(TIỂU LUẬN) essay topic the failure of taiwan’s number one milk tea brand

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY SCHOOL OF ECONOMICS SUBJECT: MICROECONOMICS ESSAY TOPIC: THE FAILURE OF TAIWAN’S NUMBER ONE MILK TEA BRAND INSTRUCTOR: NGUYỄN THANH TRIỀU CONDUCTED IN 2020 GROUP REPORT Group members: Student name Responsibility in Assignment Participation % Huỳnh Nhật Bảo Ngọc Introduction, conclusion, the continuous in market, wrong goals and business strategies when face to different challenges 35% Lê Hồng Minh Duy Wrong goals and business strategies when face to different challenges, consumer 35% Phan Thị Tú Quyên History of Ten Ren and the process of approaching Vietnam’s market, experience from Ten Ren failure 30% Table of Contents Part I: Introduction………………………………………………………………… Part II: Content…………………………………………………………………….4 History of Ten Ren and the process of approaching Vietnam’s market………… a About Ten Ren…………………………………………………………….4 b Aims and ambition of Ten Ren…………………………………………….5 Failure of Ten Ren a The continuous change in market……… b Wrong goals and business strategies when face to different challenge…….7 c Consumer……………………………………………………………… 11 Experiences from Ten Ren’s failure 12 a Human……………………………………………………………………12 b Strategy……………………………………………………………… 13 Part III: Conclusion…………………………………………………………… 14 References……………………………………………………………………… 15 PART I: INTRODUCTION Conducted according to the assignment of instructor Nguyen Thanh Trieu and Microeconomics curriculum, our group through the process of learning, consulting and discussing have written the essay about “The failure of Taiwan’s number one milk tea brand” The main content of this essay concludes:  History of Ten Ren and the process of approaching Vietnam’s market  Failure of Ten Ren  Experience from Ten Ren’s failure Nowadays, on the road, the type of store that we see the most is definitely the milk tea shops This is considered a very potential market for entrepreneurs, especially when looking to start a business However, benefits always come with high risks, and Ten Ren is a prime example This essay will explain the reasons why one of the most famous milk tea brands in Taiwan suffered failures in Vietnam, from which lessons can be drawn so as not to repeat Ten Ren's unfortunate mistakes PART II: CONTENT History of Ten Ren and the process of approaching Vietnam’s market a About Ten Ren Ten Ren's Tea or Tian Ren's Tea is a Taiwan-based company that specializes in tea and ginseng products Founded in 1953 in Taiwan by Ray Ho Lee, "Ten Ren's Group" also operates Cha for tea houses in Southern California as well as "Ten Ren's Tea" stores in California and six stores in New York, and other places, and through the subsidiary "Ten Fu Group" produces and sells tea products in China, where much of its activity now takes place By 2003 it had 113 outlets globally, making it becomes Taiwan's largest tea shop chain Ten Ren’s Tea is also the largest supplier in the East Asia region with more than 300 million cups of milk tea sold each year worldwide Vietnam is the eighth country chosen by Ten Ren to prioritize market development, along with great powers such as the US, Canada, China, Hong Kong, and Japan On August 15, 2017, Mr Nguyen Hai Ninh - CEO of The Coffee House coffee shop chain and representative of Taiwan Ten Ren Company signed a franchise contract, officially developing the Ten Ren beverage brand with the main products are tea and milk tea in Vietnam With a promise to dominate the Vietnamese milk tea market, Ten Ren has opened 23 branches in Ho Chi Minh and Dong Nai within two years Ten Ren Vietnam has modern and cozy style design with main bright colors Besides, consumers have opportunity to enjoy a new flavor of milk tea from Taiwan Ingredients used by Ten Ren are carefully selected by “the tea artisans”, and the traditional roasting process have retaining the bold Asian tea flavor Ten Ren's most distinctive tea is King's Oolong 913 tea This tea is made from an esoteric recipe and is nowhere to be found The first impression when drinking King's Oolong 913 is a mild bitter taste, but when the tea has reached the neck, the natural post-refreshing sweetness will return This promised to be a new trend for a young friend in the near future From the beginning, the news of Ten Ren coming to Vietnam was always waited In an era when the demand for enjoying milk tea is increasing, Ten Ren had created a fever for young people because of its extremely attractive and unique taste Many customers have affirmed that the first impression of enjoying this milk tea made them never forget the taste and appearance of this product Ten Ren’s approach to market is unique compared to other competition in the market at this time The brand marketing strategy emphasize on the flavor and the process making of its tea Thanks to a distinctive market strategy, the franchise chains have stimulated success in countries and territories, it was hope to become the biggest milk tea brand in Vietnam However, the reality had fallen short The Coffee House had not found a successful recipe in Vietnam with this famous brand b Aims and ambitions of Ten Ren There are many milk tea brands come from Taiwan, why does The Coffee House choose Ten Ren? Mr Vo Duy Phu, Marketing Director of The Coffee House said: “Ten Ren Milk Tea's mission in Vietnam is disseminate tea culture and improve the quality of the Vietnamese milk tea market Ten Ren Milk Tea is rich in tea flavor, giving customers a refreshing taste, low sugar, low fat, taking advantage of the natural sweetness of tea, ginseng, licorice to ensure safety for health.” From the beginning, most people predicted that Ten Ren will dominate milk tea market with three major type of products are milk tea, packed tea and ready to drink Invested up to 100 billion Vietnam dong, The Coffee House plan that will open 40 stores in 2018, but until the end of 2018, there are just 23 stores It seems that more than the ambition to dominate the milk tea market, The Coffee House wants Ten Ren to change the Vietnamese drinking habits, bringing a brand suitable for all ages and gender by ensuring the health of users in each product According to Mr Nguyen Hai Ninh, at first, Ten Ren will focus on promoting the field of milk tea, but Ten Ren's real strength is in bottled and instant-drink products Nguyen Hai Ninh hopes to bring customers who use bottled drinks to themselves, and furthermore, it is the market of Pepsi and Cola Failure of Ten Ren a The continuous change in market Milk tea market The milk tea market has always been considered substantial this is a market that always creates a fever with trends and milk tea shops growing at a dizzying speed in terms of quantity Base on a report from Euromonitor, Vietnamese milk tea market was estimated 282 million USD in 2016, and the most interesting point is that this market has a growth rate of 20%/year 2017 - the year when Ten Ren approach Vietnamese market had seen as an exciting year for the milk tea market Base on iPos’ research, a provider of label printing and management software for F&B brands; in this year, urban areas in the North witnessed the emergence of more than 170 new milk tea brands, including their own opening and buying franchises from reputable brands At a seminar on the milk tea and F&B market in June of this year; Lozi, an application provider that shares food and drink experiences, announced a survey result: there are about 1,500 stores nationwide It had expected that by the end of the year, this number will increase strongly when a series of big brands have just entered the market As a result, in the first months of 2017, average each month in Hanoi, there were additional milk tea shops of different brands Apart from exciting development, many people wonder if the raw milk tea market is gradually saturated with approximately 100 brands are competing By the end of 2017, some famous names in the F&B in Vietnam such as The Coffee House or Golden Gate Group have officially joined the franchise through franchising of well-known foreign brands In November 2017, The Coffee House opened the first Ten Ren store Although Ten Ren is a prevalent brand in Taiwan, it is still a new name for Vietnamese consumers In a country has about 1,500 milk tea shops with nearly 100 competing brands, there was many disadvantages for Ten Ren when entering the Vietnamese market, despite of having good support from The Coffee House Fast food delivery services such as Grabfood, Now have grown significantly with attractive promotions, leading to many customers moving from milk tea shops to home delivery in recent years As a result, this greatly affects famous milk tea brands This is because when the product is shipped to home, the advantages of space and location will no longer be useful, especially when these are the factors that help well-known milk tea brands distinguish from local and normal brands The dense appearance of home-made milk tea stores, with more affordable price, more conform with the living conditions of young people, made many milk tea brands emerging in Vietnam at that time, somewhat struggling The F&B market Although the milk tea market or the F&B market in Vietnam is a very attractive market for enterprises, go along with diversity and attractions are the high competitiveness and fast speed of elimination That is the reason why food and beverage businesses should focus on the wishes and needs of their customers However, this market fluctuates very complicatedly because customer demand is not fixed and is very short term, most people use trend-following products, as 7level spicy noodles in the past The dizzying pace of growth brings considerable concern whether the milk tea market will quickly be forgotten These days, social networks are remarkable developing, making this a powerful communication tool for businesses, because customers are influenced a lot from social networks However, this is also the fastest way to affect businesses because the voice of consumers has become stronger than ever Just one small mistake can impact considerably on reputation of business, and this greatly affects the behavior of other customers; whether it is the reputation of the restaurant, store or supplier of raw materials for business That is the reason why as the more brands intend to enter this market, the more essential of market investigation Besides 4P of marketing - Product, Price, Place, Promotion, F&B also has a very high requirement on P's in service marketing: People - Process and Physical Evidence The waiter is the first thing customers come into contact with before enjoying the food, so attitude and service style are very important The streamlined process also increases customer satisfaction, helping customers not have to wait too long As a result, the physical environment makes customers feel more palatable, and can even impact on customer behavior b Wrong goals and business strategies when face to difficult challenges The unfavorable opening When the first store had opened, the Ten Ren store had had an electrical problem, resulting in Ten Ren had to close to fix this problem after few days of opening It is considered a bad start and extremely detrimental to customers This was a big mistake for Ten Ren in the preparation, leading to a pitch that received a great deal of negative reactions, not only because of the incident above but it also because of delaying in service With ambition is too great and opening stores quickly, Ten Ren was unable to manage its stores well Although there was a losing point in the beginning, Ten Ren still could not learn its lesson when stores were constantly complaining about slow service, uneven product quality, and store space not well-prepared This is one of the reasons why people who have been drinking Ten Ren had to leave, and also made new customers afraid Especially in today's social networking era, a small mistake in management has been spread quickly, and Ten Ren had been complained of during service regularly Wrong customer segment The Coffee House seems to have a little bit of hurry to bring this brand to Vietnam without doing thorough market research to choose the right customer segment and menu From the beginning, the fact that Ten Ren chooses the high-end segment is a huge challenge since brands like Gong Cha and Koi are doing very well The recognition of these brands is also very great because when we mention highquality milk tea, most customers will think of these brands Price Average income per capita of Vietnam (2019) is about 2,800 USD, approximately 64, 400, 000 VND/year Compared to the previous markets of Ten Ren, this is a quite low number since the average price of a cup of Ten Ren is in the range of less than 40 thousand Vietnam dong for tea products and 40 - 70 thousand Vietnam dong for other products Overall, this is a high price, especially since Ten Ren's target customer is young people Although it is known that Ten Ren targets to customers with high income, the quality is nothing too special and is always considered the most expensive in the market, this is considered a big shortcoming in the balance between quality and imitation of Ten Ren The willingness to pay for a cup of milk tea for young people is mostly $2 - $3 (52%) and $1 - $2 (28%), Ten Ren's price is in the first group Although consumers are willing to pay between $2 - $3 or about 45,000 -70,000 Vietnam dong, Ten Ren's price is too close or even equal to this figure, leading to consumer surplus almost very small This caused a hesitation when customers wanted to drink Ten Ren's milk tea, especially when Ten Ren does not have enough novelty to attract, and customers can completely choose other brands with lower prices but still satisfy the demand Willingness to pay for a cup of milk t 5.71% 13.65% 28.57% 52.06% Less than 1$ 1$-2$ 2$-3$ More than 3$ Location Location is an essential point to distinguish famous brand with others The challenge of milk tea brands is finding convenient premises, eye-catching space decoration to become a gathering place for "check-in" for young people Ten Ren targeted the high-end segment, where had strong competitors with certain foothold in the milk tea market in particular and the beverage market of Vietnam in general As a result, enjoying milk tea in beautiful decoration space, located in beautiful locations, and suitable for check-in are factors that are very interested Although most of Ten Ren's stores are located in District 1, District and Tan Binh district, they are located on less prominent and difficult-to-find routes, and there are no stores located on important routes High-end milk tea stores are usually located on famous roads such as Ho Tung Mau, Su Van Hanh, Phan Xich Long Moreover, Ten Ren does not focus on opening many stores in commercial centers such as Van Hanh Mall, SC Vivo City where the target consumers of this brand often visit Flavor Compared to other milk tea brands, Ten Ren's menu is moderately diverse with main drinks: classic traditional tea, traditional milk tea, fresh milk latte tea, tropical fresh fruit tea and ice cream float In Ten Ren, it is difficult to find a drink that is must try Although Ten Ren is different in type of tea, it does not make a significant difference when Ten Ren uses King's Oolong 913 tea, and also not suitable for Vietnamese tastes, especially young people The result of a recent survey shows that this relative group prefers the sweet and fatty taste that is neutralized with the mild bitterness of tea Whether a lot of tea or more milk is based on personal preference, most people are still more preferred to milk Meanwhile, Ten Ren milk tea still carried the brand flavor in the Taiwan market with its clear and bold tea taste Favorite Brands 160 140 120 100 80 60 40 20 Bobapop Tocotoco Gongcha Koi The R&B Tea Heekka Uncle Tea Ding Tea Others Favorite Brands Considering the customers, if you change the pursuit of strong tea flavor to reach office workers like Phuc Long, Ten Ren's current menu will need to be adjusted to be more suitable for because the current beverage lines include only sweet drinks, less coffees Currently, in the consumer's impression, Ten Ren is strong in tea, but as "tea in milk tea", not tea in particular This weakness is largely affected by the misleading communication strategy, not focusing on promoting its strengths on social networks, not introducing products at the place of sale but merely displaying the product Some users don't even realize Ten Ren sells its own tea Ten Ren's signature tea is not suitable for the consumer segment of this brand, and in contrast, those who like Ten Ren's bold teas have no chance to reach them Ten Ren has completely failed to make a mark, a unique flavor for everyone when it comes to Ten Ren Big competitors The time when Ten Ren came to Vietnam market was 2017, it can be considered quite late when at this time, the milk tea market has been shaped by big brands, especially brands in the consumer of Ten Ren's high-end products such as Gong Cha, Koi, The Alley have a firm foothold in the hearts of consumers This is a big difficulty for Ten Ren, and also one of the most important reasons why Ten Ren failed in the Vietnamese market Although it has never talked about its competitor, with the current price and business model, it is easy to recognize Ten Ren's direct rival is Phuc Long, R&B, especially Gong Cha and Koi - two brands with very close price and taste to Ten 10 Ren Along with the popular trend of milk tea, coffee chains have also started to expand their products, creating more choices for customers Ten Ren's competitors in Vietnam were not only high-end milk tea brands such as Gong Cha, Koi, The Alley but they also were major coffee chains like Highlands Coffee, Phuc Long, The Coffee House There are a lot of big competitors with substitutes With availability of close substitutes, the price of Ten Ren is greater than the price elasticity of demand so customers tend to choose the brand with lower price It makes the quantity of Ten Ren fall and makes investment not efficient High cost Ten Ren showed frustration in its financial allocation, starting with the decision to import materials from abroad (mainly tea) to ensure quality According to Nguyen Hai Ninh: "Tea material will be imported from Taiwan in the first time and then, if finding tea in the country that meets the standards, it will take advantage of domestic resources." However, by the time Ten Ren was closed, no supplier was able to satisfy this brand, which meant that Ten Ren could not reduce production costs Furthermore, store fee still a difficulty for businesses Base on a report by a research unit in Ho Chi Minh City, real estate values in some milk tea trading routes have increased due to the competitiveness of this attractive drink Real estate fever due to milk tea has led to huge operating costs Great competition, high operating costs make profit of the milk tea chains drop seriously c Consumers The determinant of market orientation is the customer, so trying to satisfy the consumer’s demand and take the consumer as the orientation to explore its value can bring the external sustainable competitive advantage for the enterprise's marketing Zaithaml, Monroe, Gronroos, Woodruff and others formally put forward the concept of "customer value" or similar concepts in the late 1980s These scholars pointed out that when customers bought the products, they not entirely rely on their satisfaction with the enterprise, but through continuous comparison to measure their value and then choose the product or service that can maximize their own value 11 According to the latest data on external consumption behavior by Worldpanel, Kantar, in the first months of this year in Ho Chi Minh City, milk tea is still the most popular instant drink after coffee On average, out of people buy milk tea at outside stores every weeks "Remarkably, the young generation of Gen Z (born in 1997, accounting for about one third of the population of Vietnam) is the" most active" group with milk tea Accounting for nearly 60% of these types of customers' spending on non-alcoholic drinks, milk tea is not only a drink but also the 'lifestyle' of today's youth ”, Ms Pham Quynh Trang - Insight Director at research firm market research Worldpanel, Kantar Vietnam assessment Gen Z is a group of consumers who are always looking for new things Therefore, to stand out in this fierce competition, brands need to constantly update trends with innovative and unique ideas and products that bring more new experiences, according to Ms Pham Quynh Trang We had done a small survey on milk tea habits in 315 students, aged from 15 to 22 years old, and the figure for the frequency of using milk tea in a week of this subject is amazing Frequency of drinking milk tea for young people per week 15.24% 3.49% 41.59% Every day 1-2 times 29.52% 3-4 times No Promotion time 10.16% The demand for milk tea of today's young people has gradually become a young culture, but big demand does not mean doing business in this market is easy as there are more than 100 brands across the country competing with each other Ten Ren had tried very hard to create trends in PR for each of its reality stages At 12 specific times, it launches product variations with appropriate fruits and promotions Although Ten Ren has always had accounting profits, the economic profits are too low because what Ten Ren does, other brands can it and even better than Ten Ren Experience from Ten Ren’s failure? a Human The foundation of business must first of all towards human is the core value No one can devise a perfect business plan, but people are sensitive enough to capture changes in the market, detect irregularities and change in a timely manner Building a well-structured and highly qualified human resources system is the most important factor for businesses, especially new businesses Enterprises not only must select qualified, experienced, market-sensitive human resources and diners to cope with all situations, but they also provide flexible plans, especially suitable for imported products, how to adapt to the Vietnamese market b Strategy Product In the milk tea market with so many choices, creating a quality product with a special and different taste is necessary to build a private brand Products need to be invested in creatively, new, constantly changing and updated according to the trend to suit the tastes of customers Once a brand wants to attack each type of customer, the most important thing is to research the user and hit on their emotions In a consumer-centric market, create for them the most "familiar" emotions to make your product or service friendly Management Strategy The milk tea market in Vietnam emerged very quickly with a series of domestic milk tea brands such as Bobapop, Phuc Long, Tocotoco, Gongcha, Koi Thé Most of these milk tea companies expanded their scale slowly, firmly grasp the Vietnamese market Therefore, enterprises need to prepare a suitable and flexible plan that can both grasp the opportunity and take into factors such as infrastructure, promotion, location, price, and perceptions of customers, for a reasonable investment Although opening multiple stores in a short time will help increase brand awareness, it requires an experienced management system to avoid mistakes in the business process as well as serving customers 13 Financial Strategy A company needs to set up the right spending plan in order to survive and thrive For example, Phuc Long, they set up a farm with a factory from the very beginning so the company can completely control the quality and cost of raw materials As a result, they get good tea leaves at a low price compared to imported from another company In addition, we also have a financial strategy of "offset losses" of the Trung Nguyen conglomerate chain: the system of their coffee shops lost nearly 24 billion VND in 2018, but the group overall profit was up to 347 billion copper However, beyond the aforementioned bookkeeping benefits, economic profit is the key factor This is also the reason why The Coffee House decided to stop Ten Ren's business Businesses need to make a difference, not be duplicated with any other brand In addition, the process of periodically importing raw materials will also bring certain obstacles Periodic importation in fixed quantities under contracts means that if these expected quantities are not consumed, inventory product will accumulate over the years, possibly expire and throw away This potential problem places a heavy burden on the sales team to ensure that the necessary monthly revenue with stable consumption of each product does not lead to oversupply and the financial team allocates resources properly to minimize excess costs PART III: CONCLUSION Ten Ren closed when The Coffee House had a personnel change Seedcom founder Nguyen Hai Ninh has just left the CEO position and transferred the right of CEO of The Coffee House to the young co-founder Mai Hoang Phuong Although there are many regrets, this is a very reasonable and timely decision Ten Ren had always stood between the profit and loss, but the failure to find the right business model is enough to make Ten Ren stop after only years This is also a warning sign for brands entering and are about to enter not only the milk tea market but also the F&B market Enterprises need to have a process of thoroughly investigating the market as well as identifying the appropriate customers with product quality and business model In addition, in order to adapt to the ever-changing market with a fast rate of rejection, businesses need to have flexibility in their business strategies as well as anticipate the trend so as not to be left behind 14 References Website: [1] https://marketingai.admicro.vn/nghien-cuu-thi-truong-tra-sua-viet-nam/ [2] https://nhipsongdoanhnghiep.cuocsongantoan.vn/cau-chuyen-kinh-doanh/2017nam-cua-kinh-doanh-tra-sua-3427866.html [3] https://www.brandsvietnam.com/congdong/topic/13622-Thi-truong-FB-VietNam?fbclid=IwAR1lwAjiF5j9O-_xMmu9Gl62J8IcsFzngQwhlJxX_xylTEUMQCVEGByiJY [4] https://doanhnhansaigon.vn/thoi-su-trong-nuoc/tra-sua-ten-ren-cay-dang-dongcua-1093310.html [5] https://vietnamnet.vn/vn/kinh-doanh/thi-truong/100-thuong-hieu-tai-viet-namthi-truong-tra-sua-lieu-da-bao-hoa-551235.html [6] https://www.atlantis-press.com/proceedings/meess-18/25900573 15 16 ... about ? ?The failure of Taiwan’s number one milk tea brand? ?? The main content of this essay concludes:  History of Ten Ren and the process of approaching Vietnam’s market  Failure of Ten Ren  Experience... improve the quality of the Vietnamese milk tea market Ten Ren Milk Tea is rich in tea flavor, giving customers a refreshing taste, low sugar, low fat, taking advantage of the natural sweetness of tea, ... with the mild bitterness of tea Whether a lot of tea or more milk is based on personal preference, most people are still more preferred to milk Meanwhile, Ten Ren milk tea still carried the brand