Vietnam Insider

Instead of branching out to Germany or Thailand, as had been suggested by business partners, local coffee chain Cong Caphe has established a foothold in Seoul in its first foreign market foray, officially joining the South Korean coffee industry. However, what whether the venture will be successful remains to be seen.

Hoang Tien, born in the early 90s, has achieved a fair bit of success with his startup Coffee Bike Vietnam. For him, Cong Caphe’s recent foray into the South Korean market has been quite inspiring event for brand promotion.

“It creates a motivating force for young Vietnamese startups to raise their confidence in building their brands on their home turf. Foreign brands have entered Vietnam to develop their business chains through franchising, and Vietnamese firms can do the same,” Tien said.

Coffee has grown into an indispensable part of life for many South Koreans. The capital city Seoul features a dense presence of coffee and pastry shop brands, such as Holly’s, Ediya, Angels in the US, Tous Les Jours, Paris Baguette, and Caffe Bene, to name but a few. Those shops either lie right next to each other or are only a few metres removed from one another.

Venturing deeper into the city’s small lanes, more coffee shops offer the Korean style of beverage. In addition, vending machines sell coffee everywhere, from office buildings, schools, and hostels to metro stations and trade centres.

Vietnamese coffee chain Cong Caphe opened its first South Korean location in Seoul’s Yeonnam-dong Street, a favourite venue for South Korean youths. The main bartender here is an experienced Vietnamese expatriate living in Seoul.

Cong Caphe chose to establish a presence in Seoul instead of in Germany or Thailand, as had earlier been suggested by business partners. The reason behind the decision is that Vietnam has emerged as a favoured destination for South Korean tourists, whose the number of arrivals in Vietnam ranks second among foreign visitors coming to Vietnam, trailing only Chinese tourists. Many South Koreans, therefore, might want to taste the Vietnamese flavour of coffee along with a variety of Vietnamese snacks such as banh mi and peanut candy.

Matching the Korean taste
Cong Caphe is now mulling over taking further steps in South Korean market. The coffee chain’s growth story dates back to 2007 with the first shop in Hanoi. It now boasts more than 50 shops across Vietnam.

To win the heart of customers, the brand has made efforts towards network expansion and brand recognition; the shops feature a retro décor to pique the curiosity of young guests, consistent from table and chair sets, glasses, and cups to the general décor, whereas the beverages will be adapted to fit the host country’s culture.

Considering the advantages, Cong Caphe’s venture abroad was viewed as ‘promising’ by market observers.

Although having a lengthy tradition in tea, South Koreans now drink coffee an average of 12 times a week, even more often than they eat their traditional kim chi dish. This explains why, even though coffee shops have sprung up like mushrooms in the country, there are still enough customers to make operations profitable.

Korea Customs Service (KCS) figures show that the country’s coffee market value touched $10.8 billion last year, nearly four times the average level of a decade ago. This equals 26.5 billion coffee cups served, averaging 512 cups per capita a year for the population of 51.7 million. Mixed coffees were the most selected beverages, with 13 billion cups served. Running second was freshly roasted coffee, with 4.8 billion cups. The remainder was packed coffee and other coffee-flavoured beverages.

High expectations
Cong Caphe venturing abroad is good news for the chain, but concerns persist. A decade ago, coffee chain Trung Nguyen, XQ Silk, and Pho 24 also ventured into global markets, but achieved little success.

Recently, Wrap and Roll, a subsidiary of Chao Do, started franchising in Australia, Singapore, and China; rice burger VietMac franchised in Germany; and Vietnamese restaurant chain Truly Viet under Redsun began franchising in Australia.

As fact, the number of Vietnamese brands franchising abroad is very modest compared to the massive entry of foreign food brands into the country’s market.

Expanding their footprints abroad is the aspiration of many local firms looking for expansion. However, reaching the global market sustainably requires very careful preparations.

Retail and franchise expert Nguyen Phi Van said that to franchise abroad, local firms must dare to make changes and have to share a common vision with and support their partners.

In particular, they must build up suitable platforms and follow a clear roadmap for business restructuring and franchise plans in the domestic and foreign market.

For Cong Caphe, it is too early to say whether its foreign venture will end up successful. As Van, those firms which take control of raw material sources and supply chains will have the upper hand in brand value augmentation when they engage in franchising model at home and abroad.

Anh Hoa report on VIR