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Young people drink coffee at a local coffee shop in Ho Chi Minh City. (Photo by Ken Kobayashi)
BUSINESS SPOTLIGHT
People wondered how the world's biggest coffee chain would fare in a country that is the world's largest exporter of robusta beans.
The Seattle-based chain itself has been quiet about its progress. The company told Nikkei Asia it will mark 10 years in Vietnam by opening its 100th location but declined to answer a question about whether it is profitable in the country.
And while Vietnam has Southeast Asia's biggest cafe market by value and number of shops, it has just 0.9 Starbucks for every 1 million people -- the smallest number among the region's six main economies.
"Starbucks is not something people can afford every day," Ngan said at her shop, where the roof is a canopy of grape leaves. "I want to bring quality and something people can afford."
Price is one of three factors that explain local rivals' ability to defend their share of the $1 billion market. Taste and a distinct drinking culture are the two others.
While Starbucks offers a cup of mild arabica for as much as $5, often mixed with syrup, competitors sell every possible alternative from specialty coffee to $1 robusta, which tends to be bitter but also cheaper and higher in caffeine than arabica varieties.
For Enma Bui, another figure in the local coffee market, Starbucks is bittersweet. On one hand, she said the global giant generated more curiosity about coffee after it arrived in Vietnam; on the other, its sugary concoctions flatten palates.
"I had a customer come to me and ask if they could have a Starbucks caramel macchiato," said Bui, the brand ambassador at cafe and wholesaler Lacaph. "How do you convince someone to drink black coffee and enjoy its beautiful notes if they're used to that?"
Vietnam's coffee tastes date to the 19th century, when French colonizers planted the seeds of what would become the world's biggest robusta grower. Through the 2000s, coffee drinking developed into a national habit, dominated by domestic chains Highlands Coffee and Trung Nguyen. Thousands of tiny cafes sprouted up, with low barriers to entry that made it possible for a single location to change owners three times in as many months.
But in the 2010s two trends emerged. Vietnamese chains led by The Coffee House and Phuc Long embraced young customers with a hipper aesthetic -- and free WiFi. And the communist country's opening economy brought international influences, such as "third-wave" coffee, with its focus on distilling a bean's natural flavors.
These newer shops added to the existing sea of coffee kiosks and family shops, many operated out of people's homes, resulting in a market of 19,000 cafes. Only the U.S., China and South Korea have more, according to Euromonitor data.
Despite this scale, foreign brands have carved out a relatively small slice of the market.
"I guess it's something to do with the demographics and the consumer profile in Vietnam that could explain why the international cafe chains have not been doing as well as expected," Euromonitor Asia beverage insights manager Nathanael Lim told Nikkei. "Because they have done well in other markets in Asia, they think of using the same strategy, by positioning themselves as boutique and premium."
Among early international movers, Coffee Bean & Tea Leaf has just 15 stores after about 15 years in the country, while Gloria Jeans exited Vietnam in 2017, though it is attempting a comeback.
"We will take a thoughtful and locally relevant approach to drive sustainable growth," Starbucks Asia Pacific president Emmy Kan said without addressing Nikkei's question about its limited presence in the country of 100 million. Vietnam has fewer than 90 Starbucks outlets, while the region's next-smallest market, Singapore, has 146, Euromonitor said.
Local relevance, say those who know, is key.
Coffee in Vietnam is social, said Mindfully Cafe's Ngan. Friends like to dine at a restaurant, then move to a coffeehouse for a drink -- relocating is part of the routine. Or they like to watch the street from a cafe, at times on the street itself -- a feature that sets sidewalk vendors apart from Starbucks.
Some patrons like to go where somebody knows their name. During a joint interview Ngan's wife, Nguyen Thi Ngoc Yen, jumped up to brew lemon-soda espresso for a regular who had walked in.
"See you tomorrow," the customer said on his way out.
"If he's not here, it's not a normal day," Ngan joked.
Bui of Lacaph likewise sees independent cafes as serving quintessential local needs.
"Coffee is an excuse," she said, describing the desire for community that draws Vietnamese to cafes.
"It's really magical, this one small thing, but everyone can talk about it," she said.
"A sense of community is really important for a cafe. We talk to neighbors, friends, street vendors who come to sell snacks"
Lacaph brand ambassador Enma Bui
And talk about it people do, discussing fruity aromas and filter methods in Facebook groups. Two decades ago, coffee was important to Vietnam as a profitable export and as a daily ritual. Only in recent years has it taken on the cachet of a dedicated craft, with imbibers more aware of the contents swirling about in their cups and aware they're partaking in a culture.
It remains a lucrative export. Vietnam ships out 25 million bags of beans a year, behind only Brazil, U.S. Department of Agriculture data shows. Those are 60 kilogram bags, mostly of robusta.
Domestic demand is also, in a word, robust. The tropical country's cafe market grew 13% from 2021 to 2022, according to Euromonitor data.
How far Starbucks Vietnam, or any other international chain, can tap into that growth remains to be seen.
"As customer preferences evolve, we continue to meet them where they are through ongoing partnerships," Kan told Nikkei.
Taste for the little auburn beans is indeed evolving, even among the brewers.
"I didn't even drink coffee before," Bui said. But once she entered the sector, "It charmed me somehow."
Vietnam's coffee culture survives 10 years of Starbucks
Deep history, popularity of local brews make country hard for global brands to crack
asia.nikkei.com
