Weak Starbucks may allow Trung Nguyen to regain footing

Starbucks may close some stores in Vietnam due to poor performance

Starbucks announced closing 150 stores next year. Photo: cafebiz.vn

The US coffee giant on June 16 officially announced its plan of closing 150 poorly performing company-operated stores next year, about three times as many as it typically closes, according to cnn.com.

According to cnn.com, the company told investors that is expects revenue from its stores to grow by only 1 per cent in the quarter that begins next month, lowering its previous forecast. Its stock slumped by 3.5 per cent in after-hours trading.

“Our recent performance does not reflect the potential of our exceptional brand and is not acceptable,” Starbucks CEO Kevin Johnson said in a statement. “We must move faster to address the more rapidly changing preferences and needs of our customers.”

With the small scale and the low influence in Vietnam, it is forecasted that some stores may be listed among the 150 stores to be closed.

Five years after first entering Vietnam, the number of Starbucks stores is 34, much lower than in other countries, including Thailand (198), Malaysia (190), and Indonesia (147). Starbucks stores in Vietnam also number less than those of other brands, including Trung Nguyen’s 60 stores, The Coffee House’s 80 stores, and Highlands’150 stores.

Furthermore, according to FT Confidential Research’s survey on the most visited coffee chains in Southeast Asia in 2015, Vietnam was the only country where a pretty low proportion of respondents (6 per cent) selected Starbucks, while the US coffee brand led the ranks in other countries.

This data could partly prove that Starbucks’ revenue in Vietnam may not be satisfactory at the time of the survey. Regarding revenue, the representative of Starbucks’ marketing department in Vietnam contacted by VIR refused to comment.

On the topic of closing stores in Vietnam, the representative also said: “We will soon announce official information.”

Trung Nguyen brand is threatened from domestic competition

Paving the way for Trung Nguyen

Dang Le Nguyen Vu speaking at Trung Nguyen's latest event to launch Trung Nguyen Legend products (Photo: laodong.vn)

Starbucks’ unexpectedly weak business operations in Vietnam may pave the way for domestic coffee giant Trung Nguyen to gain back some of the market after its three-year fall-back due to the divorce of chairman Dang Le Nguyen Vu and his wife Le Hoang Diep Thao.

Focusing on high-end coffee products Trung Nguyen Legend and expanding business scale in China may be Trung Nguyen’s direction in the near future.

After five years of retreating from the public, Vu made his first media appearance on June 16 at Trung Nguyen’s latest event to launch the new products of the Trung Nguyen Legend portfolio, including Trung Nguyen Legend Special Edition, Trung Nguyen Legend Classic, and Trung Nguyen Legend Iced Milk Café.

In addition, Trung Nguyen plans to boost the development of the Trung Nguyen Legend Café chain and the E-Coffee grocery chain over the country.

In the context of Starbucks’ unexpected weak performance in Vietnam, Trung Nguyen, with its long years of experience and stable revenue despite the divorce, may be able to regain some of its domestic market share.

Trung Nguyen’s expansion in China will be particularly interesting as on May 24, Trung Nguyen Legend Corporation announced entering an official co-operation with China-based Shanghai Qinzhou Trade Co., Ltd. to distribute G7 instant coffee products in East China, including Shanghai, Hangzhou, Suzhou, and Nanjing, with the revenue target of $1.6 billion. The Chinese coffee market is estimated at $9 billion, according to zing.vn.

In 2016-2017, Trung Nguyen’s revenue in China, including Hong Kong and Taiwan, reached $30 million. It is expected that the revenue in 2018 will hit $100 million.