GDP per capita in Vietnam has been increasing dramatically from 2012 to 2019 and in 2020, its statistic is expected to be $1361.07. As a consequence, Vietnam will expect a rise in their pay, which prompts interest for a higher quality of the product, a more premium spot like Phuc Long could be their option.
On 4 February 2016, Vietnam has formally signed the TPP, Trans-Pacific Partnership, where there will be no exchange hindrance. The advantages of joining TPP are that there will be more coming investment from outside the country, Phuc long can get more opportunity to enter the worldwide business sector, improving its reputable image. For buyers, as a result of TPP joining, Vietnamese’s income would be 13% higher than before TPP signed, and actually the desires of a rise in pay will help gain the sales of Phuc Long. On the other hand, Phuc Long will likewise have to deal with the growing challenge of the opponent brands.
Vietnam has some topographical advantages based on climatic conditions, geography, and soil which are suitable for the growth of the coffee trees have given Vietnam's coffee a unique taste. With geography, Vietnam located in the tropical belt Northern Hemisphere and in terms of climate, it is sunny and also lots of rainfall. Evenly distributed rainfall between the months of the year especially those months coffee grows most. Vietnam has basaltic soils which are suitable for coffee allocated throughout the country. Thus coffee tree needs two basic elements which are water and soil, both of which are available in Vietnam. This makes Vietnam the advantage that other countries do not have.
On the other hand, lack of moisture, aging trees, and disease are some currently dangerous factors affected directly to the production of coffee in Vietnam, the decline in the coffee product is about 4.5% in 2019. The profitability of Phuc Long is hugely influenced by the coffee bean market in Vietnam as the price of coffee beans will result in an increase in Phuc Long’s production cost and this further detrimental to its profitability due to the many competitors in the instant coffee market.
Vietnam was initially acquainted with coffee in 1857 when the French were stationed here. Since that time coffee growing and consuming had gotten to be a local culture. Nowadays, youngsters such as teenagers and office workers are more familiar with instant coffee. However, there are more and more people from other segments have instant coffee instead of drip coffee because it is time - saving and flexible.
As per Trung Nguyen Owner, the reason why they are successful is Vietnamese taste. In the actual fact, Vietnamese individuals incline to strong coffee’s taste preference. It is easy to see from a street coffee shop on the pavement to a top of the line coffee house in Vietnam, strong-taste cups of coffee are usually served for customers.
As a Vietnamese culture, some of the famous brands from outside the country are developing new strategies in regard to adaption to local needs and demands. On their menu particularly the Coffee bean and Tea Leaf and Starbuck, they concentrate on adjusting organizational culture and drinks in order to suit the Vietnamese taste. For example in the US, they are selling take away drinks but in Vietnam, they design the store to be spacious and convenient for customers to enjoy the drink there.
Vietnam has been encouraging domestic and foreign investors to open factories to process coffee (coffee powder, dissolved coffee, etc) with modern technology, diversified products with high quality to ensure food safety, and meet the demands of consumers. When joining TPP, Vietnam would attract numerous foreign as well as replace the ineffective traditional process.
Vietnamese citizens in general and Vietnamese youth in particular are likely to stay up-to-date and connected with the internet. They enjoy using digital devices in order to communicate, receive information, entertaining, and so on. As a result, the internet is creating a new channel through which Phuc Long can easily communicate, interact, and approach their customers with extraordinary capacity and extremely fast to compare with other old methods. Moreover, a huge amount of internet users can enable e-commerce where transactions can be done online.
III. SWOT analysis of Phuc Long
1. Targeting customers
The coffee market in Vietnam is very competitive. However, Phuc Long, which has operated since 1957, still has a position in Vietnamese consumers’ awareness in recent years. Phuc Long has the manufacture in Bao Loc, which is the center of tea and coffee agriculture in Southern Vietnam. Therefore, they have provided various types of coffee products made from pure and high-quality materials for different kinds of targets. Phuc Long currently concentrate on the teenager and young adult:
● Teenager: Phuc Long aims for teenagers to create more products that suit their taste with new and modern recipes. Teenagers’daily life is quite busy, it leads to the fact that they need fast and convenience services. Moreover, they use their parents’ or guardians’ grants to afford drinks, so the price could be very sensitive. Thus, the company supplies takeaway service for the younger who required cheaper and more convenient services. The average price in a takeaway coffee store is around $ 1.5. This segment is usually attracted by new and unique beverages. Product with good advertising and good reputation on social media is a big plus.
● Young adult: The average income of the middle class in Ho Chi Minh city is $148. Nowadays, Phuc Long expands the coffee chain by open more stores with modern decoration and a nice view for their clients to stay and drink beverages. The coffee’s cost in these stores is around $ 2-3, which is suitable for people in the middle-income range. Most of them use their own money to purchase the products, so price and quality are the most important concerns of this segment. Phuc Long uses their own materials to produce coffee, so their drinks are always guaranteed. Mouth to mouth promotion plays an important role in this segment in order to pick the products.
2. Product differentiation
Product: Phuc Long coffee & tea are made from 100% local ingredients which bring about the best experience in terms of tasting traditional Vietnamese coffee. Moreover, their products are diversified between flavors, types of coffee used, and recipes for drinks. Phuc Long’s products are not only focused mainly on bringing the traditional flavors but they also provide a wide range of choices that came from foreign recipes.
Chanel: An increase in the number of stores in Ho Chi Minh City in the past five years is proof that Phuc Long has exploited successfully their advantages of targeting a much more varied range of customers. There are three types of Phuc Long stores which are the Phuc Long store (Only supply products), Take away Express, and Take away House. Take away Express stores are targeting a lower-income class such as students, workers with a low-priced menu, and the latter type of store targets higher-income customers. There are differences in the diversification of menu, space, and services between two types. In addition, Phuc Long has its own farms, factories, preparation system, hence, their products are not overpriced due to changes in ingredients price and secured quality.
Image: Phuc Long brand logo was designed with the image of a round traditional teapot, a piece of specific equipment to make great tea drink, on a premium silver color. As a result of having a reasonable price associated with a high traditional quality product, Phuc Long can deliver their products, expand their brand easily to customers at a higher speed without doing as much promotion as their competitors.
Phuc Long has performed well in terms of strategy. Using its own integrated production line, Phuc Long is providing customers with the best quality, demonstrating the unique traditional Vietnamese taste in tea and coffee. Moreover, targeting consumers in many different income classes allows Phuc Long to compete not only with mid-range competitors but also with brands with high-priced products.
For a more in-depth and detailed look, you can refer to Phuc Long's report in here.
Phuc Long - an outstanding example of success in the tea and coffee market in Vietnam (Part I)
An Nguyen - Vietnam Credit