Market Research

Industry Profile & Outlook

-Industry: Food and Beverage

-Industry Description:

The food and beverage industry in Vietnam has grown rapidly recently. The industry is driven by both local and foreign brands. Many foreign brands have invested in this potential market and are supposed to continue investing heavily. There are three main reasons for the investment in the Vietnamese market:

1. urbanization

2. growth of spending

3. an increase in the middle-class population

-Compared to global food chains, local brands are preferred by local taste and more affordable prices. As a result, foreign brands have underperformed and cannot expand their chains as fast as they expected (Das, 2017). In terms of out-of-home consumption, full-service restaurants and quick-service restaurants are the key players, accounting for 72% (36% each) of the overall business.

-Full-service restaurants resemble a conventional sit-down eatery which can be casual or elegant, while quick-service restaurants are takeaway coffee and fast food. The rest of the business share is divided between convenience stores, street food (11%), bars and clubs, canteens and hotel venues (Das, 2019).

Learning how the

industry works:

The food and beverage industry in Vietnam is full of chances for companies that want to start their business.
Vietnam is a developing country with an emerging economy, young population, and is seeing an increase in wealth and urbanization rate. As more young consumers follow westernized lifestyles. With a higher level of income, they are willing to pay higher for the convenience, experience, and more options. The main markets in Vietnam with predictably increasing opportunities are dairy, bakery sectors, and beverages (Figlobal, n.d., p.5).
Although the industry has a lot of opportunities for local and international players to enter the market, there are many challenges to gain success. Infrastructure is improving with nearly 6% of GDP spending, but in rural areas, significant difficulties to distribution and transportation remain. One of the biggest challenges for domestic enterprises is that they have not been well-prepared for regional integration. Domestic enterprises need to increase investment in technologies and equipment. For international businesses, it is necessary to do intensive research about market demands, local businesses' customs, and potential buyers. There are obstacles to enter the local market including language and cultural barriers (Figlobal, n.d., p.4).

History of the industry &

industry today:

Vietnam’s food processing sector has grown rapidly in recent years, accounting for 15% of GDP and 40% of exports. Exports are considered particularly important for the sector (Europa, n.d., p.25).
However, food consumption is also growing rapidly, and recent indications show that the growth in food consumption is outstripping the growth of the food processing sector (Europa, n.d., p.25).
The food and beverage sectors are the main industries and make significant contributions to the country's economy. The industry accounts for 15% of Vietnam's GDP and witnesses a steady 7% growth per year (Vietnamnews, 2015).
With a market of approximately 100 million people, Vietnam has a young population structure, 60% of the population aged 18-50, and household expenditure is expected to increase by 10.5% annually on average. Therefore, the conditions for Vietnamese businesses to access the domestic market and develop are favourable, despite the pandemic (Ringier, n.d.).

Understanding the Future of Food & Beverage:

Convenience is one of the things that Vietnamese people take into consideration when they purchase any product due to the busy modern lifestyle that people want to save time. This trend is good news for packaged food products (Exportconnect, n.d.).
Customization of food offerings to local tastes. Although foreign food products such as fast-food chains have initially had success entering the Vietnamese food and beverage market, they have struggled their novelty wears off and the food becomes seen as bland and unhealthy when compared to local food. This has led to the customization of products for the local customers, using traditional ingredients or adapting traditional cuisine (Europa, n.d., p.29).
Western food in the food and beverage market sees a steady increase because there are more and more foreign franchisees in Vietnam. Western food accounts for probably 35 percent of the Vietnamese out-of-home consumption share. Consumers are excited to experience new food products catered to local taste (Das, 2017).
Food safety is increasingly concerned by customers because of food poisoning scandals. Customers are beginning to put safety and quality of food over price. This means that Vietnamese people are more likely to pay higher for guaranteed food such as imports from countries that have strong food safety regulations and organic products (Exportconnect, n.d.). Moreover, concerns about Covid-19 are led to more natural ingredients, probiotics and prebiotics in the front line of enhancing the immune system (Ringier, n.d.).
With the development of technology and the concern of Covid-19, online ordering is becoming a preference for Vietnamese people, especially the young consumers in major cities. It is a great way for people to limit physical contact with others and also increase convenience for users.

Local Market

When mentioning the local market, two levels need to be discussed. First of all, is the city-wide level. For this level, coffeeHolic is located in Ho Chi Minh City (formerly known as Saigon). The city is Vietnam’s biggest economic and financial hub (VIR, 2019). Accounting for one-third of Vietnam’s GDP, this city has a population of over 10 million people and is widely seen as one of the fastest-growing markets in Asia-Pacific. (Indochina Properties, nd). Many coffee shops are located around the city such as L’Usine, Cafe Runam, Boo Coffee, Cà Phê Đỗ Phủ, The Vintage Emporium Thao Dien, Kokois, and Café Terrace, which are some of the must-visit places of this dynamic city. (Miniano & wordsmith, 2020)
For the district-wide level, our coffee shop is located in District 5 which is commonly known as the Cho Lon area. Jack Hornberger from Vietcetera demonstrated “This district is Chinatown in Vietnam and home for many Vietnamese Chinese’s populations. District 5 is about a 15-minute drive from central District 1. It holds approximately 174,000 people and spans 4.27 km². The density is very high at 41,000 people per square kilometre” (Jake Hornberger, 2017). There are plenty of vintage café shops located around the District such as Phúc Long Coffee & Tea, Effoc Coffee, Cheese Coffee, Célin Coffee Shop, The Bus Stop Coffee, The Myra – Coffee & Tea, Xúc Xắc Xoay Café, Sama Coffee, The Yum Cha Tearoom, Angelique Bistro and Road Trip Coffee. Just like our brand, those coffee shops branded themselves with vintage decorations and a unique atmosphere. Additionally, coffeeHolic has to compete with various café patios like Koi Garden Coffee Đại Thế Giới, Nhật Nguyệt Coffee, Cát Đằng Coffee, Book Café PNC, Café Pha Lê Đá and Rita Võ Coffee. Also, other foreign businesses such as The Coffee House, Starbucks, or Highland become a high threat for a new brand like us. (Bùi Thương, 2020)
As Vietnamese consumers in the Southern metropolis (HCMC) are more likely to either go out for drinks or order drinks for delivery and take-out, “coffee was the most popular choice in Ho Chi Minh City, especially in the ready-to-serve format” (Tuoi Tre, 2019, para. 6). By researching, we have set out our target customer group to be those people (both male and female) who are living in Ho Chi Minh City (ages 25 to 34 years old) as they make up the highest portion of coffee consumers in Vietnam in 2020 (Statista Research Department, 2021). One of the reasons behind this is that they benefit from employment policies of raising the minimum wages (in various occupations) and increasingly contribute to the development of the Food & Beverage industry in Vietnam. In addition to that, the market is expected to be “dominant by small companies (less than 50 employees) – 84%” when the growth of “beverage consumption is 6.7%” (Nieuwsbericht, 2019). As a result, CoffeeHolic is targeting customers who are willing to pay 20,000 VND – 80,000 VND for products and services (Q&Me, 2018), (V., D., &; Q., 2020). By identifying the behaviour patterns of local customers in District 5, “Vietnamese consumers are considered to be the most health-conscious in Southeast Asia” (Nieuwsbericht, 2019). As a result, CoffeeHolic develops a specific demographic profile on the targeted market and offers customers high-quality products and professional services.

Key Competitors / SWOT Analysis

KAI COFFEE

Strengths:

Location: The store is located at a three-way crossroad, next to a secondary school requiring a small walking distance to two shopping malls.

Products: High-quality signature items, such as Almond Cafe Macchiato (Cheese Foam), KAI Green Tea Latte, and Roasted Hazelnut Milk Tea.

Price: KAI Coffee provides customers with Combo options including one customizable drink, Latte or Tea, and Black Coffee (plus milk) at an affordable price for friends’ gatherings.

Atmosphere: Popular checked-in place, modern architecture, and nice lighting designs with ideal interiors on different floors. One sky-high rooftop and terrace ready for evening gatherings.

Service: KAI Coffee is open 24 hours a day, good service culture with relatively high ratings on social media platforms (7.7/10 on the Foody app).

Weaknesses:

Competition: KAI Coffee is less known by customers from other districts. Their main competitors are large corporations in the geographic area. The brand has to face strong existing competitors – Cheese Coffee on the opposite street.

Parking Area: Small parking lot near the main street, which may cause traffic congestion at peak hours.

Atmosphere: Customers find the dark-colored design in the store relatively hot in the morning.

Organizational: KAI Coffee needs to hire more part-time staff on the weekends but the turnover rates are very high and unstable due to irrelevant salaries leading to cost disadvantage.

Expenses: Higher cost of leasing, daily operation, maintenance, and utility.

Customer Service: Social media reviewers believed KAI Coffee staff usually requested customers to repeat their orders many times.

Opportunities:

Expansion: KAI Coffee has many opportunities to expand its business and market its products in local areas (District 5).

Customer Service: Growing demands for home delivery services. KAI Coffee offers unique customer service suitable for both young teenagers and senior office workers while their opposite competitor promotes self-service.

New Products: KAI Coffee can develop its menu and add more new products to the business.

Customer loyalty: KAI Coffee is ready to attract new customers and retain the old ones through special offers on the weekends and holidays. Vouchers improve customer loyalty and experience.

Threats:

Competition: New established start-up businesses in the same area (coffeeHolic Cafe). New coffee shops announce more interesting special offers, holiday vouchers, and loyalty programs. Other competitors are targeting their key customers and segments.

Price: KAI Coffee has to deal with increasing prices of imported ingredients and other supplies while have keep their products affordable to customers.

Company app: KAI Coffee does not have a company app to introduce its new products and special offers.

Environmental Factors: environmentally friendly ingredients and equipment are very expensive compared to its monthly profits.

CHEESE COFFEE

-307 Hong Bang-

Strengths:

Location: The store is located at a three-way crossroad, near a secondary school requiring a small walking distance to two shopping malls and popular tourist destinations.

Products: Diverse menu options, well-known products, such as Earl Grey Milk Tea, Watermelon Cocoberry, and Jasmine Almond Milk Tea. The brand allows customers to order different sizes and customizable drinks.

Price: Customers using mobile banking are often given vouchers and special offers on the weekends.

Packaging: Cheese Coffee has a very unique packaging design. They tend to use environmentally friendly paper cups since customers gradually pay attention to protecting the environment.

Atmosphere: Popular checked-in place, modern architecture, and nice lighting designs with ideal interiors on different floors. One sky-high rooftop and terrace ready for evening gatherings.

Weaknesses:

Competition: Small businesses provide more affordable products including KAI Coffee, Laha Coffee, and our coffee shop, the coffeeHolic Cafe. The products Cheese Coffee is selling usually range from 35,000 VND to 60,000 VND (1.94 CAD to 3.33 CAD), which is quite expensive to many Vietnamese.

Service: Cheese Coffee is open from 7:00 to 22:15, the brand promotes self-service which is not common in the Vietnamese beverage industry. Cheese Coffee offers limited home delivery services and does not offer special offers and vouchers to cash users.

Parking Area: Very small parking lot near the main street, which may cause traffic congestion at peak hours.

Atmosphere: Cheese Coffee is very crowded at night and there is no seat available for customers on the weekends.

Organizational and Operation: Large corporation requires many training workshops for both full-time and part-time employees. The higher cost of leasing, daily operation, maintenance, and utility.

Customer Service: Social media reviewers believed KAI Coffee staff usually request customers to repeat their orders many times.

Opportunities:

Expansion: Cheese Coffee has many branches in other geographic areas with different target markets. The brand is well recognized by a large number of residents in the local areas.

Customer Service: Cheese Coffee develops its own app introducing new products, special offers, and many other vouchers on special occasions.

Customer loyalty: In the future, the brand needs to provide cash users with special offers and retain old customers by rewards and discounts system.

Marketing: Cheese Coffee builds strong marketing strategies on social media platforms to broaden its brand awareness among local residents.

Threats:

Finance: Large corporations are difficult to maintain cash flow while Cheese Coffee also faces a low-profit margin and high expenses in operation, marketing, and human resources.

Competition: Local stores in the area including coffeeHolic Cafe, KAI Coffee, and Laha Coffee introduce more interesting special offers, holiday vouchers, and loyalty programs.

Price: Cheese Coffee provides customers with products and services at higher a price than other competitors while coffeeHolic Cafe, KAI Coffee, and Laha Cafe offer products at lower prices with excellent customer service.

Home Delivery: Cheese Coffee offers limited delivery service while Vietnamese people tend to look for home delivery service nowadays.

LAHA COFFEE

-283 Hong Bang-

Strengths:

Location: The store is located on a strategic main street opposite a secondary school requiring a small walking distance to a hospital and a shopping mall.

Products: Laha Coffee is well-known in the local area for its high-quality coffee. The corporation is branding itself by creating signature items made from Vietnamese coffee beans. Laha Coffee also attracts new customers with their unique cold-fresh juices, such as Carrot Juice, Red Juice, and Green Juice.

Price: products and services of Lah Coffee are far cheaper than Cheese Coffee and KAI Coffee.

Atmosphere: The store is mainly designed in white and green interiors. There are seats in front of Laha Coffee with a great view of the main street.

Service: Laha Staff is well recognized for their friendliness, enthusiasm, and excellent customer service.

Weaknesses:

Competition: coffeeHolic can be the biggest competitor in this geographic area since we offer products and services as affordable as Laha Coffee does.

Products: Even though Laha is branding itself based on Vietnamese coffee, their products are not different enough from other smaller brands like coffeeHolic Cafe.

Packaging: Unattractive packaging design and not environmentally friendly since they are using plastic cups.

Parking Area: No parking lot since Laha Coffee used that space for outdoor seating arrangements.

Special Offers: Laha Coffee does not often offer vouchers on food & beverage apps for delivery service.

Expenses & Organizational: Laha Coffee has to spend more money on maintenance, operation, and training than coffeeHolic does because they own other branches in different districts. Full-time and part-time workers are usually students so the brand also faces high turnover rates.

Opportunities:

Expansion: Laha Coffee is expanding its business in other districts with broader target markets.

Price: The brand tries to keep the price affordable to fit the common Vietnamese income to compete with larger international brands like Starbucks, KOI, and Gongcha.

Customer Service: Growing demands for home delivery services.

Customer loyalty: Laha Coffee is ready to attract new customers and retain the old ones through special offers on delivery apps.

Marketing: Laha Coffee builds strong marketing strategies on social media platforms to broaden its brand awareness among local residents.

Threats:

Competition: New established start-up coffee shops in the area.

Price fluctuations: Current economic situations, such as the cost of the lease, equipment maintenance, and workplace training make it hard to keep the service price low.

Atmosphere: Other brands are becoming more popular as check-in places by their ideal design and interior.

Environment awareness: though Laha may keep the prices low by using plastic cups, Vietnamese consumers start to go green and look for environmental-friendly products.

Our Shop - coffeeHolic

Strengths:

Location: The store is located on a strategic main street opposite to an apartment, near two secondary schools, and requiring a small walking distance to a supermarket and a shopping mall.

Products: High-quality signature items and trendy products that attract students, young people, and social media influencers. coffeeHolic also provides customers with customizable options with different sizes and prices.

Price: coffeeHolic offers much cheaper products and services than larger brands, such as Cheese Coffee, KAI Coffee, and Laha Coffee, does.

Atmosphere: Popular checked-in place with a vintage concept and comfortable atmosphere for customers to relax.

Organizational: Small business model allows coffeeHolic to grow in the future with low-cost expenses on labour.

Weaknesses:

Competition: More popular and well-known large brands are also targeting similar markets in the industry. And Cheese Coffee, KAI Coffee, and Laha Coffee offer more diverse services and products.

Parking Area: Small parking lot near the main street, which may cause traffic congestion at peak hours.

Atmosphere: Narrow and small space compared to competitors, the coffee shop can be very hot in the summer without air-conditioning.

Lack of funds: coffeeHolic may need to get more financial support from its co-owners or investors.

Popularity: Since coffeeHolic is a newly established store, it would be less popular and known by customers.

Supplier relationship: As a new brand in the local area, coffeeHolic has to spend time finding the right supplier and a stable ingredients supply.

Opportunities:

Expansion: coffeeHolic has many opportunities to expand our business to multiple locations in the district.

Brand Awareness: coffeeHolic can build our brand awareness to attract new customers by organizing activities, such as Singing Together, English Classes, Coffee Workshops. We can promote these activities on social media platforms.

Customer loyalty: Developing a customer loyalty program and rewards system can help coffeeHolic to retain old customers.

New Products: coffeeHolic may add more items to our menu allowing customers to have greater options

Social Media: The marketing can implement marketing plans on social media platforms for business growth.

Sustainability development: The brand can cut down more expenses on equipment maintenance by promoting sustainability practices.

Threats:

Competition: New established start-up businesses in the same area (coffeeHolic). New coffee shops announce more interesting special offers, holiday vouchers, and loyalty programs. Other competitors are targeting their key customers and segments.

Expenses: coffeeHolic may face increased costs of the lease, equipment maintenance, and daily operation in the near future.

Company app: we still have not been able to develop our own company app.

Target Market: Customers are becoming more price-sensitive, and easy to change their tastes.

COVID-19: The pandemic may have more disastrous effects on small businesses like coffeeHolic than other large competitors, such as Cheese Coffee and Laha Coffee

Target Market

coffeeHolic is focused on selling to customers (B2C).

DEMOGRAPHICS

For our business, we welcome people from all age groups. However, we are targeting groups of customers with ages ranging from 25 to 34 as they make up the highest portion of coffee consumers in Vietnam in 2020. (Statista Research Department, 2021). In addition to that, all genders are welcome as male consumers consume more coffee than female consumers (Statista Research Department, 2021), and female consumers tend to lean more towards juice and smoothies (V., D., &; Q., 2020). Mentioning levels of education and occupations, we welcome all levels and occupations as our prices are made reasonable and affordable for everyone to enjoy. Last but not least, our customers can be local people who live around the District, in HCMC, or in Vietnam. They can also be foreigners who visit the city/the country.

PSYCHO-GRAPHICS

Our customers' hobbies/interests are varied but we consider hanging out with friends and loved ones at coffee shops is one of the common ones that they have. (Stephenson, 2019).
By visiting our coffee shop, they can be able to relax and feel better/less stressed/more productive. Some people also chose a coffee shop as their working space, enjoying with their friends or even a place for business negotiations. (ASHAVI, 2019)
Besides those desires, some customers might be worried about the prices at our business. Other concerns can be health/safety issues, payment methods, and the levels of the deliciousness of our products. (BritCham Vietnam, 2020)
Apart from that, we do understand that we might face potential turn-offs, such as:

*Prices are not reasonably based on customer’s perceptions

*Tasteless/unsavoury products

*Bad services

*Health and safety issues

*No or little promotions/membership priorities/discounts

*No attractive decoration

*Seatings are not properly arranged or not enough space for other activities such as working.

(BritCham Vietnam, 2020), (World Bank and partners, 2016), (ASHAVI, 2019), (Vietnamnews, 2009), (Campaign Asia Pacific; WARC staff, 2019), (Stephenson, 2019).

However, we will try our best to improve and we do realize by achieving the following things, we will succeed:

*Prices are reasonably based on customer’s perceptions

*Tasty/savoury products

*Good services

*No health and safety issues

*New promotions/membership priorities/discounts

*Attractive decorations

*Seatings are properly arranged and enough space for other activities such as working.

(BritCham Vietnam, 2020), (World Bank and partners, 2016), (ASHAVI, 2019), (Vietnamnews, 2009), (Campaign Asia Pacific; WARC staff, 2019), (Stephenson, 2019).

Lastly, we are trying to make our prices reasonable and affordable as we acknowledge that:

*A cup of coffee worth more than 41,000 VND (about US$1.8) is deemed to be pricey. (Q&Me, 2018)

*According to the figures of Decision Lab, the average spending on a meal for a customer meal in Ho Chi Minh City is VND 69,599 (V., D., &; Q., 2020)

ACTIONABLE INSIGHT

First of all, we believe that the best ways to reach the customers are:

*By advertising through Facebook and social media platforms.

*By inviting popular food reviewers to come and experience.

*By offering grand-opening promotions/discounts.

*By cash payment and strong branding because in Vietnam, people still mainly use cash instead of using cards.

(MarketIntello, 2016), (ondigitals, 2021), (BritCham Vietnam, 2020)

In addition to that, we will have special promotions to engage the customers, such as:

*Membership promotions/discounts/special offers. (on-site or through food delivery apps)

*Gifted purchase, Buy 1 Get 1 Free, Price off.

(MarketIntello, 2016), (Kantar, 2013)

We will avoid the following promotions as they do not benefit us nor the customers:

*Promotions that are not in accordance with what the people favour at that specific time period.

*Promotions on repeated items that do not attract the customer’s attention. (Vietnamnews, 2009), (Campaign Asia Pacific; WARC staff, 2019)

We will thrive to serve our customers with:

*New products that are made to adapt to changes in the market and customer’s interests and tastes.

*Products that have never been on the market/have been on the market but not too long ago and you are taking those products and make them better. (MarketIntello, 2016)

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