Why Starbucks and other international chains are way less popular than local coffee shops in Vietnam

Why Starbucks has less than 3% of Vietnam's billion dollar coffee and tea market
Why Starbucks has less than 3% of Vietnam's billion dollar coffee and tea market

As the world's second largest coffee exporter, Vietnam knows its coffee. The country is famous for a thick, heavy brew sweetened with condensed milk.

Vietnamese coffee drinks are brewed with robusta beans, which have a sharper, bitter flavor and higher caffeine content than more mild arabica beans. Robusta beans are available all over Vietnam, whereas arabica beans are served in most Western coffee outlets.

The middle class is growing in Vietnam, and the market for specialty coffee and tea shops in Vietnam is worth more than $1 billion, according to Euromonitor International.

Local Vietnamese chains are expanding faster and performing better than their international counterparts. Local chains charge less for coffee, adapt more quickly to new trends and have a huge footprint.

Australian chain Gloria Jean's Coffee exited Vietnam in 2017. Among the international chains trying to grow in Vietnam, Starbucks stands out, despite its high price tag.

"We observed that Coffee Bean & Tea Leaf has not been doing well in Vietnam," said Grace Chia, senior analyst at Euromonitor International. "Coffee Bean is not as affordable as local players like Highlands Coffee, and [it doesn't] offer the seasonal drinks or ... special events that Starbucks has that justifies its premium price point."

That makes Vietnam a prime target for international expansion for global chains. But global coffee chains are struggling in Vietnam.

What are international coffee chains doing to stand out in Vietnam? Watch the video above to find out how they're competing in the $1 billion market.

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