Major coffee chains attempt to wade through price storm

July 21, 2022 | 08:00
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Beverage chains are struggling under the pressure of increasing selling prices due to sky-high costs of fuel and raw materials.
Major coffee chains attempt to wade through price storm
Photo: Le Toan

Inflation stemming from the escalation of fuel prices is making a daily cup of coffee a more costly activity for Vietnamese people.

Highlands Coffee, the beverage chain with the largest number of stores in Vietnam, over a week ago announced an immediate adjustment of product prices.

Average tea and coffee prices have been hiked by 10-15 per cent, while some of the larger tea products are up by as much as 18 per cent. The new prices will be applied first at stores in Hanoi and Ho Chi Minh City and later at other stores nationwide, including on the ordering app. Highlands Coffee currently owns about 500 stores.

The forced adjustment of selling prices, according to the chain on its social media pages, is to be able to maintain and improve the quality of products and services as well as the customer experience in the face of current market fluctuations.

The new prices mean Highlands Coffee drinks are considered by many consumers to be on par with those of some mid-range drinks brands in the country such as The Coffee House and Phuc Long, but still lower than Starbucks.

Despite seemingly being on the positive end of the pandemic, moves like those made by Highlands Coffee mean that beverage chains may not be out of the woods yet financially. Hoang Viet, CEO of the Laha Coffee chain, said, “The price of coffee ingredients has risen25 per cent, the rent of premises has gone up 10-20 per cent, and the price of cups, bags, and straws have also climbed by 10-20 per cent. Without raising product prices, it would be difficult for coffee and beverage chains to sustain themselves.”

Meanwhile, The Coffee House has yet to change its prices but is continuing to promote a restructuring strategy, distributing products across multiple channels and aiming to bring more customers back to its stores.

The Coffee House is also trying to open new stores, with the number now returning to 154, similar to pre-pandemic numbers.

Chuk Coffee & Tea, a coffee and beverage brand owned by KIDO Group, which was launched in June last year, has also pledged not to raise product prices in the next few months.

“Products from Chuk Coffee & Tea mostly use domestic agricultural products and fruit, so they do not fluctuate in price. Therefore, we decided not to increase the selling price at this time,” said KIDO Group’s general director Tran Le Nguyen.

A representative of Starbucks Vietnam insisted that it currently has no plans to adjust prices. “Although the impact of the pandemic is inevitable, with the right strategy and agility in digital transformation, Starbucks made a spectacular turnaround in business results in 2021 and continues to be one of the leading brands in the world,” the representative said.

On July 1, Starbucks announced the closure of its first-ever store in Hanoi, on Hang Bai street, with the reason being space issues.

Since joining the Masan Group ecosystem, Phuc Long coffee has developed a kiosk model based on a strategic cooperation agreement with VinCommerce, taking advantage of over 2,200 WinMart & WinMart+ stores nationwide. This combination has helped the chain’s revenues reach an additional VND1.75 trillion ($76 million) per year, and has created more impetus to promote growth, especially in the context of the increasingly competitive market.

According to a survey by Nielsen Vietnam on the impact of the pandemic on consumer behaviour, up to 82 per cent of consumers have reduced the frequency of eating out activities, adding to the issues that coffee and other beverage chains are facing.

By Hoang Oanh

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