Masan Group, which had planned to open at least 75 flagship Phuc Long Coffee & Tea stores across Vietnam in 2023, says poor consumer confidence during the ongoing cost-of-living crisis led to lower-than-expected first quarter outlet growth
Masan Group will open 10 flagship Phuc Long Coffee & Tea stores in its second quarter | Photo credit: Phuc Long Coffee & Tea
Masan Group has expressed a cautious outlook for the expansion of Phuc Long Coffee & Tea in Vietnam, citing a challenging macro environment leading to ‘negative consumer sentiment’.
Vietnamese retail conglomerate Masan Group, which increased its majority stake in Phuc Long Coffee & Tea to 84% in August 2022, said profits for the coffee chain declined in its first quarter due to lower revenues from its flagship stores as consumer’s cut back on spending.
Rising inflation in Vietnam caused consumer purchasing power in the country’s largest cities to fall by up to 25% in 2022.
In February 2023, Masan Group announced plans to grow Phuc Long Coffee & Tea’s domestic footprint and increase its revenues by approximately 75% in 2023 following full-year sales of VND 1.6tr ($67m).
However, despite outlining a goal of opening a further 75 flagship Phuc Long Coffee & Tea stores this year, Masan Group only opened three in its first quarter, alongside two ‘mini stores’.
The coffee chain currently operates 114 flagship stores across Vietnam, alongside 23 smaller format outlets and a growing kiosk presence in Masan Group’s WIN convenience store network.
Phuc Long Coffee & Tea achieved 6% year-on-year revenue growth in the first quarter, significantly lower than the 58-90% full-year revenue growth predicted upon the release of its 2022 results. Revenue from flagship stores increased 12% to VND 311bn ($13.2m).
Masan Group said it will open 10 flagship stores in its second quarter and improve store sales and productivity. The retail conglomerate added that it will limit losses from kiosks by testing new operating models and closing underperforming locations.
The group is trialling a ‘hub and spoke’ model for its kiosk sites which redirects online traffic from flagship stores to nearby kiosks during peak hours. Masan said has already increased the daily revenue of its kiosks threefold during the pilot phase, while enabling flagship Phuc Long Coffee & Tea outlets to better serve in-store customers.
Further highlighting the trading difficulties facing some hospitality operators in Vietnam, Chinese specialty coffee brand Mellower Coffee announced its exit from the country in April 2023 while foodservice conglomerate Jollibee Foods Corporation said it would cease operating the Vietnamese fast-food noodle chain PHO24 restaurants in the Philippines and Vietnam in May 2023.
Masan Group’s cautious approach to expansion also comes as competition within Vietnam’s branded coffee shop market intensifies.
World Coffee Portal research forecasts the Vietnamese branded coffee shop market, led by Milano Coffee with more than 2,000 stores, will exceed 5,200 outlets by 2025.
In March 2023, Jollibee Foods Corporation reported strong year-on-year outlet growth for its Highlands Coffee chain, which operates 553 stores nationwide.
Vietnamese retail group Seedcom currently operates 155 outlets of The Coffee House across the country and launched a new ‘exclusive and upscale’ coffee shop brand – SIGNATURE by The Coffee House – in January 2023.
Meanwhile, US coffee giant Starbucks said its long-term goal in Vietnam is to become consumer’s ‘everyday café’. The US coffee giant currently operates 91 stores across the country having set a target to reach 100 stores in the country by the end the first quarter of 2023.