Drinks chains tinker with new models

June 22, 2023 | 15:03
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Many beverage chains have been forced to close their out-of-date business models, despite being effective during the pandemic and being good for brand building.
Drinks chains tinker with new models
Phuc Long has reduced its presence in Winmart stores, Photo: Le Toan

The kiosks of Phuc Long tea and coffee brand have disappeared at the Winmart and Winmart+ supermarket chains since the end of May, officially ending the existence of the kiosk model after nearly two years of operation.

Nhung Nguyen, a salesperson at the Winmart+ store on Hoang Hoa Tham street in Hanoi, said that the closure of these kiosks was inevitable as they had little business and took up quite a large area in the store.

“The number of bartenders at the Phuc Long kiosk was reduced from two to one before closing completely. Sometimes we asked them for help when Winmart+ is crowded. Since removal, the kiosk area has been used to display other items,” Nguyen said.

Phuc Long was the first beverage chain to put the kiosk model to the test, opening a series of kiosks of other coffee and beverage brands such as The Coffee House.

Two months after Masan spent $15 million buying a 20-per cent stake in Phuc Long in May last year, 41 kiosks of the chain were opened at Winmart+ stores in Masan’s retail system.

At its peak, nearly 1,000 kiosks and 111 flagship stores made Phuc Long the second-largest food and beverages brand in Vietnam, after Highlands Coffee. However, the number of kiosks decreased to 760 at the end of last year until they were completely discontinued in May.

After failing with the kiosk model, Phuc Long continued to test a similar model called Hub-and-spoke. A representative of Phuc Long said that the new model works by transferring online customers from flagship stores to neighbouring kiosks during peak hours.

“Hub-and-spoke will reduce the pressure on flagship stores and contribute to increasing daily sales of kiosks by up to 2.8 times during the pilot phase,” the representative said.

According to the financial report published in March, Phuc Long achieved $68.6 million in revenue in 2022, mainly from the business of more than 100 flagship stores.

Previously, a number of other coffee and beverage chains also quickly said goodbye to the kiosk model.

The Coffee House opened up to eight new kiosks in a row in October 2021, but after that, there was no move to show the model could be replicated. This brand has just reopened its Signature store in Ho Chi Minh City in January after more than a year of closure.

Ngo Nguyen Kha, CEO of The Coffee House, said that the new model has a different space with an open bar, aiming to serve visitors with better incomes looking for new experiences.

“In its growth journey, The Coffee House has continually pondered how to reinvent itself but maintain its identity. We feel fortunate customers are growing up with us, with higher and higher requirements for products and experiences,” Kha said.

“With the return of our signature high-end store model, customers are still willing to spend time and pay more for the new experiences. This group of customers is not large enough for The Coffee House to open hundreds more stores, but enough to open a few in some areas.”

The model has many similarities with Starbucks’ Reserve Bar. In Vietnam, two Starbucks Reserve Bar stores located in Han Thuyen street in Ho Chi Minh City and Nha Tho street in Hanoi, work as high-end store models that attract a vast number of customers.

Although not interested in the kiosk model, Starbucks has recorded a transformation in its operating model by opening a number of smaller stores for take-away and delivery during the pandemic.

“We believe that in the food and beverage segment, there must be the right formula to develop. We will continue to open more stores and create opportunities in addition to places that we have visited,” said general director of Starbucks Vietnam Patricia Marques.

As of the end of last year, Starbucks had 87 outlets spread across eight cities and provinces nationwide. The US chain plans to open its 100th store in Vietnam this year as a way of marking the 10-year journey of presence in Vietnam.

According to Mordor Intelligence Inc., Vietnam’s food and beverage industry will achieve a compound annual growth rate of up to 8.65 per cent from 2021 to 2026.

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By Tra My

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