Beverage chain Phuc Long profit soars after shutting kiosks in WinMart

Its earnings before interest, taxes, depreciation, and amortization rose 33% year-on-year to VND78 billion ($3.17 million) for the quarter, the best result so far this year.

The subsidiary of conglomerate Masan Group, which also owns the WinMart convenience store chain, however reported a 16% year-on-year fall in revenues to VND377 billion.

The main reason for the improved profitability was the restructuring of the number of its outlets inside WinMart stores, Masan said in a note.

It launched the Phuc Long kiosk model in May 2021 aiming to have 1,000 kiosks set up inside WinMart outlets and hoping to make it the country’s top beverage chain.

Within 12 months it had over 700 kiosks.

But since the end of last year Masan has shut down 150 of them and instead focused on opening standalone outlets. Now Phuc Long has only 92 kiosks in addition to 147 outlets.

Another 11 stores are set to be opened this year.

The stores contributed three-fourths of Phuc Long’s revenues in the first nine months, underlining the effectiveness of the traditional model over kiosks.

Other beverage chains have also tried and failed with the kiosk model. The Coffee House set them up at Kingfoodmart outlets in 2021 and Highlands Coffee opened street kiosks in 2019, but they have all been shut down.

Food and beverage analyst Hoang Tung said demand for takeout in Vietnam remains low, with most people preferring to have an in-store experience or their drinks delivered.

If they pay a premium price for a drink, they prefer to have it in a store, he added.

Nevertheless, globally, Luckin Coffee and Cotti Coffee have proved the kiosk model works with thousands of outlets in many countries. Cotti Coffee is set to enter Vietnam after setting up 5,000 kiosks in five countries.

Tung said: "Starting with the kiosk model and focusing entirely on it is the key to success. Kiosks do not work if they are supplements to a traditional business."