Highlands Coffee Situation Analysis [PDF]

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Situation Analysis Highlands coffee Louis | MKT304 | 29/01/2021 Group members Lê Huy Hoàng Đỗ Việt Hoàng Nguyễn Đức Huy Nguyễn Hoàng Sơn Phan Hoài Khánh Ly

Table of Contents I.

Vietnamese Food and Beverages Analysis.............................................................2 1.

Industry size, Growth rate..................................................................................2

2.

Projections........................................................................................................... 2

3.

Industry structure................................................................................................ 2

4.

Nature of participant........................................................................................... 3

5.

Key success factor................................................................................................ 3

6.

Industry trends.................................................................................................... 4

7.

Long-term prospect............................................................................................. 5

II. Company Description............................................................................................. 5 1.

History of Highlands Coffee...............................................................................5

2.

Highlands Coffee’s Vision, Mission, and Core Value........................................6

3.

Highlands Coffee’s Products and Services.........................................................6

III.

Market Analysis................................................................................................... 7

1.

Market segmentation and Target market selection..........................................7 a) Market segmentation:...................................................................................... 7 b) Target market:.................................................................................................. 7

2.

Buyer behavior..................................................................................................... 8

3.

Competitor Analysis............................................................................................ 8

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I.

Vietnamese Food and Beverages Analysis 1.

INDUSTRY SIZE, GROWTH RATE -

Revenue in the Food & Beverages segment reached US$488m in 2020 Revenue growth rate in the Food & Beverages segment shows 53.6% in 2020

2. PROJECTIONS -

Revenue in the Food & Beverages segment is projected to reach US$559m in 2021. Revenue is expected to show an annual growth rate (CAGR 2021-2025) of 5.0%, resulting in a projected market volume of US$678m by 2025. User penetration will be 11.8% in 2021 and is expected to hit 16.9% by 2025. The average revenue per user (ARPU) is expected to amount to US$48.11. In global comparison, most revenue will be generated in China (US$176,857m in 2021). In the Food & Beverages segment, 0.7% of total market revenue will be generated through online sales by 2023.

3. INDUSTRY STRUCTURE 

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Competitors: - In Beverage market, there are a lot of coffee chains which compete directly with the ‘Highlands Coffee’. They are: The Coffee House, CONG Coffee, Urban Station Coffee, Trung Nguyen Legend, Phuc Long Coffee and Tea, Gemini Coffee, StarBucks, …etc. - They all have 30-130 stores nationwide - They shared similar products offering and strategies, especially The Coffee House, Phuc Long Coffee and Tea and StarBucks are a lot likely to Highlands Coffee. - All of their fixed costs are really high due to their fee of location of store premises, cost of high quality raw materials, cost of equipment and furniture. Potential competitors: - Since the Revenue in F&B segment reached US$ 488m in 2020 and still going up and projected to show a market volume of US$678m by 2055. This is a big pie for the worldwide investors to come in. - To entry this segment of market, it requires huge investments and larger gestation periods that increase the risk. Distribution channels: - Gaining distribution in Beverage market can be extremely difficult and costly. When you not only have to pay for a good location but also need to compete with your rally to get customers.

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- In Beverage market, there are two ways to distribute your products to customer: Offline Store or Distribute by third party market like a shelf on Big C or by some delivery company. Product differentiation: - Established firms may have high levels of customer loyalty caused and maintained by protected product features, a brand name and image, advertising, and customer service. Industries in which product differentiation barriers are particularly high include soft drinks, beer, cosmetics, over-the-counter drugs, and banking. Substitute products: - In Beverage market, it’s so much easy to find a substitute drinks for your need. In Coffee, in the market right now exist coffee cans on sale for your need, you can find any kind of drink on a can in any super market. This is really a potential threat for Coffee shop. Customer power: - When customers have relatively more power than sellers do, they can force prices down or demand more services, thereby affecting profitability. - In this market, customers are king. You not only sell your drinks but also services, most of customers come to the coffee shop to buy services not drink because most of the drinks they can made them self at home. Supplier power: - When the supplier industry is concentrated and sells to a variety of customers in diverse industries, it will have relative power that can be used to influence prices. Power will also tend to be enhanced when the costs of customers to switch suppliers is high.

4. NATURE OF PARTICIPANT -

The Coffee House: Pure Vietnamese Brand launched in 2014 Cong Coffee: Pure Vietnamese Brand develop from a small beverage shop on an old coffee street in Hanoi - Trieu Viet Vuong street. Star Bucks: Foreign brands have just entered the beverage market recently Phuc Long Coffee and Tea: Pure Vietnamese Brand launched in 1968 with the expectation of bringing quality tea and coffee products. Trung Nguyen Legend: Pure Vietnamese Coffee Brand launched in 1996

5. KEY SUCCESS FACTOR -

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The Coffee House: Born in recent years, The Coffee House is very popular with Vietnamese youth. Always occupying a large area on central roads, using the form of glass wall mounting, The Coffee House builds a new look for the coffee model in Vietnam Cong Coffee: Attracting young people with a nostalgic cafe space with retro style decoration. The attraction in Cong Coffee is not only selling coffee but

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also "selling nostalgic". The communal space brings the sound of the subsidy period, reminiscent of an old Vietnam, brings a sense of peace, closeness and provokes the curiosity and exploration of young people. Referring to Cong, people also mentioned the "divine menu" which is popular with many connoisseurs, including the coconut milk coffee that many devotees love. Phuc Long: With a youthful and modern space, delicious tea and coffee flavors and a variety of menu suitable for young people's trends, especially the relatively "soft" price, Phuc Long Coffee & Tea has successfully conquered consumers. in the Vietnamese market. Some drinks that make up Phuc Long's brand are peach tea, milk tea, caramel coffee ice blended, ... StarBucks: Not following a strategy to compete with the number of stores, Starbucks focused on product development as well as enhancing customer experience. Starbucks products both demonstrate the effort to localize in terms of taste and keep the very international character of this cafe empire, bringing Western coffee culture closer to Vietnamese consumers. Trung Nguyen Legend: Trung Nguyen's coffee products have conquered consumers in Vietnam and all over the world by their delicious taste, richness, sophistication, and imprint of Vietnamese cultural identity. The position of "energy coffee - life changing coffee" has created a very special and different "brand personality", helping Trung Nguyen to carve deeply into customers' minds, becoming a legend in Vietnamese coffee industry.

6. INDUSTRY TRENDS -

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Big data and Artificial Intelligence (AI) have recently been mentioned a lot. Their applications have also been used in some food and beverage businesses in Vietnam. For example, VinMart Scan & Go application with super-fast payment capability, which saves up to 90% of time, or the widespread use of robots in the processing and operation stages of Vinamilk. However, according to industry experts, the most potential benefits that Big Data brings to the food and beverage industry is the ability to personalize from collected data, to share data and to support automation, which makes products meet the different nutritional needs and preferences of each individual. This Covid-19 crisis also affected in the industry change. The past 2020, people spent lots of time having drinks by delivery.

7. LONG-TERM PROSPECT -

The implementation of online retail in Food & Beverages has been lagging for two decades. However, it has finally taken off now, becoming the fastestgrowing product category in e-commerce. The key challenges in this sector are facilitating the particularly fast delivery of perishable goods, solving the last mile problem, and reducing the high cost of flexible, same-day delivery. These factors keep entry barriers high.

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II.

Company Description 1. HISTORY OF HIGHLANDS COFFEE From love for Vietnam and passion for coffee, in 1999, Highlands Coffee brand was born with the desire to elevate Vietnam's long-standing coffee heritage and spread pride, harmonious connection between transmission. system with modernity. In 2002, the first Highlands Coffee shop in Ho Chi Minh City was opened at the Metropolitan Building, opposite Notre Dame Cathedral. A week later, the first coffee shop in Hanoi was born, marking the company's continuous development. In 2008, Highlands Coffee served more than 5 million visitors, with 2 million meals and over 4 million cups of coffee. As of 2009, the company has opened 80 points of sale in six provinces across Vietnam (Hanoi, Ho Chi Minh City, Hai Phong, Da Nang, Vung Tau and Dong Nai). In 2011, Viet Thai International (owner of Highlands Coffee) sold 49% of its sales in Vietnam and 60% of its sales department in Hong Kong to the Philippines Jollibee Group for $ 25 million. At this time, Highlands has 50 coffee shops. Also in this year, Highlands purchased Pho 24 chain stores of Mr. Ly Qui Trung for about 20 million USD. In 2015, Highlands expanded the number of stores to 75, as of the end of March 2017, the company has a total of 180 stores, in 14 provinces and cities in Vietnam. As of February 2019, the company has 211 stores.

2. HIGHLANDS COFFEE’S VISION, MISSION, AND CORE VALUE

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Vision: To become Vietnam favorite café and coffee and proudly share this with the world Mission: Highlands Coffee’s mission is to champion deliciously affordable modern Vietnamese coffee and café lifestyle experience. Everywhere, everyday Core Value: Customer focus: If we don’t take our customer, someone else will Respect and Integrity: If people respect you, respect them back, if they disrespect you, respect them back. They represent their ideology you present yours. Commitment: Motivation is what gets you started, Commitment is what keeps you going. Proudly Vietnamese and Community: We proud to serve Vietnam by superior Vietnamese Coffee Quality in a modern comfortable environment that reflects the appeal of modern Vietnamese life.

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3. HIGHLANDS COFFEE’S PRODUCTS AND SERVICES -

Vietnamese Coffee: A unique mix between Robusta and Arabica coffee beans, slow drip-brewed through a Vietnamese traditional “Phin” filter. Add ice and condensed milk Size: Small/Medium/Large Price: 29,000 vnd/35,000 vnd/39,000vnd Benefits: Keep you awake, bring a slower pace of life and enjoy conversation in a slowly way. - Tea: Made from Vietnam’s rich tea heritage, with fresh fruit and topping, serve with or without milk Size: Small/Medium/Large Price: 39,000 vnd/49,000 vnd/55,000vnd Benefits: Fresh, good for health, for customer who cannot drink coffee - Freeze: Natural Vietnam ingredients with blended with ice and jelly topping Size: Small/Medium/Large Price: 49,000 vnd/59,000 vnd/65,000vnd Benefits: cold drinks, a good way to indulge your day - Banh Mi: Vietnamese traditional bread Price: 22,000-25,000 vnd Benefits: provide a wider choice about food for customers. - Packaged Coffee: Packaged roasted coffee beans Size: 200g/1kg Price: 47,000 vnd/235,000 vnd Benefits: easy to make a cup of coffee at home with deliciously bold taste and alluring aroma or just be a gift not too fussy, but boldly meaningful - Pastry: hand-crafted pastries made at Highlands Coffee bakery with typical flavors of Vietnamese cuisine Price: 19,000 vnd- 29,000 vnd Benefits: provide a wider choice about food for customers. - Packaging: Highlands coffee start with glass cup and then switch to plastic cup with Highlands coffee logo and pattern.

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III.

Market Analysis 1.

MARKET SEGMENTATION AND TARGET MARKET SELECTION

a) Market segmentation: Highlands Coffee focus on the group of customer from urban areas from middle class. Buying motive for Highlands Coffee is their high quality products and services. Also the atmosphere in Highlands Coffee will suitable for many type of customer need. Highlands Coffee could be suitable for businessman who come to the coffee shop to work, for couples, friends and family to meeting, and have some good cup of coffee or tea. Highlands Coffee products consumption:  Vietnamese young generation (15 to 25)  Office workers They are group of people who are imaginative, lively and dynamic, searching for agreeable place with moderate cost

b) Target market:

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Highlands Coffee concentrates on creating a comfortable space for all customers and the decoration is the combination between classic and modern styles so the target market is various.  Demographics: Age ranges: the age from 25 to 54 years carry 44.4 per cent of the whole population in Vietnam (Vietnam Demographics Profile 2013, 2013) which is the main target of Highlands Coffee. Income: Low – Medium.  Potential customers: The medium class and young people are main customers of Highlands Coffee. They would like to drink coffee that has a brand like Highlands Coffee rather than unknown ones (Solution to marketing services for Highlands Coffee, 2012). The customers are business people who discuss about their contracts or find new partnership here. Highlands Coffee also attracts lots of foreigners because they think it has a familiar style and taste with the famous coffee brands around the world.  Geographic: Location: in big cities as Ho Chi Minh City, Ha Noi or tourist center like Da Nang City and Nha Trang City.  Site: Office Buildings Commercial Buildings At the corner of intersection, lake view.

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2. BUYER BEHAVIOR -

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Highlands Coffee’s revenue is contributed mostly from Vietnamese individual. The brand geared towards customers who have gone to work, have traveled, enjoy experiencing classy cafes with localized prices, those that are in low – middle income range. They based on customers’ insight to create new products. Besides coffee, Highlands Cofee also brings out others products such as ice-blended, milk tea, etc and recently, “Phin-di”, which is popular with young people. This has brought alternatives to customers which largely contributed to the retention of customers. People usually go to Highlands Coffee shop to have a meeting with their friends or find a place with internet or just have a spot to look at the street. the three products that generate the most sales are: Iced Coffee with Milk, Green Tea Freeze and Golden Milk Tea.

3. COMPETITOR ANALYSIS (analysis of representation of the coffee house)

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Company overview -

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History of The Coffee House: Launch in August 2014 by CEO Nguyen Hai Ninh. Nguyen Hai Ninh left the position of managing director of urban coffee and start up The Coffee House. The Coffee House vision and mission: The Coffee House was created with vision to open a space where people can connect and develop relationships. CEO Nguyen Hai Ninh implied “Retail is all about detail”, The Coffee House notice to every single details with a mission to bring comfort and feel like they are at home. Besides that, The Coffee House would aim itself to rank as 2nd most known café shop all over Vietnam, just behind Starbucks. Moreover, the main core vision “Deliver Happiness” has been with them ever since their first time introduced to the Vietnamese market, aiming at delivering satisfaction to everyone – from staff members to anyone whose order was made to get to that blissful environment. A place where everyone can share a mutual happiness - to The Coffee House, that is the most important thing.

Swot Analysis: -

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Strengths: are positive internal factors which are part of your company’s asset. These things are under the organization’s control, they are tangible or intangible. (Lekh Bhatia,2015) Weaknesses: are negative internal factors which put the organization at a competitive disadvantage. (Lekh Bhatia, 2015)

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Quality of Products: -

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Opportunities: are positive external factors to the organization and outside its control. They exist for the business to flourish and prosper. (Lekh Bhatia, 2015) Threats: are negative external factors to the organization and outside its control. Company should monitor potential risks so that they would know how to respond to them. (Lekh Bhatia, 2015)

The Coffee House and Highlands Coffee has the same taste, according to thecoffeehouse.com and highlandscoffee.com.vn, both brands use Arabica and Robusta coffee beans but the quality of Highlands Coffee is more appreciated, leads to Highlands' profit were eight times higher than The Coffee House and about three times higher than Starbucks (Cafef.vn, 2018). Starbuck Coffee has a high price but the quality of cafe is not good. Vietnamese people favor traditional coffee taste than Starbucks taste. Maintaining the traditional taste is the key to remain the most loyal and dedicated customer (Soha.vn,2014).

Threat to Highlands Coffee: -

According to Nikkei, Nguyen Hai Ninh intends to open up to 700 stores in Vietnam in the next five years, with an average of 10 new business launches per month. Cong Cafe is one of many competitors that attract customers with their special decorations. After 8 years, Cong Cafe has launched 50 stores and expanded 1-2 store(s) per month. In addition, they have opened a Cong Cafe in Korea and in the near future, the business will increase. Highlands Coffee also has about 200 stores and most of them located near shopping malls. Since of all these brands are main threats to Highlands Coffee’s market share, they always expand their business and they know Vietnamese customers’ insight to make sure their businesses are flexible together with marketing strategies.

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