Why Starbucks failed in Vietnam?

CASE SHARINGVIETNAM

RC

8/30/20234 min read

Starbucks in Vietnam: A Lesson in the Importance of Localization
Starbucks in Vietnam: A Lesson in the Importance of Localization

When you think of Starbucks, what comes to mind?

For many, it's a familiar green logo, a cozy ambiance, and a cup of their favorite coffee.

The brand has become synonymous with coffee culture in many parts of the world.

However, in Vietnam, a nation with a rich coffee heritage, Starbucks failed in Vietnam.

Starbucks entered the Vietnamese market a decade ago, hoping to tap into the country's deep-rooted coffee culture.

Fast forward to today, and the brand accounts for a mere 2% of Vietnam's $1.2bn coffee-drinking market.

With just 92 stores in a country of nearly 100 million people, one has to wonder:

where did Starbucks miss the mark?

Coffee in Vietnam is more than just a morning pick-me-up.

It's an experience, a ritual, and a significant part of the nation's cultural fabric.

Here are some unique aspects of Vietnamese coffee culture:

Traditional Brewing Coffee in Vietnam

The Vietnamese use a "phin", a tin filter, to brew their coffee.

This method allows the coffee to drip slowly, resulting in a strong and aromatic cup.

Robusta Over Arabica in Vietnam Coffee Culture

While Starbucks prides itself on using 100% Arabica beans,

Vietnam's preference leans heavily towards the stronger and more bitter Robusta variety.

This difference in taste preference is crucial.

Cultural Significance of Coffee in Vietnam

Beyond the preference for Robusta beans, coffee in Vietnam carries a strong cultural heritage, symbolizing leisure, community, and tradition.

This cultural aspect is something international chains often overlook.

Highlighting the ritualistic nature of coffee drinking in Vietnam could provide a more nuanced understanding of why local coffee shops prevail.

Case Study: Starbucks Failed in Vietnam Because of Localization

Starbucks' challenge in Vietnam can be attributed to a lack of effective localization.

Here's where they could have done better:

Starbucks Menu Vietnam Adaptation

Starbucks' global menu didn't resonate with the local palate.

The Vietnamese have a penchant for innovation, blending traditional Robusta coffee with ingredients like egg yolk, yogurt, and even fruit. Also Vietnamese want a thick heavy brew with condensed milk which is Cà Phê Sữa Đá (Iced Milk Coffee) and this is available all over Vietnam, from the street sidewalks to restaurants. Local brands have successfully catered to these tastes, however, Starbucks missed out on them.

Starbucks Coffee Price in Vietnam

Coffee in Vietnam is accessible and affordable.

With the average monthly wage in Vietnam being around US$345, Starbucks' pricing made it a luxury rather than an everyday choice.

The basic Vietnamese iced coffee would cost you only VND 6,000 (US$0.25).

Street vendors serve flavorful coffee on sidewalks, often costing a fraction of what one would pay at Starbucks. According to Starbucks Menu Vietnam, a medium-sized Cold Brew at Starbucks with none of the add-ons costs about VND 65,000 (US$2.6).

Local chains, recognizing this, adjusted their prices to be more in line with local economic realities.

Starbucks can be only affordable for office workers but not blue-collar as frequent purchasers.

Vietnam coffee culture
Vietnam coffee culture
Starbucks in Vietnam
Starbucks in Vietnam

The Power of Localization for Starbucks

Starbucks' journey in Vietnam serves as a potent reminder of the importance of localization.

When entering a new market, especially one with strong cultural ties to a product or service, understanding and integrating with local preferences through business intelligence systems and local business experts is paramount.

Starbucks' experience in Vietnam underscores the significance of localization

in international business strategy.

As the world becomes more interconnected, the brands that will thrive are those that not only understand but also respect and integrate with local cultures and preferences.

How many Starbucks in Vietnam?

As of the information available in 2023, Starbucks has reached a significant milestone in Vietnam by opening its 100th store, underscoring the brand's expanding presence in the country.

This achievement reflects Starbucks' commitment to growing its market in Vietnam, despite the challenges posed by strong local coffee culture and preferences.

The opening of the 100th store not only marks a notable expansion but also indicates Starbucks' ongoing efforts to adapt and resonate with Vietnamese consumers through its global brand and localized offerings.

Reference:

Starbucks Vietnam: Why the US chain cannot crack a coffee-loving nation

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River Chan
River Chan

River Chan is a marketing director of ToAsia.biz with over 10 years of experience in marketing from strategic planning, project execution, and data analysis across different industries.

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