Likely Re-division of Vietnam’s Coffee Market

According to figures of TNS Market Research Company, Vinacafe ranks the first, Nescafe the second, and G7 the third on Vietnam’s coffee market in 2010-2011. However, the two latter are competing closely for 2^nd place.

 

One of the most attention-driven transactions in Vietnam’s coffee market is the contract related to the most well-known coffee brand name, Highlands Coffee. After the purchase of 100 percent of Pho 24 Brand name, leaders of the Highlands chainstore sold 50 percent of sales section of Vietnam-based Viet Thai Company (including the brand names of Pho 24 and Highlands) to Jollibee Foods at the price of US$25 million.

Recently, due to big losses, the owner of Duc Lap Minh An Coffee and Duc Lap Dakmil plans to sell these two brands to a Korean enterprise for VND18 billion (US$861,656).

 

Mr Nguyen Thanh Tung, Deputy General Director of Vinacafe Bien Hoa JSC, says that it will take a lot of money, effort and time of local coffee trading companies for Vietnam to equal the per capita coffee consumption rate of other countries.

 

As such, he believes that share buying and selling does not exclude the goal of enhancing competitiveness for the seller and creating opportunities for buyers to reduce time and cost needed for penetrating the coffee market. In the short term, almost all transactions result in mutual benefit.

 

Talking about the cooperation between Masan and Vinacafe, a representative of the latter admits that this collaboration helps to equip his enterprise with more marketing techniques so that products churned out by the company are advertised in a more attractive manner and larger scale. Another reason behind this handshake lies in the fact that Masan has strong financial capacity and a skilled and professional marketing and sales team. Financial experts also believe that Masan still continues to buy more shares of Vinacafe due to the forecast that product consumption of this company in local market can increase by 8-10 percent per annum, 6-7 percent higher than global consumption. Besides, Vinacafe is a leading brand in the instant coffee market with stable business and large distribution network…

 

Therefore, Masan’s purchase of Vinacafe’s shares will not only help it manage the operation of a large brand name, but also pave the way for it to occupy a ‘piece of cake’ in instant coffee in the fastest way and then control this market in Vietnam.

 

However, from a different viewpoint, many brand name consulting experts argue that the merging of big brand names also has negative effects. Facts have shown that the new market dynamics have turned many enterprises into losers.

 

Clearly, competition pressure is huge although the coffee market is expected to be full of difficulties and has put quite a few enterprises into tough situations.

 

Big brand names like G7, Néscafe and Vinacafe are currently in tough competition through investment in techniques, factories, prices and promotions. Other coffee enterprises are also diversifying their products and establishing their own brands to win the remaining market share. 

 

Although Vinacafe’s strategy is seen as not having many changes, in order to better meet market demand in different market segments, Vinacafe will continue its strategy to invest in technology to maintain its competitive advantage – good product quality, as well as R&D, marketing and product selling. “It is expected that from Quarter III of 2012, Vinacafe’s production capacity will be significantly improved because a new coffee processing factory with the designed capacity of 3,200 tonnes per year will be put into operation,” says a leader of this enterprise.

 

According to Mr Dang Le Nguyen Vu, Chairman of Trung Nguyen Coffee Company, to maintain an active role in competition, in early March 2012, Trung Nguyen launched its “whole-chain production strategy” for the Vietnamese coffee industry, with the project of national coffee clusters expected to generate US$20 billion for the coffee industry in the next 15 years.

 

Mr Anil Bhuwania, MacCoffee’s Director in East Asia and Southeast Asia, shares that after three years studying the taste and market, MacCoffee officially made changes in 2011 in its coffee formula to meet Vietnamese tastes. Particularly, it has used local coffee source to reduce input cost and thereby create a competitive advantage. As such, in 2012 and coming years, it is MacCoffee’s strategy to focus on establishing its distribution network, redeveloping its brand name identity and changing product packaging. The criterion MacCoffee is pursuing is concentrating on R&D activity to maintain quality for consumers according to international standards. MacCoffee’s confidence in making large investment this year and in the time to come is built on the increasing number of instant coffee consumers. Despite its modest market share and though MacCoffee has not made much investment in brand name establishment, the coffee volume sold each year witnesses constant growth of 20 percent. “MacCoffee is making efforts to establish its brand name through the role of chief sponsor for Vietnamese Super Chef programme, which airs in May 2012,” says Mr Anil Bhuwania.