The opening of Starbucks’ first three outlets in Hanoi saw throngs of curious Vietnamese line up to order the iconic Venti-sized latté.
Four months later and it’s still too early to tell whether the push into the capital will ultimately prove successful. And for Starbucks, success means replicating other US franchises — KFC comes to mind — that have opened hundreds of stores and spread their influence across this Communist land.
But Starbucks would not be blind to the fact that Hanoi presents a unique challenge for its business model. Here, where there are probably more coffee shops per square kilometre than anywhere else on Earth, the coffee drinkers are particularly discerning.
This all begs the question: in a market as coffee-clogged as Vietnam, where does Starbucks see its opportunity?
The Starbucks Experience
For the expansionist company, it needs to convince a population of discriminating coffee consumers to pay premium prices for a product widely seen as inferior to the home-grown liquid gold.
This challenge seems even more daunting when you consider that many of Starbucks’ specialities, including its ice-blended frappuccinos and café lattés, were long ago introduced by rivals such as Highlands and Gloria Jean’s.
But Starbucks knows there is one thing it can do better than its competitors: create a coffee ‘experience’. The world over, this is what Starbucks trades on.
Walking into the Ly Tuong Kiet outlet, it’s easy to think you’ve left Vietnam. There’s the art deco furniture, stylish New York décor, soft soundtracks and MacBooks as far as the eye can see. Timber shelves line the walls, stocked with shiny new merchandise. Staff donning the famous green apron smile from behind polished counters, carefully writing your name on a recyclable cardboard cup.
Even a jaded Australian coffee-snob like myself has to admit that there’s something very impressive about the whole thing — it’s a well-oiled machine.
‘It’s a Nice Place to Spend Time’
Starbucks’ well-oiled nature is perhaps why each outlet has been able to attract a strong showing from all subsets of Hanoi’s population. A visit will guarantee handfuls of tourists and maybe a couple of western diplomats. But the clear majority is made up of Hanoi’s nouveaux riche, huddled over large white mugs.
“It’s a nice place to spend time,” says 28-year-old Ha Hoang. “It feels cool and refined and I don’t have to choke on the clouds of cigarette smoke like at Highlands.”
Linh Nguyen, who’s in sales, says, “I sometimes schedule meetings here because it helps me create a good first impression with clients — especially if they are Vietnamese.”
There is no doubt that Ha and Linh are part of the much vaunted, rising middle-class that is tipped to top 20 million, or 22 percent of the population, over the next few years. And with Vietnam’s current domestic café market already worth US$3 billion (VND66 trillion) every year, it is clear that it is a long-term strategy that could pay off handsomely for Starbucks.
This is especially the case when you consider the Vietnamese appetite for foreign goods. It’s clear Starbucks is considering it. The company’s Asia-Pacific chairman Jinlong Wang has previously noted that the company aims to appeal Vietnam’s “emerging middle-class consumers who want to enjoy international products”.
That’s not to say that everyone has welcomed the US company’s arrival.
“It’s not strong enough compared with Vietnamese coffee,” says taxi driver Thuan Anh. “To pay VND80,000 is also very expensive, so I think most people won’t be able to afford it.”
On the other side of the socioeconomic spectrum, Hanoi University student Trang Pham is among a host of coffee-drinkers who think the novelty of the company’s brand may not be enough to attract young consumers in the long run.
“I went with some friends once. It was nice but we actually prefer going to the Coffee Inn, because it’s cheaper and the coffee tastes better,” she says. “But I think the atmosphere is very mature — which is why I think it is popular with the older business crowd.”
Expat Joshua Zukas says, more than Starbucks’ economic impact, some will bemoan the larger impact on Vietnamese culture.
“Having more choice is a good thing but it’s annoying — from a foreigner’s perspective — to come to Vietnam and see the special coffee atmosphere changing.”
Others have adopted a more nationalistic tone, such as 35-year-old shop owner Huyen Thi Tran.
“We need to support Vietnamese businesses. They’re not good at branding like these big multinationals,” she says. “But if [our own people] can do things just as well, we should be giving more money to them.”
Made in Vietnam
All of this overlooks the fact the American coffee giant’s entry into Vietnam may benefit local coffee producers and the industry’s 1.6 million workers — mostly from the Central Highlands — who rely on the coffee sector to earn their living.
Starbucks has promised to look at sourcing more of its coffee locally, which has reportedly led to some Vietnamese farmers changing their crops to Arabica beans. At the moment, however, local newspapers have reported that Starbucks continues to source most of its coffee from Yunnan, China.
The branded merchandise that adorns the walls of Starbucks is also affixed with ‘Made in China’ stickers, another reminder of the importance of economies of scale to their business model.
For now, none of this has diminished the novelty of Starbucks’ entry into the capital, which has largely been successful. And while it’s probably unlikely that it will go broke, time will tell if Vietnam will truly take off its conical hat off to the world’s biggest coffee chain.