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 trade capabilities with ASEAN countries This advantageous positioning is crucial for developing economic sectors, promoting regional connectivity, and supporting open-door policies that attract foreign investment.
Vietnam's unique coffee flavor is attributed to its favorable climate, geography, and soil conditions The country, located in the tropical belt, benefits from abundant sunshine and rainfall during the coffee growing season There is a distinct climatic division, with the southern region's hot and humid conditions ideal for Robusta coffee, while the northern region's cold winters and misty rains are perfect for Arabica coffee Additionally, Vietnam's basaltic red soil, particularly concentrated in the Central Highlands and Southeast, spans millions of hectares, making it highly suitable for coffee cultivation.
Vietnam's unique geographical advantages enable it to produce premium coffee beans, earning global recognition As the world's second-largest coffee exporter and the leading exporter of robusta coffee, Vietnam's coffee industry has flourished Recent data from Vicofa indicates that Vietnamese coffee is now exported to over 85 countries and territories, with exports surpassing $4 billion in 2022, representing over 15% of the global coffee export market.
Political
As of 2023, Vietnam has been a member of ASEAN for 28 years, making its policies and strategies for ASEAN cooperation an essential part of the country's new-era foreign policy This involvement highlights Vietnam's commitment to multilateral diplomacy and underscores its strategic focus within the region.
Vietnam has made notable advancements in foreign policy by shifting from the 'more friends, fewer enemies' approach to a strategy that emphasizes diversification and multilateralism in international relations As an 'active, positive, and responsible member' of ASEAN, Vietnam embraces a philosophy of proactive collaboration with fellow ASEAN nations to foster a strong and cohesive community.
In recent years, Vietnam has made significant strides in foreign affairs, enhancing its economic integration on both regional and global scales The country has engaged actively 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 ongoing international integration is establishing a framework for stable and sustainable partnerships with its global 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 expanding start-up ecosystem promote innovation and entrepreneurship, attracting significant investments from multinational companies These enterprises contribute valuable technology and expertise to the local market, enhancing Vietnam's innovation capacity and export competitiveness while opening new markets and trade opportunities.
Vietnam is prioritizing environmental and social challenges that necessitate technological innovations The country is grappling with the adverse effects of swift industrialization, including greenhouse gas emissions, water contamination, waste management issues, and marine plastic pollution At 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 1.84% average in 2020 This rise in inflation can diminish currency value, elevate living costs, and impair economic competitiveness For Highlands Coffee, the impact of inflation translates to increased expenses for raw materials, labor, rent, and advertising Consequently, in response to economic pressures, Highlands Coffee announced a price hike of 10-15%, raising product prices by 4,000-10,000 VND, with some items seeing increases of up to 18%, all aimed at maintaining product quality and service amidst market fluctuations.
Religion
On March 9, 2023, the Ministry of Information and Communications and the Government Committee for Religious Affairs in Hanoi released the White Paper titled 'Religion and Religious Policies in Vietnam.' The document asserts that Vietnam experiences no discrimination or conflict regarding beliefs and religions It highlights the existence of 67 designated religious activity points for foreigners, primarily 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 State's commitment to respecting and ensuring the freedom of belief and religion for foreigners legally residing in Vietnam.
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 enhances the growth of Vietnamese coffee products within diverse religious contexts.
About Highlands Coffee
Highlands Coffee proudly embraces the message "Highlands Coffee® Belongs to Us," reflecting its commitment to fostering community connections This initiative goes beyond merely promoting Vietnamese coffee culture; it aims to create a vibrant hub for people to gather, 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. h
Highlands Coffee uniquely identifies itself with a warm and inviting shade of red, which serves as the brand's signature color across all its outlets While each location features its own distinct decor style, the consistent use of this red hue fosters a luxurious and cozy atmosphere This inviting environment makes Highlands Coffee an ideal spot for various activities, including work, study, relaxation, and socializing with loved ones.
Highlands Coffee showcases traditional Vietnamese wooden tables and chairs, creating an authentic atmosphere Many locations also feature handwoven lights crafted from rattan and bamboo, which add a rustic charm The soft illumination from these lanterns contributes to a cozy and relaxed ambiance, making it an inviting space for customers.
Highlands Coffee is renowned for its exceptional service, where customers are warmly greeted by friendly staff upon arrival The attentive team assists patrons in navigating the menu to ensure they make the best choices After placing their orders and completing payment at the counter, customers receive a receipt and a calling card to collect their drinks when ready While waiting, they can enjoy chilled, purified water The staff efficiently processes orders to ensure prompt service, enhancing the overall customer experience.
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 caters to a wide variety of customers.
Highlands Coffee expertly combines premium Robusta and Arabica beans from Vietnam's highlands, utilizing unique roasting and grinding methods to ensure exceptional quality Their dedication to excellence starts with the careful selection of beans sourced from trusted suppliers Moreover, Highlands Coffee offers a variety of beverages, including Freezes and teas, that reflect Vietnamese culture through locally sourced ingredients, highlighting the rich and distinct flavors of the region.
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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 h 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 varies by location and establishment type, with major cities like Jakarta and Surabaya seeing prices around $1.40 in 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 h 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 society, coffee shops have emerged as the preferred social venues, replacing traditional bars Recently, local coffee chains have gained significant market presence, surpassing global brands in popularity.
In 2021, Indonesia saw a rise in its café and bar scene, with around 8,000 establishments operating, marking an increase from the previous year This upward trend in the number of cafés and bars has persisted throughout the observed period, reflecting the growing popularity of these social venues in the country.
The coffee market in Singapore is set for heightened competition with Luckin Coffee and Tim Hortons planning to expand their outlets Currently, Singapore boasts approximately 322 coffee shops, with a significant number 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 comprises about 500 individuals, with roughly 150 permanent residents who have established long-term lives and careers Despite its small size, the community has contributed to a notable presence of Vietnamese restaurants in major Indonesian cities, which have gained popularity due to the increasing demand for healthy dining options.
Coffee consumption in Indonesia, especially Sumatran Arabica coffee
Singapore is home to a vibrant community of approximately 10,000 Vietnamese individuals, primarily composed of young, educated professionals engaged in various labor activities With 38% of its population being foreigners, Singapore boasts a rich cultural diversity that embraces Vietnamese culture As a result, Vietnamese cuisine is widely available, with numerous restaurants scattered across the country.
Vietnamese coffee has been well-received since
Vietnamese brands entering the Malaysian market and experiencing strong growth. beans, has doubled since
In 2010, the rising coffee consumption among young Indonesians can be attributed to the influence of coffee habits observed in countries such as Australia and the United States, where a significant number of Indonesian students are pursuing their studies.
Experts estimate that with this growth rate, by 2025, Indonesia may no longer have enough coffee for export.
In 2020, Janji Jiwa emerged as Indonesia's leading coffee chain, boasting 800 outlets nationwide Just two years after its inception, Janji Jiwa surpassed Starbucks, solidifying its position in the market Local coffee chains dominate the café landscape in Indonesia, reflecting the growing preference for homegrown brands.
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 significant political uncertainty and instability, which hindered effective policy-making, diminished public trust, and heightened social tensions This complex legal environment, influenced by civil, Islamic, customary, and colonial laws, presents challenges for foreign investors like Highland Coffee These investors often struggle to navigate and comply with local laws and regulations, particularly regarding taxation, labor, intellectual property, and environmental protection.
Indonesia has encountered terrorist threats in the past, impacting security perceptions for both domestic and foreign investors Despite these challenges, the country benefits from a stable and democratic political system, which mitigates political risk in Asia Additionally, Indonesia boasts a strong and resilient economy characterized by high-income levels, a diversified trade structure, and a prudent fiscal policy.
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 and enjoyable experience for patrons, while the friendly service staff enhances customer satisfaction and loyalty Young generations are increasingly drawn to well-decorated coffee shops for socializing, reading, and enjoying music, while professionals seek these spaces for meetings and work Highlands Coffee effectively meets the diverse needs of its customers, making it an ideal destination for both leisure and productivity.
● Flexibility to meet changing customer needs
Highlands Coffee provides a convenient delivery service via its app, offering limited delivery within 1km for smaller orders while accommodating larger orders with an expanded delivery range A major factor in Highlands' success is its unique blend of international and traditional flavors, appealing to a diverse customer base The company continually launches new products, including the recently popular Highland Freeze, which showcases distinctive flavors With over 15 years of growth, 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 a cultural mission that mirrors the modern lifestyle of Vietnamese people By utilizing 100% locally sourced coffee from Vietnam's fertile highlands, Highlands Coffee ensures an authentic Vietnamese flavor The brand meticulously hand-selects and roasts premium aromatic Arabica and robust Robusta beans to create its signature blends, delivering a unique coffee experience.
Coffee offers customers other Vietnamese-inspired drinks, cakes and “banh mi” in luxury space
Highlands Coffee's success is largely attributed to its innovative service model, which has transitioned from traditional service to a modern self-service approach enhanced by Ecall technology By installing self-service equipment across its locations, Highlands Coffee streamlines customer interactions, allowing employees to focus on counter service rather than attending to each table This transformation not only improves efficiency but also elevates 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, reducing transaction times, but also increases security for customers.
Highlands Coffee Shop targets high-end customers by positioning itself as a premium coffee destination that justifies its high prices with exceptional service quality The owners believe that the elevated cost reflects the superior experience provided to customers, who are encouraged to appreciate the value of the special services offered Additionally, the company employs up-selling, cross-selling, and diverse sales strategies to enhance profitability and customer satisfaction.
Highlands Coffee has strategically expanded into the Philippines, seeking to enhance its profitability By the end of 2021, the coffee chain operated 483 outlets across Vietnam and the Philippines, establishing itself as one of the largest coffee chains in Vietnam in terms of scale and revenue.
Highlands Coffee is experiencing significant growth in Vietnam, expanding its coffee chain to capture a larger market share in the competitive beverage industry The recent Jollibee collaboration highlights its ambition to take Vietnamese coffee global, enabling Highlands to connect with both local and international customers effectively.
Highlands Coffee employs advanced cultivation technologies and selectively handpicks each coffee bean to guarantee top-quality products for customers They meticulously choose production areas known for yielding superior coffee beans and are dedicated to maintaining high standards Committed to continuous improvement, Highlands Coffee strives to uphold its reputation as the "finest Vietnamese coffee shop."
Highlands Coffee is committed to minimizing plastic waste across its coffee chain through various initiatives The company has launched the “Green Arms” campaign to decrease single-use plastics and has transitioned to stainless steel spoons in-store Additionally, Highlands Coffee now utilizes compostable plastic bags made from corn starch for take-away and delivery orders This collaboration with AnEco reflects their shared goal of promoting sustainability and reducing plastic waste for a greener future.
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; however, customers often experience dissatisfaction due to inefficient service and unwelcoming staff attitudes To enhance customer satisfaction and improve its image, it is crucial for Highlands Coffee to focus on professionalizing its staff and streamlining service efficiency.
The company's website features a dedicated FAQ section, along with readily available phone numbers and email addresses to ensure prompt customer support Additionally, links to their social media platforms, such as Facebook and Instagram, are provided for enhanced connectivity.
Highlands Coffee has effectively identified and catered to the preferences of its customers, crafting a welcoming café environment tailored to its target audience The establishment harmoniously blends elegance and tradition, showcased through its distinctive black and red color scheme Upon entering, customers are greeted by a warm atmosphere enhanced by soothing jazz music and impressive décor, creating a memorable experience.
Before employees at Highlands Coffee begin selling, they receive extensive training to ensure they can effectively communicate information about all products and services, enhancing the overall customer experience for both new and returning patrons As a prominent coffee chain in Vietnam, Highlands Coffee faces peak customer traffic during busy hours, requiring staff to be agile and efficient to streamline the purchasing process.
Following a purchase, numerous customers have reported encountering staff members with a negative attitude when offering feedback on product quality or seeking additional services This unprofessional behavior has led to a negative perception of the brand, undermining the positive image Highlands has worked to establish Unfortunately, this issue remains unaddressed by the company.
Entry modes
Reasons for choosing a franchise business form to enter the Malaysian market
Highlands Coffee is jointly owned by Jollibee JC Group, which holds 51% of the shares, and Viet Thai International, with 49% Jollibee JC operates a global fast food chain, Jollibee, present in 24 countries and territories As of January 2023, Jollibee Foods Corp reported a total of 6,481 stores worldwide In fiscal 2022, the company experienced a remarkable revenue growth of 38% year-on-year, reaching 211.9 billion Philippine pesos (approximately $3.8 billion) According to Forbes, Jollibee Foods Corp is recognized as one of the fastest-growing Asian restaurant chains globally.
Jollibee Foods Corporation (JFC) has experienced a consistent annual revenue and profit growth of 15%, as reported by VNExpress After navigating two challenging years of pandemic-related business struggles, the company announced that all its brands are now achieving double-digit growth.
Jollibee has expanded Highlands Coffee beyond Vietnam, successfully integrating it into their restaurant chain and impressing customers The company plans to further develop Highlands Coffee in Vietnam while also introducing its products across Jollibee locations throughout Asia This strategic move adds significant value to Jollibee, capitalizing on the global recognition of Vietnamese coffee as a premium quality beverage.
In 2020, Highlands Coffee solidified its status as Vietnam's largest coffee chain, with total revenue nearing 2,140 billion VND, only experiencing a slight decline By 2022, the coffee chain achieved a remarkable revenue of approximately 3,700 billion VND, marking a significant recovery and growth compared to the previous year impacted by the Covid pandemic Highlands Coffee's continued success underscores its dominance in the Vietnamese coffee market.
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, in 2021, the Covid-19 pandemic severely impacted the economy, leading to complete shutdowns and strict social distancing measures, particularly in major cities As a result, the service sector faced significant challenges, and Highlands Coffee experienced a revenue drop to 1.729 trillion VND, marking a 19% decline 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 with significant price hikes on their products, leading to surprising outcomes for the brand By the end of 2022, the company’s revenue had doubled to 3.569 billion VND, while post-tax profits soared to over 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, with 52 located in the Philippines, its sole international market The Philippines shares strong cultural ties with Malaysia, as both countries are part of Southeast Asia and have populations that are ethnically similar, primarily speaking closely related Malayo-Polynesian languages This connection fosters significant cross-border relations between the two nations.
Franchising in the Asian market generates over $500 billion annually, according to the International Franchise Association (IFA) In 2021, 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 outlines the legal framework for business models Under this Act, all franchising businesses must be registered with the Registrar of Franchises (ROF) to ensure compliance with legal standards.
1998 Failure to Compliance is considered an offense.
Founded in 1994, the Malaysian Franchise Association (MFA) plays a crucial role in advancing the government's initiative to foster entrepreneurship via franchising The establishment of MFA has been pivotal in enhancing the franchising sector in Malaysia It acts as a valuable resource hub for existing and potential franchisors and franchisees, as well as for media representatives and the general public.
Food and beverage franchising in Malaysia
Franchising has been a significant contributor to the Malaysian economy since its inception in the 1940s To support franchise investors, the Malaysian government has implemented various regulations and incentives Currently, Kuala Lumpur boasts at least two franchised restaurants or beverage outlets in each small town, with new establishments opening monthly across the city and other regions of Malaysia.
Restaurants and beverage outlets in Malaysia consistently report substantial annual profits, reflecting the strong demand from Malaysian consumers With a steady stream of customers from morning until night, these establishments significantly contribute to the local economy Consequently, food and beverage franchising in Malaysia is vital for meeting the needs of the population while driving economic growth.
Trends of investors in Malaysia
Franchising is increasingly popular among Malaysian investors, who are favoring international franchises with strong market brands This trend highlights the growing preference for established business models that offer greater market recognition and potential for success.
Supporting and promoting activities for franchising
Every year, Malaysia hosts numerous significant events in the franchising sector, including the esteemed 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 in collaboration with the Malaysian Franchise Association, showcasing the best in the industry.
Malaysia's socio-cultural landscape is a vibrant blend of diversity and harmony, where multiple ethnic and religious communities coexist peacefully This rich multicultural heritage creates a captivating mix of traditions, languages, and beliefs that define the nation's unique 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 new 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 Trung Nguyen Legend and Cộng Cà Phê continue to maintain strong sales, with Cộng Cà Phê operating two locations in Malaysia This situation highlights a significant opportunity for the growth of Vietnamese coffee in the Malaysian market.
Highlands Coffee's direct franchising in Malaysia allows for effective collaboration with franchisees and better control over business operations This approach not only promotes the essence of Highlands Coffee and Vietnamese coffee culture but also provides valuable insights into the local market By engaging directly, Highlands Coffee can select suitable franchisees who may later become sub-franchisees, enabling further expansion through local partnerships.
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 establish its presence in the Malaysian market As a renowned Vietnamese coffee chain, Highlands Coffee aims to attract potential franchisees by capitalizing on Jollibee's strong brand image and support Through collaboration with Jollibee and its franchise partners, Highlands Coffee is actively seeking franchise opportunities in 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 robust support in various areas, including selecting accessible business locations, ensuring compliance with legal business procedures, and providing guidance on brewing techniques and store operations.
● 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 drew to a close, Highlands Coffee evolved from selling instant coffee to becoming a prominent coffee shop chain in Vietnam Within a decade, the brand was acquired by Jollibee, leading to significant growth Today, Highlands Coffee stands as a leading player in the coffee and tea market in Vietnam.
Highlands Coffee aims to inspire and promote Vietnamese pride 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 significantly from Jollibee's global presence By 1995, Highlands Coffee expanded its reach 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, establishes a strong foundation for Highlands Coffee to pursue future growth in the global market, particularly within the EU.
Highlands Coffee has experienced rapid market expansion, growing from 299 stores at the end of 2019 to nearly 700 stores by 2022, excluding 39 locations in the Philippines This significant 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 renowned coffees, including traditional Vietnamese varieties, emphasizing the importance of consistent quality across its locations The brand projects a modern and dynamic image while maintaining a warm and memorable connection with customers The jazz-infused ambiance in Highlands Coffee shops fosters a relaxing and luxurious atmosphere, catering 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, linked to the Netopia Internet Cafe chain, along with IP Ventures in the Philippines, highlighting the strong partnership between Digital Paradise and IP Ventures.
Highlands Coffee, a prominent coffee chain in Vietnam, has expanded significantly over the past decade, currently operating 39 outlets primarily in the form of kiosks situated in bustling streets and shopping centers across Manila and the Visayas region of the Philippines By the end of 2021, the brand boasted a total of 483 stores in both Vietnam and the Philippines, establishing itself as one of the largest coffee chains in Vietnam, second only to Trung Nguyen Coffee.
5.1.5 The success of franchise stores in Vietnam
As of February 2019, Highlands Coffee has established itself as a leading brand in Vietnam, boasting over 211 coffee shops across the country and generating remarkable revenue of approximately 1,628 billion VND This success highlights Highlands Coffee's effective franchising business model, making it the most successful coffee franchise in Vietnam.
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 recognition and customer loyalty enable franchisees to swiftly recoup their 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, Jollibee Group, a Philippines-based company, made a strategic 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 reported 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 generated revenues of 1.82 trillion dong, reflecting a 6.9% increase from 2021, while achieving 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, positioning them on the higher end of the Vietnamese market, which is the fifth largest 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 loyal customers, with some even considering "breaking up" with the brand.
Given the current volatility of the economic market and the ongoing instability in Highlands' economic situation, there is a significant risk that the prices of Highlands Coffee products may continue to rise To mitigate this risk, it is crucial 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 introduced the unique flavors of Vietnamese coffee to local consumers, Highlands Coffee faces significant challenges in entering this new market due to its lack of experience in offering coffee products and services in Malaysia.
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
With an annual income of $36,846 USD, Malaysia ranks third in Southeast Asia, largely due to its robust industrial sector that has driven economic growth since the 1980s Significant investments from Japan have propelled the development of heavy industries, positioning Malaysia's exports as a crucial factor in its economic expansion The production and export of primary commodities, including crude oil, palm oil, tin, and rubber, have been vital 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 currently 32.37 million, with a youthful demographic where 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 While older Malaysians typically enjoy coffee at traditional kopitiams or local coffee shops, coffee remains a vital component of daily life for most Malaysians.
5.3.3 Top most attractive markets in the world in 2023
A.T Kearney has published a ranking of global retail markets, highlighting that higher rankings attract increased investor interest for market entry Malaysia, with a population of 30.74 million and a per capita GDP of 9,766 USD, is recognized as a relatively developed nation in Southeast Asia.
5.3.4 The coffee market in Malaysia has been growing strongly in recent years h
Malaysia has long favored tea as its popular beverage, but recent trends indicate a rising preference for coffee among its citizens This shift is largely attributed to the arrival of international coffee chains and the growing coffee culture embraced by those educated abroad, resulting in a notable increase in coffee consumption throughout the country.
The coffee industry in Malaysia is experiencing significant growth and increased competition, with a rise in both international coffee chains and local cafés Coffee consumption is becoming more prevalent, particularly among young millennials, positioning Malaysia among the top 50 coffee-consuming countries Statistical data indicates a rise in coffee consumption from 635 thousand 60kg coffee bags in 2020 to an estimated 800 thousand in 2021 and 2022 The International Coffee Organization attributes this trend to urbanization and fast-paced lifestyles, with Malaysia boasting the highest urbanization rate at 73%, leading to a notable per capita coffee 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 Both nations engage in various regional free trade agreements, notably within ASEAN and ASEAN+, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
5.3.6 Diplomatic relations between Malaysia and Vietnam
In 1973, Malaysia and South Vietnam officially established diplomatic relations, marking a significant milestone in their bilateral ties Notably, Malaysia became the first ASEAN nation 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 fostered a strong and pragmatic relationship, marked by mutual support and shared strategic interests 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 values Malaysia as its second-largest trading partner, while Vietnam is Malaysia'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, driven by the rise of American coffee chains like Starbucks, Tim Hortons, and Coffee Bean This trend reflects their growing appreciation for unique coffee creations, including frappuccinos and chai lattes, enjoyed in comfortable, air-conditioned cafes equipped with 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 how Malaysians savor coffee in social settings, with a growing number of establishments providing diverse coffee options This trend reflects a significant shift in coffee consumption habits across the nation.
5.4.2 Malaysia - a multi-racial country with many different cultures and consumption habits
Malaysia's cultural diversity is largely shaped by its multi-religious population, with Islam being the predominant faith, practiced by over 61.3% of citizens This religious composition enriches the nation's regional cultures and significantly influences various aspects of life in Malaysia, including daily routines, the economy, education, and politics.
5.4.3 Malaysia's population is trending towards aging
In 2022, the percentage of Malaysians aged over 65 rose to 7.2%, up from 7% in 2021, highlighting the country's transition towards an aging population Recent statistics indicate that this demographic shift is expected to continue, with significant changes anticipated by 2030, as noted by Malaysia’s Chief Statistician.