Chinese people are feeling helpless, especially those who lack the necessary skills or have low education levels. For this “vulnerable class”, opening a coffee shop is like a shortcut to realizing their dreams. They can start a business with just a coffee maker, which does not require large initial costs. But it is not easy to succeed in a very competitive market like China. Many shops were forced to close after a short time because their business was at a loss, unable to compete with large chains.
Luckin Coffee was the first coffee chain to surpass Starbucks in the number of stores in China, but the chain was delisted from Nasdaq in 2020 because of accounting fraud. The chain paid the price for being too impatient to expand and meet investor expectations. After two years of “drought”, early this year Luckin Coffee is trying to make its records transparent in order to return to the New York stock market.
In a huge market with burning Chinese dreams, the explosion of coffee shops brings countless opportunities. There are a few who will win alongside the majority who will lose, but certainly young people will not give up their dreams.
Big dream for Vietnamese coffee
Shanghai coffee shop is discussed in a popular coffee shop in Saigon – a place considered the cradle of Vietnam’s leading coffee chain brands. This is also the place with the most coffee shops and the place that consumes the most coffee in Vietnam.
The latest statistics from Q&Me published on the Statista data site show that: Ho Chi Minh City has the most chain coffee shops in Vietnam with 701 shops, Hanoi ranks second with 341 shops and other provinces and cities account for 482 shops. In total, Vietnam has 1,524 restaurants belonging to the chain.
But a coffee chain trader in Ho Chi Minh City said: “Including cafes or shops of a few square meters, perhaps this city is not as good as Shanghai because the population is only one-third the size. But based on the ratio of shops to residents, we are definitely not losing.” He estimates the number to be around 3,000 shops, including toad shops or roadside shops with a few plastic chairs or bricks as “brand identification”. That means the ratio is 3 shops per 10,000 people. “But when it comes to coffee culture, our market is superior,” he added.
This businessman explains that Vietnamese people love coffee, similar to tea in Japanese or Chinese culinary culture. A statistic shows that up to 65% of survey participants drink coffee seven times a week. Vietnam’s per capita coffee consumption will reach 3 kilograms in 2023, nearly double the figure of 1.68 kilograms in 2009. This number is far behind Finland’s 12 kilograms, with an average of 4-7 kilograms. cups per day, sometimes up to 30 cups.
European countries, mostly Northern ones with more and longer winter days, take 9/10 positions as the world’s highest per capita coffee consumers. The EU only gave up the 10th position to Canada – according to World Population Review and Coffee Affection. This also explains why the EU is the market that consumes up to 40% of Vietnam’s coffee exports.
But in Vietnam, coffee shops are not simply places that sell drinks and sources of caffeine. It’s a space to relax, gather and chat with friends. Air conditioning and free WiFi also help the cafe become a place to study and work instead of an office for young people. There is a clear “class” distinction through price. The Coffee House has a more dynamic and youthful design, with prices suitable for students. For higher prices, there are Highlands Coffee, Trung Nguyen and even more expensive ones are Starbucks and Phuc Long.
The entrepreneurial spirit of Vietnamese youth is no less, but the speed of coffee shop closures is also not lost after the past two years of Covid. The model of a pearl milk tea shop or coffee shop or before that “slash lemon tea” is considered to be highly profitable, like milk tea up to 60 – 70% or super profitable like lemon tea. However, the monotonous model and fierce competition from other shops, along with the high rent, have driven away young people with little capital and little experience.
Even large chains from abroad have failed and disappeared in the Vietnamese market, such as Gloria Jean’s Coffee from Australia or NYDC from Singapore and even domestic chains backed by foreign investment funds. A survey by the Faculty of Management at Andrews University in the US in 2018 showed the causes of failure: high operating costs, not understanding the market, fierce competition and leadership thinking. Strong brands like Starbucks may exist but the number of stores is still not growing as fast as expected.
Recent moves show that Vietnamese coffee has a bigger dream, expanding abroad. The E Coffee chain of Trung Nguyen Group also opened its first store in Laos in 2020. In May 2021, TNI King Coffee opened its first store in the US and together with its Korean partner opened its first store in Seoul. . This chain announced that it will reach 100 foreign stores in 2022. Or like Phuc Long tea and coffee chain, which opened its first store in the US from July 2021. Up to now, there has been no new action even though Phuc Long has great support from Masan.
Moving ahead and more clearly is the Highlands Coffee chain. Capitalized by the parent corporation in the Philippines, the chain opened up to 39 stores in the island before the Covid-19 epidemic, but has now fallen to 33 stores – according to Highlands Coffee Philippines’ website. Another chain, Cong Ca Phe, has 6 stores in Korea and 2 in Malaysia.
Vietnamese coffee chains have always been looking for strategies and preparing to explore foreign markets, especially the US market, over the past decade – according to brand expert Vo Van Quang of the School of Management. BizUni business. They have to look for a new land because the domestic market is increasingly narrow and competitive. Exploring new markets is increasingly urgent and vital.
“We often worry that we are from a small country accessing the market of a large country. But now, businesses have overcome that fear because they see the potential of a large market,” commented the brand expert.
At that time, listing on the New York Stock Exchange or Nasdaq is just a small matter. But definitely don’t make the same mistake as Luckin Coffee.
