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Foreign coffee, fast food retreat


On July 20 New York Dessert Coffee bid goodbye to Vietnamese customers via Facebook and promised to “come back someday.”

Earlier, in May the Singapore-based NYDC had closed three outlets on Nguyễn Trãi Street and at the Cantavil and Crescent malls in HCM City. The one at Metropolitan in downtown Sài Gòn continued to operate. However, it too finally closed.

In 2012, when NYDC came to Việt Nam for the first time, the company expected to open at least 20 outlets by investing an estimated US$300 million within five years.

However, NYDC’s dream of finding a firm foothold in the Vietnamese food and drink market did not materialise due to certain reasons.

And many other major foreign food and drink brands are also in the same boat, with some having had to pare their activities and others leaving Việt Nam altogether.

Burger King, for instance, debuted in 2012 with an ambitious plan to build 60 stores in five years in Việt Nam. However, it recently closed several restaurants and had only 16 as of February.

Around three years ago Gloria Jeans and Coffee Bean & Tea Leaf also had to close their larger outlets.

Analysts attribute their failure to factors like the presence of many Vietnamese chains like The Coffee House, Phúc Long, Urban Station, Trung Nguyên, Kafe, and Highlands Coffee.

The question now is if Vietnamese chains can grab the opportunities created by the withdrawal of foreign brands.

The Vietnamese coffee market is considered very promising estimated to grow at 15 per cent through 2020.

According to Kantar Worldpanel, a global expert in shopping behaviour, the Vietnamese coffee market is growing at 3 per cent in urban areas and 11 per cent in rural areas mostly thanks to instant coffee.

Euromonitor surveys also show that retail turnover of instant coffee in Việt Nam is expected to grow annually at 18.5 per cent to VNĐ2.4-3.6 trillion ($107 million-$160.7 million) in the period from 2011 to 2016.

To tap this hugely promising market, several Vietnamese and foreign firms had vied with each other to open cafés especially chains of them, sparking fierce competition.

When the foreign coffee brands like Gloria Jean’s Coffee, NYDC, Highlands and Starbucks first came, Vietnamese were instantly attracted, especially young people, thanks to their unusual tastes and upmarket image.

The US-based Starbucks Coffee Company, for instance, had a huge impact when it opened its first shop in HCM City in 2013. It became so popular that customers had to queue up for an hour for a cup of coffee. Amid the euphoria, the company quickly opened more stores and now has 16.

McDonald has opened five McCafe outlets around HCM City since setting foot in Việt Nam in early 2014.

But the situation changed when people turned their back to foreign coffee shops after their curiosity was sated.

Explaining the change, many customers said the prices at foreign coffee shops were too high for them while the tastes were not really suitable for the Vietnamese palate.

Though local companies have emulated foreign firms and opened chains, they seem to be more successful, which is proved by the fact that their market shares have rapidly grown.

Analysts said local brands have many advantages that the foreigners do not have: affordable prices, comfortable spaces and comprehensive understanding of Vietnamese consumer behavior.

Vietnamese chains only charge VNĐ30,000-40,000 ($1.5 or 2) for a coffee, much lower than the VNĐ100,000 ($4.5) often charged by the foreign ones.

Besides, Vietnamese beverages and foods are diverse and tasty and also familiar.

The Vietnamese cafe chains that have become highly popular include Passio Coffee, Coffee House, Trung Nguyên, Phúc Long, and Urban Station.

Analysts expect them to grow developed rapidly. The Coffee House now has 30 shops and wants to increase to 200 nationwide by 2020.

Passio Coffee is eyeing 50 shops before the year is out.

Spokespersons for the Vietnamese chains say that in spite of having to compete with many other local cafes they believe they will perform well since the market is big enough.


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