| HANOI, July 23
HANOI, July 23 With more coffee shops per square
mile than probably anywhere on earth, opening a cafe in
Vietnam's capital could be a bit of a gamble. This week, U.S.
coffee chain Starbucks is opening three of them.
Vietnam's entrenched coffee culture means Starbucks is
delving deeper into what could be one of its most challenging
markets yet. The brew is sold cheaply in the simple cafes that
line almost every city street, or in the more sophisticated
outlets run by local chains Trung Nguyen and Highland Coffee, in
which the Philippines' Jollibee Foods Corp has a stake.
Jeff Hansberry, president of Starbucks China and
Asia-Pacific, said on Wednesday Starbucks was seeking growth in
Vietnam by offering "meaningful service" with "passion and
He, however, side-stepped questions on the company's
ambitions for Vietnam, and how exactly it intended to compete.
The three Starbucks Hanoi cafes add to the eight that have been
open since February 2013 in the economic hub, Ho Chi Minh City.
"We've been thoughtful and careful about our entry into this
important market," Hansberry told reporters after a
ribbon-cutting ceremony at a Starbucks cafe in downtown Hanoi.
"We intend to grow with this exciting and dynamic economy,"
Vietnam's economy, however, has lost some of its edge. Once
seen as Asia's next emerging market daring, Vietnam is now mired
in bad debt, inefficiency and weak retail spending that rose
12.6 percent in 2013, its slowest growth in four years.
A stream of bankruptcies since 2011 continues, with 18,000
closures and 50,000 businesses suspending trade in the first
five months of this year, according to official data.
Many small firms are denied loans, squeezing credit growth
at 3.5 percent in the first half of 2014, well short of the
central bank's 12-14 percent target for the year.
And while the middle class is expanding, times are hard for
most Vietnamese, adding to Starbucks' challenges.
Starbucks prices range from 55,000 dong ($2.59) for a black
coffee - about half the average daily wage - to 85,000 dong ($4)
for an Asian Dolce Latte. These prices are slightly higher, or
the same as, offerings from Highland Coffee and Trung Nguyen.
By comparison, the thousands of streetside cafes in Hanoi
offer shoe-shines, free wi-fi and traditional drip-filtered iced
coffee for just 10,000-15,000 dong (47-71 U.S. cents).
For some of these traditional cafes, Starbucks is no rival.
"I don't see this as competition in that way that big fish
eat all the small fish," said Nguyen Van Tinh, 54, who runs a
streetside coffee shop that grew from the mobile coffee stall
his grandfather started in 1926.
Starbucks network - 11 outlets so far in two cities - is
also dwarfed by Highland Coffee, which has 50 outlets in five
cities, and Trung Nguyen, which claims 13 billion cups of its
coffee have been consumed worldwide since its start-up in 1996.
Trung Nguyen, owned by a local businessman, also has outlets
outside Vietnam and exports to 60 countries.
Vietnamese consume roughly two million bags of coffee a year
and the Southeast Asian nation is the world's second-largest
On opening day, queues extended out of the door of Hanoi's
first Starbucks. Some Vietnamese, however, said they preferred
to keep their coffee simple, and cheap.
"Newcomers like Starbucks make the coffee scene more
interesting, but I prefer to sit by the street and drink
Vietnamese coffee," said Nguyen Duc Minh, a recent university
graduate. "These places are down to earth and they really suit
($1 = 21,200 dong)
(Additional reporting by Nguyen Ha Minh and Ho Binh Minh;
Editing by Miral Fahmy)