Phuc Long - an outstanding example of success in the tea and coffee market in Vietnam (Part I)

I. Company background

Phuc Long is one of the most famous companies of coffee and tea in HCM, Vietnam. Phuc Long was created in Bao Loc, Lam Dong, where is a noted place to cultivate tea in Vietnam in 1957. The first Phuc Long tea workshop was started to run in the middle ’70s in HCM. Since then, Phuc Long company developed a lot in their markets and human resources. Today, Phuc Long coffee and tea is a well-known brand that has good equipment. Their brand logo is the shape of a traditional teapot which is their particular machine to make perfect tea. In addition, they offer customer services as a combination of their many other products depends on special dates. Now, Phuc Long coffee and tea has around 16 stores in HCM. 
 
Phuc Long’s main product is tea. They have various types of tea, so that customer cannot be boring. In sort of tea, there are black, blooming, green, oolong, and bu-erh teas. In each kind of tea, there are more specific teas. They also have their own method for a teabag, so that the consumers feel more convenient. Furthermore, Phuc Long provides coffee in many different ways. For example in Phuc Long coffee, they have basic coffee such as espresso and Moka like other coffee shops, but they have one special set of coffee as well. ‘Girl set’ is a package that has a girl printed who is wearing Vietnamese traditional clothes ‘Ao Dai’ and playing Zither. ‘Girl set contains handle coffee filter and a spoon. Its package is useful and convenient to carry outside. Moreover, Phuc Long supplies mooncakes which is a Vietnamese favorite. They sell mooncakes as a pack of a special gift for valuable days such as independence day in Vietnam.

II. Factors that create Phuc Long's success

1. Micro environment

➢   Company

Born in Bao Loc (Lam Dong) since 1957 and inherited the family business, Mr. Lam Minh Boi, a director of Phuc Long company, seeking to develop the business of tea and coffee. In the past, Phuc Long has simply accommodated resellers with a qualitative coffee and tea across the country but nowadays, they have been expending the sphere of their business by using raw materials (coffee and tea leaf) to make tasty drinks in their own coffee shops and invest in plant construction in Thai Nguyen and Binh Duong with a modern production line to meet domestic demand as well as export to the world. 
 
After the success of producing, Phuc Long coffee stores is established as a reputable coffee and tea house belong to Phuc Long Coffee and Tea Co Ltd due to the perfect quality of its.They have to pay a lot for rental cost and initial investment costs is also huge. Currently, they have 16 stores highly desirable places in Ho Chi Minh City. Half of the stores are in city centre, district 1: Mac Thi Buoi, Ly Tu Trong, Le Loi, etc. Their coffee shop is designed to make customer welcome and cozy as they are at home. Furthermore, the menu offers the best range of variety and affordable prices, they use as much local produce as could be expected such as oolong tea, black tea, dark roasts as well as moon cake and preparation tools, etc...
 
Moreover, Phuc Long’s marketing department pursuits the planning strategy that is “think consumer” to provide consumer value and satisfaction. According to Hoang and Thanh's statements in 2014 that when choosing a country as the destination to discover, foreign tourists have the intension of enjoying local coffee and tea brand instead of world famous brand such as Starbucks, the Coffee bean and tea leaf, etc. After that, those customers could generate positive word of mouth for Phuc Long, Vietnamese coffee and tea brand, when they come back their countries, as a result the sales increase. 

➢   Competitors

In the competitive environment in Vietnam, there are so many well-known coffee brands in Vietnam and they compete intensively. Notably in the district 1 (HCM city), within a radius of 600 – 800 meter around Ben Thanh market, there are 5 out of 9 Starbucks stores, 10 out of 17 the Coffee Bean and Tea Leaf stores, over ten stores of Trung Nguyen coffee and even Phuc Long, which was established recently, has 6 stores in this area. These foreign coffee brands are really a potentially strong competitors of Phuc Long.
            
Highland is the biggest companies but has been decreasing shares recently: has 98 total outlets with strategic locations in big cities, up-to-dated menus, professional service, reasonable prices, good quality drinks. Besides, Vuvuzela is growing quickly. In addition, Starbucks is new and growing, highest value sales growth in 2018 with international reputation, Western lifestyle and uniquely designed spaces. Phuc Long has been stabilizing in recent years. It is clear that Phuc Long hasn’t had any significant influences on coffee industry because of the firmly development of strong competitors such as Highlands Coffee, Starbucks. 

➢   Customers

Phuc Long coffee can meet the demands of both common people and high-income customers. They divide their stores into two types: take away express and take away house. In terms of take away express stores, they focus on people with average income with affordable prices for instance it only costs 30,000 VND for a cup of ice coffee and that is also an average price for tea. On the other hand, take away house stores serve the same drinks but higher price due to the premium service and splendid space. A cup of coffee costs averagely 40,000 VND. Overall, Phuc Long aimed at the wide range of customers from different areas which are workers, foreign people as well as student. Affordable price is a key factor bring Phuc Long brand to customers as fast as possible.
 
In addition, Phuc Long also aims at some big markets including Japan, America through foreign tourists coming to Vietnam. By researching interest and the psychology of tourist, Phuc Long company has made a small coffee bag which is designed to be artistic and colourful ethnic such as brocade fabric bags, plastic bags printed with Vietnam girls wearing traditional dress or some wonderful images of Vietnam’s landscapes. By using this approach, Phuc Long has gradually been a potential coffee and tea exporter of Japan and the US. The company has been trying to maintain top three big market: Japan, Philippines and Indonesia.

➢   Public 

Although having recently operated stores in Vietnam for 3 years, Phuc Long has received so many positive responses from customers. Le Thi Nhi, a patron of Phuc Long, commented that she liked coming to there because they have magnificent view, professional customer service and especially a qualitative coffee and tea. Therefore, Phuc Long stores especially Phuc Long’s take away house stores in the main routes are always packed because these are the favourite choice of youngsters to come to relax or chat. As a consequence, that is a main alarming position leading to some of the weaknesses which can make this coffee brand decline. Being usually overloaded affects the service there and many people complain about the parking spot of Phuc Long. Lack of areas for parking make customers feel extremely inconvenient, time consuming and they even have to walk a long distance to have just a drink. Phuc Long is becoming more and more famous in Ho Chi Minh city, even Ha Noi in which they do not have any store but Phuc Long still need a consideration to address these negative situations.

➢   Supplier

Phuc Long possesses their own farm system and the factory with modern equipments therefore they take the initiative in raw materials. That seems to be an advantageous effect on not only Phuc Long themselves by easily controlling the prices and resources supplying but also customers as they can buy drinks with a lower price compared with other prestigious brands,

2.  Macro environment

➢   Demographic

Vietnam is identified as one of the young populated countries, working age account for roughly 70% of total population. It is an unmistakably positive sign for Phuc Long - a new gorgeous coffee chain as its target customers whom mainly focus on this specific age group.
In terms of the tendency of people’s shifting from rural to big cities, Hanoi and Ho Chi Minh, has been accelerated in recent decades. Notably in Ho Chi Minh city, comparing to 100 years ago, the population of HCM city now has more than 111 times as in the past, from the nearly 55,000 people in 1905, this amounted to more than 6.1 million people. But in fact the increase not due to natural population growth, which is mainly due to a mechanical rise from the waves of immigration. In terms of education, a number of the survey show that the rate of university-educated immigrants is higher than that of university-educated people living in HCM city, with 9,15% and 7,8% respectively. As a result, the number of white-collar in HCM city has actually changed, with 61% of immigrants to be a director or vice-director, and about 31% of those people who are locals. Hence, people are more likely to have a higher standard of living and pay more money on services.
 
Furthermore, Vietnam with a population of 80 million people in which 49% is in the working age. This abundant labour force is provided for the national economy. Export coffee production is a process including several stages such as breeding, planting, packaging. This process requires a relatively large workforce. Especially in Vietnam, it lacks of application of machinery to work and producing so the advantage of large workforce can reduce a lot of cost for coffee producers in order to lower the price when they export.

( End of part I )
An Nguyen - Vietnam Credit