Coffee chains race to establish global presence

Tea and coffee chain Phuc Long has just announced plans to open its first store in California in July.

TNI King Coffee last month launched its first store in the U.S. It has already opened its first outlet in South Korea with a partner.

Highlands Coffee, one of the biggest Vietnamese coffee chains, has started branching out to other markets since 2011. It now has 39 franchised outlets in the Philippines.

Cong Ca Phe has six outlets in South Korea and two in Malaysia, while E-Coffee opened its first store in Laos last year.

The branching out decisions of these brands have happened in the wake of heavy competition in Vietnam’s café chain industry.

In 2019, Highlands Coffee saw its revenue rise 32 percent year-on-year to VND2.2 trillion ($95 million), after having risen at roughly the same rate in 2018. It was followed by popular competitors like The Coffee House, Starbucks and Phuc Long.

In terms of outlets, Highlands Coffee ranks top with 437 at the time of publishing, followed by Trung Nguyen E-Coffee with 414, The Coffee House with 180, Phuc Long with 82 and Starbucks with over 60.

Opening coffee chains in foreign markets, particularly the U.S., is a strategy that Vietnamese chains have been thinking of and preparing for the last 10 years, said branding expert Vo Van Quang.

"They used to have concerns of going from a small country to a big one, but now they have overcome that fear because they see a lot of potential in entering a huge market," he told VnExpress International.

One of the biggest advantages for Vietnamese coffee chains in the U.S. market is that consumers there are not as particular as European ones.

"Most Americans do not have high standards for coffee. They consider it only as a necessity to help them stay awake to work," he said, adding that in other markets like France or Japan consumers are more difficult to please.

Another major advantage is that Vietnamese food and drinks have already established trust in the U.S. as a delicious and healthy alternative to fast food.

"With two million Vietnamese in the U.S., there are now Vietnamese restaurants in every state. Pho and banh mi have become popular dishes among locals there," said Quang, referring to the iconic Vietnamese noodles soup and sandwich.

These types of dishes can be included in the menu of coffee chains to increase their competitiveness, he added.

The potential of foreign markets has had Vietnamese coffee chains thinking big.

TNI King Coffee, for example, plans to launch an additional 19 outlets in the U.S. by the end of this year and targets to hit 100 stores there by next year.

"Opening the first store in the U.S. markets is a strong development step for TNI King Coffee in the global market," said founder and CEO Le Hoang Diep Thao.

The company had earlier talked about having 1,000 stores in South Korea, but mentioned no specific time frame.

Branching out to other markets is a sensible move as local coffee chains have been fighting within a small market in recent years, Quang said, adding: "Recent moves by Phuc Long and King Coffee show that coffee chains have adopted a bigger vision to grow larger abroad."