About the environment of home country: Viet Nam
Geographic
Vietnam's strategic geographical location at the crossroads of international maritime and air routes, along with its extensive road and rail networks, enhances its export and trading capabilities with ASEAN countries This advantageous positioning is crucial for the development of economic sectors, regional territories, and for fostering open-door policies, integration, and foreign investment attraction.
Vietnam's unique coffee flavor is influenced by its tropical climate, diverse geography, and fertile soil The country benefits from abundant sunshine and rainfall during coffee-growing months, with a distinct climate division: the southern region, characterized by hot and humid conditions, is ideal for Robusta coffee, while the northern region's cold winters and misty rains favor Arabica coffee Additionally, Vietnam's basaltic red soil, particularly in the Central Highlands and Southeast regions, provides excellent conditions for coffee cultivation, covering millions of hectares.
Vietnam's geographical advantages contribute to its production of high-quality coffee beans, making it a leading player in the global market As the world's second-largest coffee exporter and the top exporter of robusta coffee, Vietnam has successfully expanded its reach, exporting to over 85 countries and territories In 2022, the country's coffee exports surpassed $4 billion, representing over 15% of the global coffee export market.
Political
As of 2023, Vietnam has been an ASEAN member for 28 years, making its policies and strategies for ASEAN cooperation a vital part of the country's new-era foreign policy and a key element of its multilateral diplomatic efforts.
Vietnam has significantly transformed its foreign policy during its ASEAN membership, moving from a 'more friends, fewer enemies' approach to a strategy focused on diversification and multilateralism As an 'active, positive, and responsible member' of ASEAN, Vietnam embraces a philosophy of proactive collaboration with fellow member states to foster a strong community.
In recent years, Vietnam has made significant strides in foreign affairs, enhancing its economic integration on regional and global levels The country has actively engaged in various international organizations and forums, particularly within ASEAN, the United Nations, and APEC Additionally, Vietnam has signed numerous new-generation bilateral and multilateral free trade agreements, further expanding and deepening its foreign relations This progress establishes a framework for stable and sustainable partnerships with its international counterparts.
Vietnam's stable political situation with ASEAN acts as a bridge, and collaborative development policies create favorable conditions for Vietnamese businesses to penetrate foreign markets, particularly in Asia.
Economy
Vietnam's vibrant business landscape and burgeoning start-up ecosystem drive innovation and entrepreneurship, attracting significant investment from multinational companies This influx of technology and expertise enhances the local market, boosting Vietnam's innovation output and export competitiveness while generating new trade opportunities and markets.
Vietnam is increasingly prioritizing environmental and social challenges that necessitate technological innovations The country is grappling with adverse effects from rapid growth and industrialization, including greenhouse gas emissions, water pollution, waste management issues, and marine plastic pollution In a significant commitment made during the UN Climate Change Conference in Glasgow in 2021, Vietnam pledged to achieve net-zero emissions by 2050.
According to the report of the General Statistics Office, Vietnam’s inflation in
In 2021, inflation fluctuated between 2% and 2.5%, with projections for 2022 potentially reaching 4%, significantly higher than the average of 1.84% in 2020 This surge in inflation can diminish currency value, elevate living costs, and weaken economic competitiveness For Highlands Coffee, rising inflation translates to increased expenses for raw materials, labor, rent, and advertising Consequently, in 2022, the chain announced a price hike of 10-15%, or 4,000-10,000 VND per product, to sustain product quality and service amidst market fluctuations, with some products seeing increases of up to 18%.
Religion
On March 9, 2023, the Ministry of Information and Communications, along with the Government Committee for Religious Affairs, unveiled the White Paper titled 'Religion and Religious Policies in Vietnam' in Hanoi The document asserts that Vietnam fosters an environment free from discrimination and conflict among various beliefs and religions It highlights the existence of 67 designated religious activity points for foreigners, predominantly found in Ho Chi Minh City and Hanoi, catering to diverse nationalities including South Koreans, Filipinos, Singaporeans, Malaysians, Russians, Americans, and French citizens Furthermore, the White Paper underscores the Vietnamese government's commitment to respecting and safeguarding the freedom of belief and religion for legally residing foreigners.
In summary, Vietnam and its businesses foster strong partnerships with global religions, facilitating access to high-quality products and services, particularly in the coffee sector This collaboration plays a significant role in enhancing the development of Vietnamese coffee products within diverse religious contexts.
About Highlands Coffee
Highlands Coffee proudly embraces its Vietnamese roots with the message "Proud of Vietnamese coffee" and has recently introduced "Highlands Coffee® Belongs to Us." The brand is committed to not only sharing the rich coffee culture but also fostering community connections, aligning with the founder's vision from the brand's inception.
With its brand, Highlands Coffee consistently embodies simplicity, modernity,while preserving the Vietnamese identity, reaching international standards yet always focusing on the community.
Highlands Coffee's signature color is a warm shade of red, which serves as a distinctive mark for the brand While each outlet features its unique decor style, they all share this common color, fostering a sense of luxury and coziness This inviting atmosphere makes Highlands Coffee an ideal venue for work, study, relaxation, or socializing with family and friends.
Highlands Coffee showcases traditional Vietnamese wooden furniture, including tables and chairs, which contribute to its authentic atmosphere The cafes are often adorned with handwoven lanterns crafted from rattan and bamboo, adding a rustic charm The soft illumination from these lanterns creates a cozy and inviting ambiance, perfect for relaxation.
Highlands Coffee is renowned for its attentive and friendly service, ensuring a warm welcome from the staff as soon as customers enter the store Customers place their orders at the counter, where staff members assist in navigating the menu and making suitable choices After payment, customers receive a receipt and a calling card to collect their drinks when ready During the waiting period, chilled, purified water is available for self-service The staff promptly prepares orders to ensure quick service for all customers.
Highlands Coffee is celebrated for its dedication to clean, high-quality ingredients and an artisanal approach to coffee bean selection This careful process guarantees the delivery of premium coffee beans, paired with distinctive brewing techniques, creating a diverse and appealing menu that meets the preferences of a broad customer base.
Highlands Coffee expertly combines premium Robusta and Arabica beans from Vietnam's lush highlands, employing unique roasting and grinding methods to ensure exceptional quality Their dedication to excellence starts with the careful selection of beans from trusted suppliers In addition to coffee, Highlands Coffee offers a range of beverages, including Freezes and teas, crafted with locally sourced ingredients that reflect the rich flavors of Vietnamese culture.
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International market selection
Compare 3 countries: Malaysia, Indonesia, Singapore
Revenue in the Coffee market amounts to
Revenue in the Coffee market amounts to US$2.7bn in 2023.
Revenue in the Coffee market amounts to US$160.6m in 2023
Market growth A statistical analysis on coffee consumption in
Malaysia shows that coffee consumption has increased from 20.69 million kg in 2020 to
35.82 million kg in 2021 and 2022 (Statista,
Indonesia’s 2022/23 coffee production is forecast to increase by 7 percent from the previous year to 11.35 million (60 kilogram) bags on favorable weather in southern Sumatra
Improved demand following the easing of pandemic-related
Singapore's coffee sales are set to increase steadily by 3.2% value compound annual growth rate (CAGR) over 2022–27, according to GlobalData value of cafes and bars in
Malaysia amounted to around 1.25 billion U.S dollars, an increase compared to the previous year restrictions is expected to raise domestic coffee consumption to 4.8 million bags in 2022/23
In 2022, the sales value of independent cafés and bars in Indonesia amounted to approximately 1.3 billion U.S dollars
Prices According to data from
2020, the average price of a cup of coffee in
In Indonesia, the average cost of a cup of coffee fluctuates based on the location and establishment type, with major cities such as Jakarta and Surabaya seeing prices around $1.40 at cafés and restaurants.
- 2.10 At a street vendor or small café, a cup of coffee may only cost approximately $0.70 - 1.05
The average price of a Coffee/Tea Without Milk (Per Cup) was reported at approximately $0.9/Cup in July 2023
Purchasing power of Indonesia is 27.5 in 2023
Cost of living in Indonesia is, on average, 10.3% lower than in Vietnam.
Purchasing power of Singapore is 95.6 in 2023
Kopitiam is a type of coffee shop mostly found in parts of Indonesia, Malaysia, Singapore In Malaysia, Singapore and Indonesia, Kopitiams are found almost everywhere
There are no less than
100 brand names of modern kopitiam operating in various part of Malaysia
As of 2021, Kopi Janji Jiwa has the largest number of outlets among other coffee shops in Indonesia, with 920 outlets spread across Indonesia
Kopitiam in Singapore are commonly found in almost all residential areas as well as some industrial and business districts in the country, numbering about 2,000 in total.
The expansive popularity of tea is currently posing a challenge to the coffee market's growth.
Highlands Coffee not only competes with specialty coffee shops in
Malaysia but also faces competition from
Vietnamese counterparts such as Cộng Cà
Kee Nguyễn, a coffee startup in Malaysia that has now expanded to 40 outlets Additionally
In a predominantly Muslim population, coffee shops have emerged as popular social venues, replacing bars as preferred hangout spots Recently, local coffee chains have surpassed global brands in market presence, reflecting a significant shift in consumer preferences.
In 2021, Indonesia saw a rise in the number of cafés and bars, reaching around 8,000 establishments, marking an increase from the previous year This upward trend in the café and bar industry has continued throughout the observed period.
The coffee market in Singapore is set for heightened competition with Luckin Coffee and Tim Hortons planning to expand their outlets Currently, there are approximately 322 coffee shops in Singapore, with many located in HDB estates.
In Singapore, the competitor of Highlands Coffee, Trung Nguyen Coffee, is expanding and gaining popularity As of now, Trung Nguyen Coffee has successfully established 4 branches in Singapore.
Market access The number of
Vietnamese residents living and working in
Malaysia is significant, and the opening of
Vietnamese restaurants and eateries has become an effective channel for promoting culture and cuisine in the host country Malaysia is a diverse, multi-ethnic
Muslim nation, with approximately 30% of its population being of
Chinese and Indian descent As a result, the overall food market and specifically the coffee market are highly varied and rich.
The Vietnamese community in Indonesia is comprised of about 500 individuals, with around 150 permanent residents Despite its small size, there is a notable presence of Vietnamese restaurants in major Indonesian cities, which have gained popularity due to the increasing demand for healthy food options.
Coffee consumption in Indonesia, especially Sumatran Arabica coffee
Singapore is home to a vibrant community of approximately 10,000 Vietnamese individuals, primarily young and well-educated, contributing to the country's diverse culture, which includes 38% foreign residents The warm acceptance of Vietnamese culture is evident, with numerous Vietnamese restaurants easily found throughout Singapore.
Vietnamese coffee has been well-received since
Vietnamese brands entering the Malaysian market and experiencing strong growth. beans, has doubled since
In 2010, the coffee consumption habits of young Indonesians were significantly influenced by trends observed in countries like Australia and the United States, where a large population of Indonesian students were studying abroad.
Experts estimate that with this growth rate, by 2025, Indonesia may no longer have enough coffee for export.
In 2020, Janji Jiwa emerged as the largest coffee chain in Indonesia, boasting 800 outlets Within just two years of its establishment, it surpassed Starbucks to become the leading coffee brand in the country Notably, local chains dominate the cafe market in Indonesia.
Singaporeans are often known for their openness to embracing new things
In such a society, traditional values are frequently evolving and not constrained by old norms This suggests a favorable prospect for introducing a fresh Vietnamese coffee flavor to the market in Singapore.
Government Debt reached 245.4 USD bn in
The annual inflation rate in Malaysia stood at 2% in August 2023
Indonesia National Government Debt reached 520.8 USD bn in July
2023, compared with 519.4 USD bn in the previous month.
Indonesia's annual inflation rate dropped to 2.28% in September 2023
Indonesia has a complex and dynamic legal system, which is
Singapore National Government Debt reached 815.2 USD bn in June
2023, compared with 813.5 USD bn in the previous quarter.
The annual inflation rate in Singapore edged down to 4% in August 2023 from 4.1% in the previous month
Malaysia has been facing political turmoil since the
2018 general election, which resulted in the first change of government since independence in
In 1957, Malaysia experienced political uncertainty and instability that hindered effective policy-making, diminished public trust, and heightened social tensions, influenced by a mix of civil, Islamic, customary, and colonial laws Similarly, foreign investors like Highland Coffee may encounter challenges in Indonesia's legal environment, particularly in navigating local laws and regulations related to taxation, labor, intellectual property, and environmental protection.
Indonesia has historically encountered terrorist threats, which can impact security perceptions for both domestic and foreign investors Despite these challenges, the country benefits from a stable and democratic political system, positioning it favorably in the context of political risk in Asia Additionally, Indonesia boasts a robust and resilient economy characterized by high income levels, a diversified trade structure, and prudent fiscal policies.
Market attractiveness evaluation
Table 1 Malaysia market attractiveness evaluation
Table 2 Indonesia market attractiveness evaluation
Table 3 Singapore market attractiveness evaluation
Conclusion: Malaysia has the highest point: 3.65.
Value chain analysis
Highlands Coffee has become a top choice for customers due to its delicious and diverse drink offerings that cater to various preferences The unique blend of Vietnamese and Western styles creates a fresh experience for patrons, while the friendly service staff enhances customer satisfaction and fosters brand loyalty Young generations are increasingly drawn to well-decorated coffee shops for socializing, reading, and enjoying music, while working professionals seek out these spaces for meetings and productivity Highlands Coffee effectively meets the diverse needs of its customers, making it an ideal destination for both leisure and work.
● Flexibility to meet changing customer needs
Highlands Coffee provides a flexible delivery service via its app, offering limited delivery within 1km for smaller orders, while larger orders can extend beyond this range A major factor in Highlands' success is its unique blend of international and traditional flavors, catering to a diverse clientele The company regularly launches new products, including the popular Highland Freeze, which showcases innovative flavors With over 15 years in the industry, Highlands has built a loyal customer base that frequents its locations for relaxation, work, and study.
Highlands Coffee offers more than just a beverage; it embodies the cultural essence and modern lifestyle of Vietnamese people By utilizing 100% locally sourced coffee from Vietnam's fertile highlands, Highlands Coffee ensures an authentic taste experience The brand meticulously hand-selects and roasts premium aromatic Arabica and robust Robusta beans to create its distinctive blends.
Coffee offers customers other Vietnamese-inspired drinks, cakes and “banh mi” in luxury space
Highlands Coffee's success can be attributed to its innovative service system, which has transitioned from traditional service to a modern self-service model enhanced by the Ecall ringing technology By installing self-service equipment throughout its locations, Highlands Coffee streamlines customer service, allowing employees to focus on the counter rather than attending to each table This modern approach not only improves efficiency but also enhances the overall customer experience.
Highlands Coffee enhances the payment experience by utilizing a POS system that accepts various physical bank cards and partners with cashless payment applications This integration of technology not only streamlines the payment process but also significantly reduces transaction times while increasing overall security.
Highlands Coffee Shop targets high-end customers by positioning itself as a premium coffee shop that offers high-quality products and services at elevated prices The owners emphasize that the higher price reflects superior service quality, ensuring customers receive an exceptional experience To enhance profitability, the company employs strategies such as up-selling, cross-selling, and diversifying its sales methods.
Highlands Coffee is strategically expanding into new markets, including the Philippines, to enhance its profitability By the end of 2021, the chain operated 483 outlets across Vietnam and the Philippines, solidifying its position as one of the largest coffee chains in Vietnam in terms of scale and revenue.
Highlands Coffee is experiencing significant growth in Vietnam, thanks to a warm reception from consumers, leading to an expansion of its coffee chain This growth has allowed Highlands to capture a substantial market share in the competitive beverage industry Furthermore, the Jollibee partnership highlights the brand's ambition to elevate Vietnamese coffee on an international scale, enabling Highlands to connect with both local and global customers.
Highlands Coffee employs advanced cultivation technologies and meticulously selects each coffee bean to guarantee top-quality products for customers They prioritize sourcing from regions known for producing exceptional coffee beans, maintaining a strong commitment to quality Continuously striving for operational improvements, Highlands Coffee aims to uphold its reputation as the "finest Vietnamese coffee shop."
Highlands Coffee is committed to reducing plastic waste across its coffee chain through initiatives like the “Green Arms” campaign, which aims to minimize single-use plastics and replace them with stainless steel spoons Additionally, the company utilizes compostable plastic bags made from corn starch for take-away drinks and delivery orders This collaboration with AnEco reflects Highlands Coffee's dedication to sustainable development and environmental responsibility.
Product benefits for the customers
Flexibility to meet changing customer needs
Highlands Coffee shop stands out for its high-quality core products and diverse supplementary services, yet customers often experience dissatisfaction due to inefficient service and long wait times for takeaway coffee Additionally, the unfriendly attitude of the staff contributes to an uncomfortable atmosphere for patrons To enhance customer satisfaction and build a more positive image, it is essential for Highlands Coffee to professionalize its staff and improve service efficiency.
The company's website features a comprehensive FAQ section, along with readily available phone numbers and email contacts to ensure prompt customer support Additionally, it provides links to social media platforms such as Facebook and Instagram for enhanced communication and engagement.
Highlands Coffee has effectively identified and catered to the preferences of its target customers by creating an inviting café environment The establishment seamlessly blends elegance and tradition, prominently featuring a striking black and red color scheme that enhances its welcoming ambiance As customers enter, they are greeted by soothing jazz music and thoughtfully curated décor, leaving a lasting impression that encourages them to return.
Highlands Coffee, a prominent coffee chain in Vietnam, prioritizes employee training to ensure staff are well-equipped to provide detailed information about products and services, enhancing the customer experience for both new and returning patrons During peak hours, the high customer traffic necessitates quick and efficient service from employees to streamline the purchasing process.
Following a purchase, numerous customers have reported encountering unprofessional behavior from staff when providing feedback on product quality or requesting additional services This negative attitude has led to a diminished perception of the brand, undermining the positive image Highlands has cultivated Unfortunately, this issue remains unaddressed by Highlands, impacting customer satisfaction.
Entry modes
Reasons for choosing a franchise business form to enter the Malaysian market
Highlands Coffee is a joint venture between Jollibee JC Group, which holds 51% of the shares, and Viet Thai International, with 49% Jollibee JC operates the popular fast food chain Jollibee, which spans 24 countries and territories As of January 2023, Jollibee Foods Corp boasted a global network of 6,481 stores In fiscal 2022, the company experienced a remarkable revenue growth of 38% year-on-year, totaling 211.9 billion Philippine pesos (approximately $3.8 billion) Forbes recognizes Jollibee Foods Corp as one of the fastest-growing Asian restaurant chains worldwide.
Jollibee Foods Corporation (JFC) has experienced a consistent annual revenue and profit growth of 15%, as reported by VNExpress After navigating two challenging years marked by the pandemic, the company has announced that all its brands are now achieving double-digit growth.
Jollibee has expanded Highlands Coffee beyond Vietnam, successfully introducing it to its restaurant chain in other Asian markets The company plans to further develop the Highlands Coffee brand in Vietnam while also incorporating its products into Jollibee locations across Asia This strategic move enhances Jollibee's offerings, capitalizing on the global recognition of Vietnamese coffee as a top-quality product.
In 2020, Highlands Coffee solidified its status as Vietnam's largest coffee chain, with total revenue nearing 2,140 billion VND, showing only a slight decline By 2022, the chain achieved a remarkable revenue of approximately 3,700 billion VND, marking a significant recovery and growth from the impacts of the Covid pandemic in 2021 Highlands Coffee's strong performance underscores its dominance in the Vietnamese coffee market, as reported by Cafebiz.
With a positive domestic business situation, Highlands Coffee is fully capable of expanding to the world to strengthen its position as well as bring pure Vietnamese coffee to international friends.
In 2020, Highlands Coffee achieved remarkable revenues of over 2.139 trillion Vietnamese dong and a post-tax profit of 112.5 billion dong However, the Covid-19 pandemic in 2021 severely impacted economies worldwide, leading to strict social distancing measures and complete shutdowns, particularly in major cities As a result, the service sector faced significant challenges, and Highlands Coffee experienced a revenue decline to 1.729 trillion VND, marking a 19% decrease and resulting in a historic loss for the company.
19 billion dong after several years of profitable operations.
In June 2022, Highlands Coffee made headlines by implementing significant price increases for its products, leading to surprising outcomes for the brand By the end of 2022, Highlands Coffee's revenue soared to 3.569 billion VND, while post-tax profits exceeded 265 billion VND, effectively reversing the losses experienced in 2021.
As of December 31, 2022, the company had short-term financial debts amounting to
228 billion VND and long-term financial debts of 285 billion VND.
● Franchise experience in the Philippines
In 2022, the Manila-based fast food group expanded its Highlands Coffee brand by opening 73 new outlets, bringing the total to 605 locations, with 52 situated in the Philippines, its sole international market This growth highlights the Philippines' close cultural ties with Malaysia, as both nations share ethnic similarities and predominantly speak related Malayo-Polynesian languages, fostering strong cross-border relations between their large populations.
Franchising in the Asian market is a booming industry, generating over 500 billion USD annually, as reported by the International Franchise Association (IFA) In 2021, South Korea experienced the highest growth in franchising, contributing 7.8% to its GDP, followed by Malaysia at 6.3%, the Philippines at 5%, and Singapore at 3%.
Franchising in Malaysia is regulated by the Franchise Act 1998, effective from October 8, 1999, which defines franchising and oversees various business models Under this act, all franchising businesses in Malaysia must register with the Registrar of Franchises (ROF) to comply with legal requirements.
1998 Failure to Compliance is considered an offense.
Established in 1994, the Malaysian Franchise Association (MFA) plays a crucial role in advancing the government's initiative to foster entrepreneurship through franchising Its timely formation has significantly contributed to the growth of the franchising sector in Malaysia MFA acts as a vital resource center for current and prospective franchisors and franchisees, while also serving the media and the general public.
Food and beverage franchising in Malaysia
Franchising has been a significant driver of the Malaysian economy since its inception in the 1940s, with the government implementing various regulations to support franchise investors Today, Kuala Lumpur boasts at least two franchised restaurants or beverage outlets in each small town, and new restaurant openings occur monthly throughout the city and across Malaysia.
Restaurants and beverage outlets in Malaysia consistently report significant annual profits, reflecting the strong consumer demand for these brands With a steady stream of customers throughout the day, these establishments contribute substantially to the local economy Consequently, food and beverage franchising in Malaysia is vital in meeting the diverse needs of the population while driving economic growth.
Trends of investors in Malaysia
Franchising is increasingly popular and is emerging as a preferred business model among Malaysian investors, who are now favoring international franchises with established brand strength in the market.
Supporting and promoting activities for franchising
Each year, Malaysia hosts numerous significant events in the franchising sector, including the prestigious Malaysia Franchise Awards, which honor outstanding franchise entrepreneurs A key highlight is the Franchise International Malaysia (FIM) exhibition, organized by the Ministry of Entrepreneurship and Cooperative Development alongside the Malaysian Franchise Association, showcasing the best in the industry.
Malaysia's socio-cultural landscape is a rich mosaic of diversity and harmony, characterized by the coexistence of various ethnic and religious groups This multicultural heritage creates a captivating blend of traditions, languages, and beliefs, which collectively shape the nation's distinctive identity.
Building a franchise system for Highlands Coffee in the Malaysian market
The group aims at Business format "package" franchising with direct franchising for the following reasons:
Malaysia presents a promising market for Vietnamese coffee, with brands like Trung Nguyen Legend and Cộng Cà Phê successfully introducing their unique coffee models and flavors to local consumers Despite challenges posed by the COVID-19 pandemic, both brands are maintaining strong sales, and Cộng Cà Phê has established two locations in Malaysia This situation highlights the potential for growth and a positive outlook for Vietnamese coffee in the Malaysian market.
Highlands Coffee's direct franchising approach in Malaysia allows for close collaboration with franchisees, ensuring effective control over business operations This strategy not only introduces the essence of Highlands Coffee and the unique Vietnamese coffee culture to Malaysia but also provides valuable insights and resources for better market adaptation Additionally, direct franchising enables Highlands Coffee to select suitable franchisees who can further develop the brand by franchising to other potential local entrepreneurs.
4.2.2 How to find a franchisor for Highlands in Malaysia
Highlands Coffee, a brand under the Jollibee group, leverages Jollibee's extensive experience in the fast food industry to enter the Malaysian market Recognized as one of the world's leading fast food chains, Jollibee will assist Highlands Coffee in attracting potential franchisees by promoting the unique appeal of a Vietnamese coffee chain Through strategic collaboration with Jollibee and its franchise partners, Highlands Coffee aims to explore franchise opportunities within Malaysia.
In addition, Highlands can also contact and work with the Malaysia Franchise Association to be approved and licensed for franchising activities and a bridge between Highlands and franchisees in Malaysia.
Highlands Coffee will franchise the brand to franchisees with the following contents:
Highland Coffee enjoys strong support in various areas, including securing easily accessible business locations, ensuring compliance with legal regulations for operational procedures, and providing guidance on brewing techniques and store management.
● The store space design is large, comfortable, unique, with a combination of modernity and tradition In particular, the decoration style of all Highland Coffee branches has a very beautiful view
● With reasonable prices and delicious drinks, that's what sets it apart from other drinks on the market.
● Have a large enough initial investment capital
● Accept quarterly and annual franchise fees (after negotiation between the two parties)
● Store management and product management costs (after negotiation)
● Has a good location and easy access to customers
● Comply with the regulations proposed by the franchisor
● Cooperate with Highlands in the process of operating, serving and conveying coffee drinking culture to customers
SWOT Analysis of Highlands Coffee in the Malaysian Market
Strengths
As the 20th century came to a close, Highlands Coffee evolved from a simple instant coffee seller into a popular coffee shop chain in Vietnam Within a decade, the brand was acquired by Jollibee, leading to significant growth and establishing Highlands Coffee as a leading player in the coffee and tea market in Vietnam.
Highlands Coffee aims to inspire and promote the pride of Vietnamese culture among its valued customers, even in international markets like the Philippines, by adopting the slogan “Take the Vietnamese coffee home” in its coffee shops.
5.1.2 Big coffee and tea market share
Highlands Coffee, having sold 49% of its shares to Jollibee Foods, benefits from the brand's global presence By 1995, Highlands Coffee expanded internationally to locations including Guam, Dubai, Kuwait, and Saudi Arabia Jollibee's entry into the US market in 1998, along with its recent expansions into Qatar, Singapore, Bahrain, Italy, and the UK, lays a solid foundation for Highlands Coffee's future entry into the European market.
Highlands Coffee has experienced significant market expansion, growing from 299 stores at the end of 2019 to nearly 700 stores by 2022, excluding 39 locations in the Philippines This rapid growth is largely attributed to their successful franchise model, positioning Highlands Coffee as the leading brand in nationwide coverage.
Highlands Coffee offers a diverse selection of globally renowned coffees and traditional Vietnamese brews, emphasizing the importance of quality consistency across its entire range The brand projects a modern and vibrant image while maintaining a warm and memorable connection with its customers The jazz ambiance in Highlands Coffee shops fosters a luxurious and relaxing atmosphere, appealing primarily to business professionals and individuals with average to high incomes.
5.1.4 Franchising experience in the Philippines
In 2011 and 2012, Highlands Coffee licensed its brand rights to Digital Paradise, a company linked to the Netopia Internet Cafe chain, along with IP Ventures in the Philippines, highlighting their strong partnership.
Highlands Coffee, a prominent coffee chain in Vietnam, has expanded significantly over the past decade, now operating 39 kiosks primarily in bustling areas and shopping centers in Manila and the Visayas region of the Philippines By the end of 2021, the franchise boasted a total of 483 stores across Vietnam and the Philippines, solidifying its position as the second-largest coffee chain in Vietnam, following Trung Nguyen Coffee.
5.1.5 The success of franchise stores in Vietnam
As of February 2019, Highlands Coffee has established over 211 coffee shops across Vietnam, achieving remarkable revenue of approximately 1,628 billion VND It stands out as the leading brand in the country with a successful franchising business model.
Opening a Highlands Coffee shop requires a substantial investment of 2.5 to 5 billion VND; however, this cost is justified by the brand's nearly two-decade reputation The strong brand name and customer trust enable franchisees to quickly recoup their initial investment.
The key to Highlands Coffee's success lies in building an excellent franchise system under the Highlands Coffee brand, along with attentive customer service, diverse products, and reasonable pricing.
5.1.6 Synergy between Highlands Coffee and Jollibee Group
In 2012, the Jollibee Group, based in the Philippines, made a significant investment of $25 million to acquire a 49% stake in the Vietnam division and a 60% stake in the Hong Kong division of the VTI Group, owned by Mr David Thai, as detailed in Jollibee Foods' annual report.
At that time, Highlands Coffee had approximately 50 stores Additionally, Jollibee agreed to provide VTI with an additional $35 million loan at a 5% interest rate, to be repaid by 2016, for future investments.
Highlands Coffee, under the ownership of a Philippine conglomerate, experienced significant revenue growth and expansion in the post-COVID-19 era In 2022, the company reported revenues of 1.82 trillion dong, reflecting a 6.9% increase from 2021, alongside post-tax profits of 12.5 billion dong, marking a turnaround from previous losses Projections for 2023 indicate a further revenue increase of 7.1%, with post-tax profits expected to reach 15 billion dong, representing a 20% rise compared to 2022.
Weaknesses
5.2.1 High product cost compared to the general market in Vietnam
Highlands Coffee products are currently priced between 30,000 and 60,000 VND, which is considered relatively high in the Vietnamese market, despite the country ranking fifth globally in coffee exports In June 2022, the brand raised its beverage prices by 10-15%, with certain items experiencing an increase of up to 18% (10,000 VND) This price hike led to dissatisfaction among many Highlands Coffee fans, with some expressing intentions to "break up" with the brand.
Given the current volatility of the economic market and Highlands' ongoing economic instability, there is a significant risk that Highlands Coffee product prices may rise further To mitigate this risk, it is essential for Highlands Coffee to adopt effective price stabilization strategies.
5.2.2 Lack of experience in the Malaysian Market
Despite the presence of established Vietnamese coffee brands like Trung Nguyen Coffee and Cong Caphe in Malaysia, which have successfully raised awareness of Vietnamese coffee's unique flavors, Highlands Coffee faces significant challenges in entering this new market The brand's lack of experience in operating coffee products and services in Malaysia adds to the difficulty of establishing a foothold.
Opportunities
5.3.1 The average income per capita in Malaysia is high.
Malaysia's economy continues to experience robust growth and is on track to achieve high-income status The average per capita income in Malaysia stands at
Malaysia's economy boasts an annual income of $36,846 USD, placing it third in Southeast Asia Since the 1980s, the industrial sector has driven the nation's growth, bolstered by substantial investments from Japan This has led to remarkable advancements in heavy industries, with Malaysia's exports emerging as a crucial component of economic expansion The production and export of primary commodities like crude oil, palm oil, tin, and rubber have significantly contributed to the country's socio-economic development.
5.3.2 The population of Malaysia is large, and the demographic structure is relatively young
Malaysia's population is approximately 32.37 million, characterized by a youthful demographic where over 65.4% are aged 15-64 and 29.6% are between 0-14 years old This young consumer base is reshaping coffee consumption trends in the country Meanwhile, older Malaysians tend to prefer coffee at traditional kopitiams or local coffee shops Overall, coffee has become a staple in the daily lives of most Malaysians.
5.3.3 Top most attractive markets in the world in 2023
A.T Kearney has published a ranking of the world's leading retail markets, highlighting that higher positions attract more investor interest for market penetration Malaysia, with a population of 30.74 million and a per capita GDP of 9,766 USD, stands out as a relatively developed nation in Southeast Asia.
5.3.4 The coffee market in Malaysia has been growing strongly in recent years
Malaysia has long favored tea as its beverage of choice, but recent trends indicate a significant rise in coffee consumption The emergence of international coffee chains and the growing popularity of coffee culture among those educated abroad are driving this shift in Malaysia's beverage landscape.
The coffee industry in Malaysia is experiencing significant growth and increasing competition, with both international chains and local cafés expanding rapidly Coffee consumption is on the rise, particularly among young millennials, positioning Malaysia among the top 50 coffee-consuming countries From 2020 to 2022, coffee consumption surged from 635,000 to 800,000 60kg coffee bags This trend is driven by urbanization and the fast-paced lifestyles of consumers, with Malaysia exhibiting the highest urbanization rate at 73%, contributing to an exceptional per capita consumption of 68.8 USD.
In other words, Malaysia is the market that customers find most accessible to coffee shops.
5.3.5 The openness of the Malaysian market is significant
Malaysia's significant market openness results in low trade barriers for Vietnamese exports, facilitated by both nations' involvement in various regional free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) within the ASEAN and ASEAN+ frameworks.
5.3.6 Diplomatic relations between Malaysia and Vietnam
In 1973, Malaysia and South Vietnam officially established diplomatic relations, a pivotal moment that marked Malaysia as the first ASEAN country to recognize the Provisional Revolutionary Government of the Republic of South Vietnam.
Since the establishment of the Strategic Partnership in 2015, Vietnam and Malaysia have strengthened their relationship, characterized by political ties, cultural similarities, and geographical proximity This partnership has fostered mutual support and cooperation, leading to significant achievements On September 8, 2023, the 50th anniversary of diplomatic relations was celebrated by the Vietnam Union of Friendship Organizations, the Vietnam-Malaysia Friendship Association, and the Malaysian Embassy in Vietnam In the ASEAN region, Vietnam is proud to be Malaysia's second-largest trading partner, while Malaysia ranks as Vietnam's third-largest trading partner.
The strong and favorable diplomatic relations between the two countries will serve as a stepping stone for the development of Vietnamese businesses investing and doing business in the Malaysian market.
Threats
5.4.1 Competitions from other coffee chains and independent coffee shops
The younger generation in Malaysia is enthusiastically embracing coffee culture, with a growing appreciation for unique brews and specialty drinks like frappuccinos and chai lattes The rise of popular American coffee chains such as Starbucks, Tim Hortons, and Coffee Bean has fueled this trend, as youth flock to air-conditioned cafés that offer comfortable seating, inviting atmospheres, and free Wi-Fi.
In contemporary Malaysia, specialty coffee shops are on the rise, transforming the coffee culture despite the enduring presence of traditional kopitiams Independent coffee chains and cafes are redefining the coffee experience for Malaysians, with a growing number of establishments offering diverse coffee varieties This shift signifies a significant change in how coffee is enjoyed in public spaces across the nation.
5.4.2 Malaysia - a multi-racial country with many different cultures and consumption habits
Malaysia's cultural diversity is shaped by its multi-religious population, with Islam being the dominant faith, representing over 61.3% of citizens This significant religious composition influences various aspects of Malaysian life, including culture, daily routines, the economy, education, and politics, creating a rich tapestry of regional cultures.
5.4.3 Malaysia's population is trending towards aging
In 2022, Malaysia's population aged over 65 years rose to 7.2 percent, up from 7 percent in 2021 This shift towards an aging population is significant, with projections indicating that this trend will continue to escalate by 2030, as highlighted by recent statistical data from Malaysia’s Chief.