There's a Coffee War Brewing in Vietnam

Almost 40 years to the day since US military involvement in Vietnam ended with the Case-Church Amendment, a new, far more friendly conflict is brewing between the two nations over coffee.

As Starbucks opens is second Vietnam location, local players like Highlands Coffee are shoring up their marketing strategies for an upcoming fight for the nation's coffee dong. But Vietnam is not just another Asian nation for chains like Starbucks. Vietnam has a stringent, deep coffee culture that is going to make the fight for its consumers far more complex.

Meanwhile, an ocean away, a Wyoming town has just become the calling card—almost literally—for another Vietnamese coffee brand.

When Starbucks announced its first Vietnam location in Ho Chi Minh City, the brand drew sneers from Vietnam's "Coffee King" Dang Le Nguyen Vu, who called Starbucks "coffee-flavored water with sugar in it." The comments, made to Reuters, solidified Nguyen Vu, the founder of Vietnam's Trung Nguyen coffee brand, as Starbucks' chief antagonist.

Starbucks' global name and over 3,300 stores in China and the Asia Pacific region make it a big target. But numerous other foreign coffee retailers are already at play in Vietnam, including The Coffee Bean & Tea Leaf and Gloria Jean’s. Dunkin' Donuts also has a donut hole in its heart for Vietnam.

Trung Nguyen may be the most vocal but it is far from the only local competition. Highlands Coffee, now with 80 locations across Vietnam, is very much like Starbucks in price and culture. Starbucks' foot in Vietnam's door has forced the brand to tweak its brand positioning and its menu in anticipation of a showdown.

Unlike in China where coffee retailers have been forced to painstakingly forge a coffee culture where historically there has never been one, Vietnam presents a whole different challenge.

Thanks to late 19th century French colonizers, coffee plantations became a normal fixture of Vietnam's agricultural mix. (Compare that to China, where Starbucks and others are struggling to jump start a meaningful coffee growing region.) This legacy stayed with Vietnamese agriculture long after the nation won its independence. Today, Vietnam is one of the top coffee growers on the globe, exporting between 1.5 to 2 million tons of beans a year.

This long tradition of coffee has also manifested itself in a local coffee drinking tradition. "Vietnamese style" is generally a dark and robust drip coffee cut with sweetly thick condensed milk. Ice coffee, a comparatively new addition to America's palate, has a long history in the nation.

Meeting the local taste is something Starbucks is keenly aware of in Vietnam. In a statement during the February 1 opening of its Ho Chi Minh store, John Culver, president, Starbucks China and Asia Pacific, said, "We have deep respect for Vietnam’s long coffee traditions and we want to ensure that our Starbucks Experience is the right balance between the global offering that our customers have come to expect of us."

So far, and now with a second location, Starbucks has reportedly seen long lines, in part thanks to the uniqueness of its American pedigree. How long that will last remains to be seen. It's worth noting that there is a lot of room for brands on the coffee drinking rungs below Starbucks. Starbucks' Vietnam drinks sell for between 60,000 and 100,000 dong, or about $3 to $5. This in a nation where the average monthly income per capita hovers around just $107.

A hemisphere away, it's exactly that same, deep coffee culture that is providing the gumption and opportunity for Vietnam coffee producers abroad. And none has made a bigger splash than Pham Dinh Nguyen. Last month Nguyen bought at auction the entire small Wyoming town of Buford for $900,000. The businessman's intention is to rename the town PhinDeli, the brand name of his Vietnamese style coffee.

In an interview with Tuoi Tre News, Nguyen revealed that he plans to convert the town's convenience store into a PhinDeli cafe, retailing both "deluxe" and "super-clean" coffee beans. Additionally, he said, the cafe will "serve coffee free-of-charge for visitors." PhinDeli will also distribute through Amazon, and eventually if things go right, Walmart and other big retailers.

 http://www.brandchannel.com (on August 7, 2013)