MARKETING PLAN COFFEE SHOP IN HO CHI MINH CITY this marketing plan aims to deliver a projection to open a coffee shop in Ho Chi Minh City, the largest economic city with an increasing young population
MARKETING PLAN COFFEE SHOP IN HO CHI MINH CITY STUDENTS NAME STUDENT ID Table of Contents EXECUTIVE SUMMARY INTRODUCTION .4 1.1 Business overview 1.2 Industry overview MARKET ANALYSIS .5 2.1 2.1.1 PESTLE analysis 2.1.2 Five Force analysis 2.2 Competitors analysis 2.3 Target markets MARKETING PLAN 11 3.1 Market segmentation 11 3.1.1 Geographic .11 3.1.2 Demographic 11 3.1.3 Psychographic 12 3.1.4 Behavioural 12 3.2 Environmental factors .5 Marketing mix 13 3.2.1 Product .13 3.2.2 Place / distribution 14 3.2.3 Price 14 3.2.4 Promotion 14 Operational plan 15 4.1 Operation Business 15 4.2 Sale forecast - Cash flow - Income Statement 16 4.3 Break even point .18 REFERENCES .20 APPENDIX 1: COFFEE CONSUMPTION SURVEY – QUESTIONAIRE .22 APPENDIX 2: COFFEE CONSUMPTION SURVEY – RESULT 24 EXECUTIVE SUMMARY The Vietnamese have an obsession–and for good reason–with coffee love Hallowed, roasted beans are special and their flavor is the best in the world Ho Chi Minh City in particular has a host of cafes in its districts and can get overwhelming with so many to choose from Saigon is a very pleasant coffee community Saigon people not only want coffee a snack, but it's also a sort of beverage Over a decade, the coffee market in Vietnam is strong and coffee brands are increasing their national presence Therefore, this marketing plan aims to deliver a projection to open a coffee shop in Ho Chi Minh City, the largest economic city with an increasing young population This city promises a competitive but profitable business The business aim to operation under franchising basis There is a financial statement embedded prior to forecast the possibility of the plan INTRODUCTION 1.1 Business overview Vietnam has been popular with the coffee culture The coffee consumption in Vietnam has been a remarkable rate comparing any other nations worldwide Therefore, reflecting the increasing demand for coffee these days, this business plan is to draw up a start-up coffee shop, located in Ho Chi Minh City, one of the largest economic city in Vietnam 1.2 Industry overview The Vietnam coffee market is expected to rise by 8.2 percent in volume during the period 2018–223 and by 1.1 kg per capita in 2018 (Comunicaffe International, 2019) Especially, the research stated that the coffee revenue in Vietnam account for over USD million in 2019 (Statista, 2019) In recent years the cafe chain model was one of Vietnam's most rapidly growing business models with an annual growth rate of 32 percent Their coffee bean sales to Vietnamese coffee chains have risen to 300 million per annum Ho Chi Minh City (HCMC) is the largest economic center in Vietnam and a place of opportunities for many investors and companies The city is host to a growing number of tea-and-coffee shops that are open every day with higher income and living standards, ranging from international giants, regional chains to local chains, start-ups and small independent stores They are also the main attractions Therefore, there is no doubt to assume that this is the potential profitable market to open a coffee shop. MARKET ANALYSIS 2.1 Environmental factors 2.1.1 PESTLE analysis PESTLE Method is a method for strategic planning that can easily be used in the external risk identification process (Rastogi and Trivedi 2016). Political factor: Vietnam has been during the sustainable and peaceful political environment recently especially, Ho Chi Minh city continues its attractive political sustainability for new business start up as well as foreign investment in trades and service sectors Economic factor: In 2018, Ho Chi Minh City accounted for nearly 22% of national GDP and 29% of its financial capital (Briefing, 2019) The city has been an economic hub for business growth among the nation This represents the business environment that has produced the incredible start-up scene of the country Social factors: the coffee culture in Ho Chi Minh City is significant with the increasing demand for to-go coffee or high-end coffee chains Coffee is still one of the essential parts of population in Ho Chi Minh City furthermore, Ho Chi Minh City has a young population who are the major customers of coffee shops. Technological factors: apart from the tradinition coffee, a black drip, the adapting european coffee style with espresso machine is emerging in Ho Chi Minh City Furthermore, the increasing of online food ordering service via mobile applications also influence the way coffee shops communicate and sales of products Legal factors: Ho Chi Minh City is an open legal environment to starting up a new business The legal process for registering and running business is quick and convenient Environmental factors: there is a concern on the use of single-use plastic packaging containers Therefore, it would be a sensitive factor in selecting appropriate containers, such as paper, recycled packaging. Overall, the external environment of Ho Chi Minh City promotes the establishment of a new coffee shop The growing demand as well as the significant coffee culture of this City will continue to encourage the success of running a coffee shop 2.1.2 Five Force analysis Porter's Five Forces is a business analysis framework to illustrate why different industries should achieve a variety of productivity rates Knowing the competitive forces and their triggers exposes the origins of existing success in a market while offering a structure to predict competition and influence it over time (Porter 2008) Threats of new entrants: everyday, there are hundreds of new coffee shops open within Ho Chi Minh city, both coffee chains and local coffee shop This threats is quite high due to the highly competitive industry Threats of substitutes: Ho Chi Minh City population is young They quickly adapt a new drinks appearing on the market Meanwhile, apart from coffee, bubble milk tea and fruit juices are emerging in Ho Chi Minh City therefore, the consumers has the wide range of substitute products on the market which make this threat high Bargaining power of buyers: Buyers bargaining power means that the burden and advantages of consumers must be reduced, performance increased, profitability improved and food products bought better (Omillo-Okumu 2019) Whereas the consumers has the flexibilty in selecting a variety of substitute products and highly competitive coffee industry by multiple players, their bargaining power is high This factor will shape the way a new coffee shop to adjust the menu, price as well as promotion to catch the customers’ attention Bargaining power of supplier: this factor reflects the possibility of suppliers to drive up cost In roasted coffee industry, there are a large number of suppliers due to the fact that Vietnam is one of the leading coffee exporters in the world Therefore, the power of coffee supplier is low. Rivalry among existing competitors: the existing competitors on the coffee shop industry are vast There are a variety of coffee shop options, from international coffee chains (Starbuck), domestic coffee chains (Highland, Phuc Long, Trung Nguyen coffee, Cong cafe, etc) to numbers of local coffee shops. 2.2 Competitors analysis Marketing and strategic planning market analysis is an assessment of the strengths and weaknesses of current and potential competitors and provides an offensive and defensive strategy framework for recognizing opportunities and risks Scanning for competitor analysis is essential to keep a company competitive and innovating (Griffiths, Fenton and Fletcher 2019) In its fastest growing time ever, Vietnam's coffee sector includes famous names like the Coffee Bean and Tea Leaf, Starbucks, McCafe, Highlands Coffee, Caffe Bene, Phuc Long, Urban Coffee Station, Passio, The Coffee House and Saigon Café aside from coffee chains, the local coffee shops are mushrooming across the city with their unique scenetic and decorating environment The analysis below are an in-depth understanding of major noticeable coffee shops on the Ho Chi Minh City markets Coffee chains: Local brands offer not only a variety of drink options but also sophisticated interior and free and easy internet access to ensure customers are retained Trung Nguyen: Trung Nguyen is the largest coffee manufacturer in Vietnam with over 1000 coffee outlets, farms and distributors A café in Ho Chi Minh City is not hard to spot because of its allure The menu is different from traditional Vietnamese coffee, like caphe sua, or Italian coffee Their' creative' coffee has also been called special, from creative one to creative Such names are based on coffee flavor, and the price is USD $1.5 to $2.1 Phuc Long: Phuc Long is a tea-related coffee chain They look like an alternative to Starbuck, but far better for local people, because we recognize the traditions and tastes of Vietnam Its varied menu is inexpensive and aims at attracting a variety of clients, both young and old Phuc Long offers coffee and tea, but is mostly popular for its high quality tea This is the best place to bring your guests some tea packets or even coffee filters as souvenirs Highland: Created by a Vietnamese American in 2003, Highland has grown 180, and become Vietnam's largest coffee network in many towns and provinces The atmosphere is great and vibrant, and the venue is easy to find Vietnamese baguette (Banh Mi) and some western cuisine are also served, but the prices are quite high The Coffee House: The Coffee House is one of Vietnam's fastest growing coffee businesses Regardless of the location, it is sometimes preferred for white-collar workers and students to work or hang out In the view of the owner, drink quality is not the only reason why customers are involved in the brand The interior has a warm and welcoming atmosphere as well as a retro theme that invokes drinks harmony and equilibrium Local and small coffee shops Viva star cafe - coffee chain: this brand is presenting in Vietnam Coffee market for 10 years and achieving major success with more than 260 franchise across the nation Milano Coffee: Milano Café is a well-known Vietnamese franchise brand that is found in major cities like Ho Chi Minh, Hanoi, Da Nang, etc It's a very local place, but the menu is translated into English E-coffee: The small coffee shop franchise Trung Nguyen has launched ECoffee aims at taking customers All other services, including coffee shops and other appliances, for lower and middle income market segments will be also sold by e-coffee shops For all sites like office buildings, subway stations, markets and grocery shops, e-coffee is optimized Others: in Ho Chi Minh city, there are thousands of small and street coffee shops for local consumption along with medium and large coffee chain There coffee shops offer lower price and focus on the local tastes Decoration is not their main attention. 2.3 Target markets A target market refers to a group of potentials that a business is interested in selling its products and services to This class also involves unique customers to whom a company deals with its marketing activities One part of the total market for a good or a service is a target market Delicate market targeting can provide a tactical competitive edge for business marketers (Weinstein 2014). The concept of target market is one of the most important tasks of a marketer It is the foundation of all marketing strategy components, from the way businesses create and identify its products or services to the marketing channels it supports There are different techniques used in order to identify and define the target market of a business, such as website and social media analytics, the competition’ markets, or consumer survey Hence, a marketing plan that identifies other important brand variables, such as supply, costs and advertising activities, focuses on the target market Regarding the nature of this plan, a survey has been conducted on a small scale research The survey was built on a qquestionaire basis with 15 selected questions reflecting the need of identifying target market (See Appendix 1) The selected participant of this small scale research are 20 people with an equal number of male and female The result of the research has been expressed major suggestion for the target market of this plan (See Appendix 2) According to the result from the survey, the income of population in Ho Chi Minh City has a dramatically increase Particularly, 50% of participants in this survey has an income ranging from million VND per month to 10 million VND per month. 3.1.3 Psychographic The division of the psychographic market into segments based on individual traits, beliefs, behaviors, preferences and product life styles In accordance with the results from the survey, it is clear that this segmentation will focus on the target customers belonging to the following group Lifestyle: drinking coffee on a daily basis for the morning freshness Behavior: preferring consuming to-go coffee as their busy and hurry to arrvie office on time Preference: come and buy coffee at independence coffee shops or coffee chains depending on the convenience 3.1.4 Behavioural The process of segmenting the consumer market into smaller and more homogeneous groups is known as the technique based on customer purchasing Behavioural segmentation is carried out by companies based on buying trends such as frequency of use, brand loyalty, advantages required, and so on Therefore, regarding these factors, the target customers would be: Frequently consuming coffee, at least cup per day Easily changing the preferall coffee shop reflecting the convenience The acceptable price is matched their spending per day for freshness, about 15,000 VND to 25,000 VND per cup Their prefered place for coffee is outside their home Overall, the analysis for the market segments clarifies that the business should focus the office workers with the medium income class They are consuming one cup of coffee daily and to-go coffee is the primary consumption The price suggested to meet this customer segment is ranging from 15,000 VND to 25,000 VND These factors would be the primary source for the marketing mix strategy described in the next part. 3.2 Marketing mix Marketing mix is a number of controllable marketing instruments used by a company to create the desired answer on the specific market (Khan 2014) It concerns the placement at the right time and at the right price for the right product or combination of it All the marketing mix elements are equally important it makes up the business plan for a company and manage it properly The 4P Marketing models are a guide to optimize the marketing mix elements It allows a company to decide its marketing choices in price, product, promotion and location so that its products respond to a specific needs or demand of customers 3.2.1 Product Taking into consideration of competitors’ menu, it is clear that a coffee shop does not sell only coffee Their menu are a set of variety of drinks, including coffee, milk, tea, yogurt, smoothies, soft drinks and desserts Therefore, in order to ensure the availability of the shop, our menu should be included different drinks and some dessert options. Regarding the consumers’ awareness of intake quality, it is important to select proper suppliers For instance, coffee should be provided by a registered roaster. 3.2.2 Place / distribution The place in the marketing mix strategy are combining different factors, including location, distribution centers, transportation, warehousing, inventory decisions, and franchises Regarding the coffee shop industry, the elements need to be carefully considered are location, and distribution of ingredients/ Location: as stated since the beginning, the selected locations should be around office buildings, where are office workers population highest Distribution: the proper distribution should rely on the profession and transportation channels of coffee roasted supplier Therefore, it is eesential to carefully select the flexible and professional suppliers to minimise the risks from distribution system 3.2.3 Price A pricing strategy includes, among others, classes, payability, dynamics of the market, competitive policies, trade margins and input costs It goals identified customers and competitors It is stated that pricing criteria reflect market conditions (Nagle and Holden 2018) Therefore, the price strategy for the start-up coffee should be equal or a little lower than competitors on the same segments and meet the expectation of the target customers In this situation, the price quotes in the menu should be a medium rate, starting from 15,000 VND to 25,000 VND this price range is highly competitive but it satisfies the highest number of customers 3.2.4 Promotion The promotional strategy is intended to inform, convince or remind target audiences concerning these products Promoting strategy may influence the purchase of rewards with moderating brand appeal and market characteristics (Liao., Shen and Chu 2009) Promotional objectives include sensitization, product testing by individuals, data collection, loyal customer loyalty, increased use and the recognition of potential customers. As starting up a new coffee shop, there are some promotional activities should be used to call for customers’ attention It includes both channel, physical or traditional advertisement and online advertisement Physical advertising This is the most effective way to reach the customers The major promotional activities should be: 50% off per bill for the first weeks Rewarding tickets, 20% off next purchase Loyalty card, buy 10 get free Word-of-mouth Online advertising Social media announcement, especially facebook and Zalo platform Mobile application advertisment Operational plan 4.1 Operation Business Regarding the highly competitive market, the possibility of failure for an unnamed coffee shop starts up is unpredictable Therefore, the best option to operate the business is franchising Franchise companies bring resources and experience to rapidly increase the business growth potential of franchisors (Gillis, Combs and Yin 2020). Business type: franchise Brand: e-coffee (Trung Nguyen Coffee) Location: Tan Binh District, E-Town areas Size of shop: 60m2 Operating hours: 6AM to 7PM 4.2 Sale forecast - Cash flow - Income Statement The method of estimating future sales is sales forecasting Sales forecast demonstrates how a business will handle its staff, cash flow and assets In reality, predictive sales data are also important for companies when they want to access investment capital, as well as allowing a business to allocate its internal resources effectively. In order to profitably operation this coffee shop, it is expected to sell 300 cups per day This expected rate will ensure the net profits to the owner at about VND 47 Million monthly In order to project the profit, it is essential to calculate the operational expenses and costs Then, the cash flow and income statement listed in the table below will illustrate the operational items during the running business. SALE FORECAST - MONTHLY SALE FORECAST - MONTHLY EXPECTED PROFIT - MONTHLY DAILY FORECAST Sale 9,000 Sale 8,738 Expected Sale per day (cup/day) 300 Fixed Cost 96,833,330 Fixed Cost 291 Variable costs 74,250,000 Variable costs 72,088,500 Total expenses 171,083,330 Total expenses Revenue 297,000,000 Revenue Gross profit 125,916,670 Gross profit Operational cost Net profit 2,824,150 123,092,520 166,266,670 Expected sale associated with profit 9,900,000 238,355,170 Revenue forecast Expected revenue associated with profit 288,354,000 Profit forecast 1,666,670 Profit forecast Associated with Sales 1,882,770 Net profit forecast Net profit forecast Associated with Sales 1,583,330 49,998,830 Operational cost 2,500,000 Net profit 47,498,830 9,611,800 1,788,630 OPERATIONAL EXPENSES (VNĐ) FIXED COSTS (F) 91,833,330 VARIABLE COST (V) 8,250 1./ PROPERTY 20,000,000 1./ INGREDIENTS AND MATERIALS 8,250 Monthy leasing 20,000,000 Rate Value (%) 2./ INVESTMENT 3,333,330 2./ OTHER QUOTAS 25 Total construction costs Yearly retain 200,000,000 Rate value (%) 10 Monthly retain 3,333,330 3./ Price 3./ LABOUR COST * Number of workers 33,000 47,500,000 Bảng lương Managers 5,000,000 Bartenders 4,000,000 Waiting staff 3,500,000 Cashiers 3,500,000 Security 5,000,000 Total workforce 13 * Total Labour Cost Managers 5,000,000 Bartenders 8,000,000 Waiting staff 17,500,000 Cashiers 7,000,000 Security 10,000,000 5./ INTERNET 1,000,000 6./ ELECTRICITY + WATER 7./ OTHERS 5,000,000 15,000,000 CAPTITAL EXPENDITURE FIXED COSTS Franchising fee Equipments furnitures Computer and softwares Other Furnitures Sounds, Internet equipments TV, Air condition Decoration Plants and lights Panels Design 535,000,000 335,000,000 100,000,000 50,000,000 50,000,000 50,000,000 20,000,000 VARIABLE COST Construction 200,000,000 200,000,000 4.3 10,000,000 20,000,000 5,000,000 10,000,000 10,000,000 10,000,000 Break even point Break-even is the key to the enterprise because it defines the minimum quantity of products that it needs to produce for the purpose of covering its fixed and variable costs (Kampf, Majerčák and Švagr 2016) The break-even point is not only one of the most common terms used for financial analysis but can also be used by traders, accouters, financial planners, managers and even advertisers Breakthrough points can benefit all aspects of an organization because it allows workers to recognize and work to achieve desired outcomes BREAK EVEN POINT Sản lượng 1,000 3,000 5,000 7,000 9,000 11,000 13,000 Định phí 91,833,330 91,833,330 91,833,330 91,833,330 91,833,330 91,833,330 91,833,330 Biến phí 8,250,000 24,750,000 41,250,000 57,750,000 74,250,000 90,750,000 107,250,000 Tổng phí 100,083,330 116,583,330 133,083,330 149,583,330 166,083,330 182,583,330 199,083,330 Doanh thu 33,000,000 99,000,000 165,000,000 231,000,000 297,000,000 363,000,000 429,000,000 Lợi nhuận -67,083,330 -17,583,330 31,916,670 81,416,670 130,916,670 180,416,670 229,916,670 BREAK EVEN POINT 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 1,000 3,000 5,000 7,000 9,000 11,000 13,000 -100,000,000 Sản lượng Tổng phí Định phí Doanh thu Biến phí Lợi nhuận CONCLUSION Vietnam coffee market is the potential profitable industry reflecting the increasing young population as well as the deep coffee cultures This is also a highly competitive market to enter Therefore, the proper method to safely enter the market is via franchising In this marketing plan, the E-Coffee of Trung Nguyen is the selected franchisor The Financial statement expected to earn over 47 million net profit per month ... coffee shops open within Ho Chi Minh city, both coffee chains and local coffee shop This threats is quite high due to the highly competitive industry Threats of substitutes: Ho Chi Minh City. .. significant with the increasing demand for to-go coffee or high-end coffee chains Coffee is still one of the essential parts of population in Ho Chi Minh City furthermore, Ho Chi Minh City has a young... projection to open a coffee shop in Ho Chi Minh City, the largest economic city with an increasing young population This city promises a competitive but profitable business The business aim to operation