Opportunity Analysis Report for a New Coffee House in Vietnam

This report evaluates the opportunities of opening a new coffee house in Vietnam and its chances of success and survival. It includes an analysis of the external environment, industry analysis, market segmentation, competitor analysis, and financial feasibility.

A new Coffee house in Vietnam: Opportunity Analysis Report

Running Head: Report
Executive Summary
The coffee lovers in Vietnam are developing discerning tastes and the increasing sophistication
among younger consumers has effectively contributed towards the premiumisation of the coffee
products and tastes. The political environment is quite stable in the country and it even has a
vibrant free market economy, which makes the Vietnam markets a better option for opening a
new coffee outlet.
The citizens of Vietnam are quite hard working and live a stressful life. This coffee shop can
provide them with an option of quick refreshment breaks and even a place to hang out in an
unprofessional manner. The number of buyers in this industry is large and due to this, the buyers
have a low Bargaining Power. The competitive rivalry is medium and there is no evidence of
price or advertising wars in the industry. The new coffee shop could target customers in the age
group of 18-40 years and even a number of elderly people who want to spend a quality time
while sipping their favorite coffee.
1

Running Head: Report
Contents
Executive Summary.....................................................................................................................................1
Introduction.................................................................................................................................................3
External Environment Analysis...................................................................................................................4
Industry Analysis.........................................................................................................................................6
Market Segmentation...............................................................................................................................8
Competitor Analysis................................................................................................................................9
Target Market........................................................................................................................................10
Key People Analysis..................................................................................................................................10
Financial Feasibility..................................................................................................................................12
References.................................................................................................................................................14
2

Running Head: Report
Introduction
The Vietnam Coffee Industry is evolving and there’s also a rapid growth in the specialty hipster
shops. Coffee production has been a major source of income in Vietnam since the early 20th
Century. The coffee lovers in the country are developing discerning tastes and the increasing
sophistication among younger consumers has effectively contributed towards the premiumisation
of the coffee products and tastes. There has been a shift from standard fresh ground coffee to the
premium coffee beans like the most popular Robusta Beans. The coffee outlets are attracting the
customers by offering them a number of premium coffee products and unique single-origin
coffee (Bhasin, 2018).
The following report is precisely written to evaluate the opportunities of a new coffee outlet in
the country and the chances of its success and survival. For the external environmental analysis,
PESTLE Analysis will be conducted and in the industrial analysis Porter’s Five Forces will be
discussed. There will also be a discussion of the market segmentation and the current coffee shop
competitors in Vietnam. This will help in evaluation of prime target markets for this new outlet.
The report will also unveil the key people related to this coffee business and the financial
feasibility of this new coffee shop (Thang & Phuc, 2018).
The diagram below shows the position of Vietnam among the countries which have the fastest
growing coffee markets by the retail value:
3

Running Head: Report
External Environment Analysis
The external environment could be analysed by conducting PESTLE Analysis which is an
analytical tool used by the managers to identify different macro environmental factors which
may have an influence on the business strategies and business performances.
PESTLE Analysis
Political Factors  Vietnam has adopted mixed economy and the government
still plays a crucial role in planning and governance. (IBIS
World, 2019).
 It is a socialist country operating under the Communist
Party.
 It has a National Assembly, which is the highest law-
making body in the country.
Economic Factors  The country has a vibrant free market economy, which is
highly dependent on exports.
4

Running Head: Report
 It maintains high and stable economic growth.
 The credits are expensive due to high inflation, high
interest rates of saving, and due to currency devaluation.
 The government is committed to economic liberisation and
international integration.
Social Factors  The citizens, mostly follow traditional values and culture,
but some of the youngsters have a tendency to get attracted
towards western culture and trends.
 The people are hard working and this urge to do well have
increased the overall productivity of the country.
 Most of the citizens dislike the blue collar job and have a
higher purchasing power, giving good markets to the
businesses.
 The country has a strong education system and almost all
the citizens prefer the English language.
Technological Factors  The country has witnessed a number of technological
advancements which transformed the quality of life and has
brought a drastic change in the quality of life.
 The internet has strengthened the communication and has
even boosted the connectivity.
Legal Factors  The legal system is quite fair and the laws are quite strict in
the country.
5

Running Head: Report
 The country has Enterprise Law, Investment Law, and
other global and regional agreement.
Environmental Factors  Pollution generated from vehicles in transportation is the
major challenge in the urban areas.
 The country is still struggling with industrial carbon
dioxide emission.
 The country has long coastal border and hence it is prone to
a number of natural disasters.
(Dung, 2015)
Industry Analysis
To have a thorough industry analysis, Porter’s Five Forces can be considered. This model is
widely used to develop a number of effective strategies in leading countries and even measures
the types and intensity of the competitive forces a business might face while establishing or
expanding.
Porter’s Five Forces
Threat of New Entrants The threat of New Entrants is medium to high as the switch
cost is low along with low capital requirements and low
restrictions. As the major costs of a coffee shop are of the
real estate and coffee making equipments, hence the required
investment is also quite low (Van & Hien, 2013).
Bargaining Power of the
Buyers
The number of buyers in this industry is large and due to this,
the buyers have a low Bargaining Power. The coffee
6

Running Head: Report
consumers do not have good negotiation power; hence, they
cannot force down the prices and cannot even pit the
competitors against each other (Muni, 2014).
Bargaining Power of the
Suppliers
Vietnam is world’s second largest coffee producer and
exporter. Although it has a large number of suppliers, having
good suppliers is a tedious task. These suppliers have
already signed contracts with the big brands like Nestle and
Starbucks. If the new café is able to pay prices more than the
brands then the supplier may dissolve the contracts otherwise
they won’t. Therefore, the Bargaining Power of the Suppliers
is Medium to High.
Competitive Rivalry The competitive rivalry is high to very high. The prime
competitive cafes in the markets are Starbucks, Dunkin’
Donuts, Coffee Bean and Tea Leaf, etc. Apart from these
foreign competitors, the local ones are Central Highlands,
Highland Coffee, Passio, Urban Station, Phuc Long, etc.
Threat of the substitutes The threat of substitutes is high and the prime substitutes are
tea, juices, soft drinks, alcohol non-caffeinated drinks,
energy drinks, etc. Any other business can attract the
customers in the beverage markets by offering substitutes at
lower price and higher quality (Tran, 2016).
7

Running Head: Report
Market Segmentation
Geographic: The tourist attraction places like Ha Long Bay, Cu Chi Tunnels, Hoan Kiem Lake,
Marble Mountains, Bac Ha Market, Cham Island, Nha Tranf, etc. could be used as the prime
location for setting up the new coffee shop.
Demographic:
> Population between an18 years and 40 years could be targeted.
> High School and College Students, young office workers, tourists, shoppers and senior citizens
could be targeted.
Psychographic:
> The college students often look for economic and cool places to hang out with friends.
> The famous spots are always filled with tourists who like to consume coffee and relax with
their friends and family members (Campbell, 2018).
> Young professionals also require some informal spot to unwind and spend some time with
friends and colleagues.
>Senior citizens who want to spend some alone time (Linh, 2016).
8

Running Head: Report
Competitor Analysis
There are a number of competitors for the new café in the Vietnam markets.
The leading brands that serve high quality coffees are Highlands Coffee, Starbucks Vietnam,
Trung Nguyen, Coffee Bean and Tea Leaf, MOF, etc. The below picture depicts the prime
competitors for the new café and even their share in the markets of Vietnam.
(Roldán-Pérez, 2018)
9

Running Head: Report
Target Market
The new coffee shop could select few target markets like:
 The school and college students who usually need places to hangout.
 Working men and women aged between 25-45 years.
 Elderly people above the age of 55 years.
 Tourists visiting Vietnam for vacations and business purpose.
 People who have a hectic schedule and need a refreshing break.
 People who believe in getting the best taste and quality Coffee at an affordable price.
 The discerning coffee drinkers who have a desire for better coffee and better
consumption experience (Matzen & Harrison, 2011).
Key People Analysis
There are number of people associated with this coffee shop who have a specific designation and
even perform specific roles in the business. The following people are crucial for the
establishment and growth of the coffee shop in Vietnam:
CEO: The Chief Executive Officer (CEO) is responsible to suggest strategic plans for the
business and even predict future success rates along with the upcoming challenges. He/ She also
has a specific role in designing and controlling the budget. He analyses where the business is
going and what specific roles people will play.
COO: The Chief Operational Officer (COO) is responsible to handle the company’s complex
operational details and ensure that the business delivers quality products and services day by day.
10

Running Head: Report
The team working under the COO tracks all the measurements and report to the higher
authorities when things aren’t going according to the plans (Mark & Birkinshaw, 2013).
CFO: The Chief Financial Officer (CFO) has a role in predicting the future profit and loss rates
and then decides the budget accordingly. He/ she also has a specific role in managing the
company’s resources and distributing them equally among all the business units of the company.
CMO: The Chief Marketing Officer (CMO) plans out the unique marketing strategies which
could be used by the company to have a competitive edge over the other similar players in the
markets. This officer also has a role in designing the strategies that lures and retains the prime
target markets for a long duration. The sales strategies are also designed by the CMO and he/she
oversees their implementation in an effective manner (Savara, 2014).
Managers: These are placed directly above the Baristas and the Waiters and manage them on a
daily basis. They assign them different roles and responsibilities and even listen to their
grievances and suggestions and forward them to the higher authorities. The Managers act as a
connecting link between the higher authorities and the subordinates. The Managers also address
the issues related to the wages of the Baristas and even manage their leaves and absence.
Baristas and Waiters: The Baristas are well trained for preparing high quality coffees with great
taste and the Waiters directly interact with the customers by taking orders from them and serving
them coffee and other food items. In times of any issues associated with the customers, the
waiters or the Baristas could contact the manager directly (Nhat, 2018).
11

Running Head: Report
Financial Feasibility
To start a new coffee café in Vietnam one will require an investment of around $ 120,000 to $
150,000. The Rental in Vietnam is quite high and one has to pay crazy amounts to open a café in
prime location. For instance, the rate for a small ground floor shop-house unit in Duxton Road
and Tanjong Pagar is around $ 10,000 to $ 15,000 per month. In areas like Everton Park and
Jalan Besar, these rates are a bit low, ranging from $5,000 to $7,000 per month (Cantler &
Niswonger, 2013).
Next investment would be in Kitchen Equipments and Coffee Machines. The top range espresso
machines can cost around $ 25,000 or above each. These machines include Synesso, Slayer and
La Marzocco. The café could also use low priced machines, which will cost around $3,500. The
café will also need a grinder, which will cost around $4,500 or above. Other Kitchen Equipments
are:
Oven: $6,000- $25,000
Dish Washer: $2,000- $3,000
Fridge, Freezer, Ice-Machines: $5,000- $6,000
Coffee/ Bar Counter: $10,000- $20,000
There are other expenses of café like interior designing and furniture. This will cost around
$20,000 to $1, 00,000 and depends entirely on the fact that how lavish one wants the café to
look. The café will have Waiters and Baristas and hence they will be paid. Most of the cafes pay
$7 to $8 per hour for the part timers and $2,000 to $2,500 to the full timers. If the Baristas apply
for the Basic Barista Training Course in certain school or academy, so it will cost around $200
12

Running Head: Report
for each of the participants. The professional certificate course can range from $500 to $1,500.
The coffee shop might be renovated in the future and this may cost around $800 to $2,000. This
will be covered under the Utility Bill (Latkovic, 2018).
Below is the project profit and loss of the new coffee shop for one year:
(Ipsos Consulting, 2013)
13

Running Head: Report
References
Bhasin, H. (2018) Top 17 Coffee Brands in the world, Available at:
https://www.marketing91.com/top-coffee-brands/
Campbell, C. (2018) Market report: A snapshot of your market sector, Available at:
https://www.bgateway.com/assets/market-reports/Restaurant-Cafe-and-Coffee-Shop.pdf
Cantler, B. & Niswonger, S. (2013) Serving More Than Great Coffee, Available at:
http://www.catalystcoffeecompany.com/wp-content/uploads/2013/04/Catalyst-Coffee-Project-
Proposal.pdf
Dung, L. (2015) Challenges in entering Vietnamese market for companies in the sharing
economy, Available at: https://www.theseus.fi/bitstream/handle/10024/97448/Le_Bao
%20Dung.pdf?sequence=2&isAllowed=y
Ipsos Consulting (2013) Vietnam’s Coffee Industry, Available at:
http://www.ipsosconsulting.com/pdf/Ipsos-Research-Note-Vietnam-Coffee.pdf
Latkovic, K. (2018) 5 Coffee Shop Digital Marketing Strategies & Industry Tips, Available at:
https://transpera.ca/marketing/blog/coffee-shop-marketing-strategy/
Linh, N. (2016) Vietnamese coffee in the path of international integration, Available at:
https://www.theseus.fi/bitstream/handle/10024/111326/Vietnamese%20Coffee%20in%20the
%20path%20of%20International%20integration-%20Nguyen%20Dieu%20Linh.pdf?
sequence=1&isAllowed=y
14

Running Head: Report
Mark, K. & Birkinshaw, J. (2013) Costa Coffee: A Proposal to Build the Next Generation Self-
Serve Espresso Bar, Available at:
https://edenmccallum.com/wp-content/uploads/2015/07/Costa_Coffee_Case_A.pdf
Matzen, T. & Harrison, M. (2011) Start & run a coffee bar, Available at: http://www.self-
counsel.com/docs/SR_coffee_bar.pdf
Muni (2014) Cafe Bistro Coffeehouse Business Plan: The Watertower Cafe, Available at:
https://is.muni.cz/el/1423/jaro2014/ENS238/um/02_Cafe_Bistro_Coffeehouse_Business_Plan.pd
f
Nhat, M. (2018) How to set up a profitable coffee shop in Vietnam, Available at:
https://www.theseus.fi/bitstream/handle/10024/150611/Thesis%20-%20Dinh%20Nhat%20Minh
%20-%20Final%20Submission.pdf?sequence=1&isAllowed=y
Roldán-Pérez, A. (2018) Coffee, Cooperation and Competition: A Comparative Study of
Colombia and Vietnam, Available at:
http://www.eafit.edu.co/centros/asia-pacifico3/Documents/Coffee_Cooperation_and_Competitio
n.pdf
Savara, T. (2014) Consumer and Innovation Trends and Future Growth Opportunities in Coffee,
Available at: http://www.ico.org/documents/cy2013-14/presentations/seminar%20march
%202014%20presentations/seminar-march2014-tanvi-savara-e.pdf
Thang, T. & Phuc, V. (2018) Vietnam Sustainable Coffee Plan Till 2020 and Vision to 2030,
Available at: http://ap.fftc.agnet.org/files/ap_policy/689/689_1.pdf
15

Running Head: Report
Tran, T. (2016) Enhancing the participation of trung nguyen coffee in the global value chain
(gvc), Available at:
https://projekter.aau.dk/projekter/files/281295621/Master_Thesis__Thi_Tuong_Vi_Tran.pdf
Van, D. & Hien, D. (2013) Report on coffee sector in vietnam, Available at:
https://www.aseankorea.org/files/upload/board/120/6/Vietnam%20CoffEe%202007.pdf
16