MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

SCHOOL OF ECONOMICS

SUBJECT: MICROECONOMICS

                    ESSAY
TOPIC: THE FAILURE OF TAIWAN’S NUMBER
ONE MILK TEA BRAND
                             

       

  

INSTRUCTOR: NGUYỄN THANH TRIỀU

1
 CONDUCTED IN 2020

GROUP REPORT
Group members:

        Student name Responsibility in Assignment Participation %

Huỳnh Nhật Bảo Ngọc Introduction, conclusion, the 35%
continuous in market, wrong
goals and business strategies
when face to different challenges
Lê Hồng Minh Duy Wrong goals and business 35%
strategies when face to different
challenges, consumer
Phan Thị Tú Quyên History of Ten Ren and the 30%
process of approaching Vietnam’s
market, experience from Ten Ren
failure

Table of Contents
Part I: Introduction…………………………………………………………………
3
Part II: Content…………………………………………………………………….4
1. History of Ten Ren and the process of approaching Vietnam’s
market…………..4
a. About Ten
Ren…………………………………………………………….4
b. Aims and ambition of Ten
Ren…………………………………………….5
2. Failure of Ten
Ren..................................................................................................5
a. The continuous change in
market……….....................................................5

2
 b. Wrong goals and business strategies when face to different
challenge…….7
c. Consumer………………………………………………………………...11
3. Experiences from Ten Ren’s
failure.....................................................................12
a. Human……………………………………………………………………12
b. Strategy………………………………………………………………......13
Part III: Conclusion……………………………………………………………....14
References………………………………………………………………………...15

PART I: INTRODUCTION
Conducted according to the assignment of instructor Nguyen Thanh Trieu and
Microeconomics curriculum, our group through the process of learning, consulting
and discussing have written the essay about “The failure of Taiwan’s number one
milk tea brand”.

The main content of this essay concludes: 

 History of Ten Ren and the process of approaching Vietnam’s market
 Failure of Ten Ren
 Experience from Ten Ren’s failure

Nowadays, on the road, the type of store that we see the most is definitely the milk
tea shops. This is considered a very potential market for entrepreneurs, especially
when looking to start a business. However, benefits always come with high risks,
and Ten Ren is a prime example. This essay will explain the reasons why one of
the most famous milk tea brands in Taiwan suffered failures in Vietnam, from
which lessons can be drawn so as not to repeat Ten Ren's unfortunate mistakes.

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 PART II: CONTENT
1. History of Ten Ren and the process of approaching Vietnam’s market
a. About Ten Ren

Ten Ren's Tea or Tian Ren's Tea is a Taiwan-based company that specializes in tea
and ginseng products. Founded in 1953 in Taiwan by Ray Ho Lee, "Ten Ren's
Group" also operates Cha for tea houses in Southern California as well as "Ten
Ren's Tea" stores in California and six stores in New York, and other places, and
through the subsidiary "Ten Fu Group" produces and sells tea products in China,
where much of its activity now takes place. By 2003 it had 113 outlets globally,
making it becomes Taiwan's largest tea shop chain. Ten Ren’s Tea is also the
largest supplier in the East Asia region with more than 300 million cups of milk tea
sold each year worldwide. Vietnam is the eighth country chosen by Ten Ren to
prioritize market development, along with great powers such as the US, Canada,
China, Hong Kong, and Japan...
 
On August 15, 2017, Mr. Nguyen Hai Ninh - CEO of The Coffee House coffee
shop chain and representative of Taiwan Ten Ren Company signed a franchise
contract, officially developing the Ten Ren beverage brand with the main products
are tea and milk tea in Vietnam. With a promise to dominate the Vietnamese milk
tea market, Ten Ren has opened 23 branches in Ho Chi Minh and Dong Nai within
two years.
 
Ten Ren Vietnam has modern and cozy style design with main bright colors.
Besides, consumers have opportunity to enjoy a new flavor of milk tea from
Taiwan. Ingredients used by Ten Ren are carefully selected by “the tea artisans”,
and the traditional roasting process have retaining the bold Asian tea flavor. Ten

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Ren's most distinctive tea is King's Oolong 913 tea. This tea is made from an
esoteric recipe and is nowhere to be found. The first impression when drinking
King's Oolong 913 is a mild bitter taste, but when the tea has reached the neck, the
natural post-refreshing sweetness will return. This promised to be a new trend for a
young friend in the near future.
 
From the beginning, the news of Ten Ren coming to Vietnam was always waited.
In an era when the demand for enjoying milk tea is increasing, Ten Ren had
created a fever for young people because of its extremely attractive and unique
taste. Many customers have affirmed that the first impression of enjoying this milk
tea made them never forget the taste and appearance of this product.

Ten Ren’s approach to market is unique compared to other competition in the

market at this time. The brand marketing strategy emphasize on the flavor and the
process making of its tea. Thanks to a distinctive market strategy, the franchise
chains have stimulated success in 7 countries and territories, it was hope to become
the biggest milk tea brand in Vietnam. However, the reality had fallen short. The
Coffee House had not found a successful recipe in Vietnam with this famous
brand.

b. Aims and ambitions of Ten Ren

There are many milk tea brands come from Taiwan, why does The Coffee House
choose Ten Ren? Mr. Vo Duy Phu, Marketing Director of The Coffee House said:
“Ten Ren Milk Tea's mission in Vietnam is disseminate tea culture and improve
the quality of the Vietnamese milk tea market. Ten Ren Milk Tea is rich in tea
flavor, giving customers a refreshing taste, low sugar, low fat, taking advantage of
the natural sweetness of tea, ginseng, licorice to ensure safety for health.”

From the beginning, most people predicted that Ten Ren will dominate milk tea
market with three major type of products are milk tea, packed tea and ready to
drink. Invested up to 100 billion Vietnam dong, The Coffee House plan that will
open 40 stores in 2018, but until the end of 2018, there are just 23 stores. It seems
that more than the ambition to dominate the milk tea market, The Coffee House
wants Ten Ren to change the Vietnamese drinking habits, bringing a brand suitable
for all ages and gender by ensuring the health of users in each product. According
to Mr. Nguyen Hai Ninh, at first, Ten Ren will focus on promoting the field of
milk tea, but Ten Ren's real strength is in bottled and instant-drink products.
Nguyen Hai Ninh hopes to bring customers who use bottled drinks to themselves,
and furthermore, it is the market of Pepsi and Cola.

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2. Failure of Ten Ren
a. The continuous change in market

Milk tea market

The milk tea market has always been considered substantial this is a market that
always creates a fever with trends and milk tea shops growing at a dizzying speed
in terms of quantity. Base on a report from Euromonitor, Vietnamese milk tea
market was estimated 282 million USD in 2016, and the most interesting point is
that this market has a growth rate of 20%/year.

2017 - the year when Ten Ren approach Vietnamese market had seen as an
exciting year for the milk tea market. Base on iPos’ research, a provider of label
printing and management software for F&B brands; in this year, urban areas in the
North witnessed the emergence of more than 170 new milk tea brands, including
their own opening and buying franchises from reputable brands. At a seminar on
the milk tea and F&B market in June of this year; Lozi, an application provider
that shares food and drink experiences, announced a survey result: there are about
1,500 stores nationwide. It had expected that by the end of the year, this number
will increase strongly when a series of big brands have just entered the market. As
a result, in the first 6 months of 2017, average each month in Hanoi, there were 8
additional milk tea shops of different brands. Apart from exciting development,
many people wonder if the raw milk tea market is gradually saturated with
approximately 100 brands are competing.

By the end of 2017, some famous names in the F&B in Vietnam such as The
Coffee House or Golden Gate Group have officially joined the franchise through
franchising of well-known foreign brands. In November 2017, The Coffee House
opened the first Ten Ren store. Although Ten Ren is a prevalent brand in Taiwan,
it is still a new name for Vietnamese consumers. In a country has about 1,500 milk
tea shops with nearly 100 competing brands, there was many disadvantages for
Ten Ren when entering the Vietnamese market, despite of having good support
from The Coffee House.

Fast food delivery services such as Grabfood, Now have grown significantly with
attractive promotions, leading to many customers moving from milk tea shops to
home delivery in recent years. As a result, this greatly affects famous milk tea
brands. This is because when the product is shipped to home, the advantages of
space and location will no longer be useful, especially when these are the factors

6
that help well-known milk tea brands distinguish from local and normal brands.
The dense appearance of home-made milk tea stores, with more affordable price,
more conform with the living conditions of young people, made many milk tea
brands emerging in Vietnam at that time, somewhat struggling.

The F&B market

Although the milk tea market or the F&B market in Vietnam is a very attractive
market for enterprises, go along with diversity and attractions are the high
competitiveness and fast speed of elimination. That is the reason why food and
beverage businesses should focus on the wishes and needs of their customers.
However, this market fluctuates very complicatedly because customer demand is
not fixed and is very short term, most people use trend-following products, as 7-
level spicy noodles in the past. The dizzying pace of growth brings considerable
concern whether the milk tea market will quickly be forgotten.

These days, social networks are remarkable developing, making this a powerful
communication tool for businesses, because customers are influenced a lot from
social networks. However, this is also the fastest way to affect businesses because
the voice of consumers has become stronger than ever. Just one small mistake can
impact considerably on reputation of business, and this greatly affects the behavior
of other customers; whether it is the reputation of the restaurant, store or supplier
of raw materials for business. That is the reason why as the more brands intend to
enter this market, the more essential of market investigation.

Besides 4P of marketing - Product, Price, Place, Promotion, F&B also has a very
high requirement on 3 P's in service marketing: People - Process and Physical
Evidence. The waiter is the first thing customers come into contact with before
enjoying the food, so attitude and service style are very important. The streamlined
process also increases customer satisfaction, helping customers not have to wait
too long. As a result, the physical environment makes customers feel more
palatable, and can even impact on customer behavior.

b. Wrong goals and business strategies when face to difficult

challenges

The unfavorable opening

When the first store had opened, the Ten Ren store had had an electrical problem,
resulting in Ten Ren had to close to fix this problem after few days of opening. It is
considered a bad start and extremely detrimental to customers. This was a big
mistake for Ten Ren in the preparation, leading to a pitch that received a great deal
7
of negative reactions, not only because of the incident above but it also because of
delaying in service.

With ambition is too great and opening stores quickly, Ten Ren was unable to
manage its stores well. Although there was a losing point in the beginning, Ten
Ren still could not learn its lesson when stores were constantly complaining about
slow service, uneven product quality, and store space not well-prepared. This is
one of the reasons why people who have been drinking Ten Ren had to leave, and
also made new customers afraid. Especially in today's social networking era, a
small mistake in management has been spread quickly, and Ten Ren had been
complained of during service regularly.

Wrong customer segment

The Coffee House seems to have a little bit of hurry to bring this brand to Vietnam
without doing thorough market research to choose the right customer segment and
menu. From the beginning, the fact that Ten Ren chooses the high-end segment is a
huge challenge since brands like Gong Cha and Koi are doing very well. The
recognition of these brands is also very great because when we mention high-
quality milk tea, most customers will think of these brands.

Price
Average income per capita of Vietnam (2019) is about 2,800 USD, approximately
64, 400, 000 VND/year. Compared to the previous markets of Ten Ren, this is a
quite low number since the average price of a cup of Ten Ren is in the range of less
than 40 thousand Vietnam dong for tea products and 40 - 70 thousand Vietnam
dong for other products. Overall, this is a high price, especially since Ten Ren's
target customer is young people. Although it is known that Ten Ren targets to
customers with high income, the quality is nothing too special and is always
considered the most expensive in the market, this is considered a big shortcoming
in the balance between quality and imitation of Ten Ren.

The willingness to pay for a cup of
milk tea for young people is mostly
$2 - $3 (52%) and $1 - $2 (28%), Ten
Ren's price is in the first group.
Although consumers are willing to
pay between $2 - $3 or about 45,000
-70,000 Vietnam dong, Ten Ren's
price is too close or even equal to this
figure, leading to consumer surplus
almost very small. This caused a
hesitation when customers wanted to
drink Ten Ren's milk tea, especially
when Ten Ren does not have enough
novelty to attract, and customers can
completely choose other brands with
lower prices but still satisfy the
demand.
8
 Willingness to pay for a cup of milk
tea

6% 14%

29%
52% Less than 1$
1$-2$
2$-3$
More than 3$

Location
Location is an essential point to distinguish famous brand with others. The
challenge of milk tea brands is finding convenient premises, eye-catching space
decoration to become a gathering place for "check-in" for young people. Ten Ren
targeted the high-end segment, where had strong competitors with certain foothold
in the milk tea market in particular and the beverage market of Vietnam in general.
As a result, enjoying milk tea in beautiful decoration space, located in beautiful
locations, and suitable for check-in are factors that are very interested.

Although most of Ten Ren's stores are located in District 1, District 3 and Tan
Binh district, they are located on less prominent and difficult-to-find routes, and
there are no stores located on important routes. High-end milk tea stores are
usually located on famous roads such as Ho Tung Mau, Su Van Hanh, Phan Xich
Long. Moreover, Ten Ren does not focus on opening many stores in commercial
centers such as Van Hanh Mall, SC Vivo City where the target consumers of this
brand often visit.

Flavor
Compared to other milk tea brands, Ten Ren's menu is moderately diverse with 5
main drinks: classic traditional tea, traditional milk tea, fresh milk latte tea, tropical
fresh fruit tea and ice cream float. In Ten Ren, it is difficult to find a drink that is
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must try. Although Ten Ren is different in type of tea, it does not make a
significant difference when Ten Ren uses King's Oolong 913 tea, and also not
suitable for Vietnamese tastes, especially young people. The result of a recent
survey shows that this relative group prefers the sweet and fatty taste that is
neutralized with the mild bitterness of tea. Whether a lot of tea or more milk is
based on personal preference, most people are still more preferred to milk.
Meanwhile, Ten Ren milk tea still carried the brand flavor in the Taiwan market
with its clear and bold tea taste.

Favorite Brands
160
140
120
100
80
60
40
20
0
Bobapop Tocotoco Gongcha Koi The R&B Tea Heekka Uncle Tea Ding Tea Others

Favorite Brands

Considering the customers, if you change the pursuit of strong tea flavor to reach
office workers like Phuc Long, Ten Ren's current menu will need to be adjusted to
be more suitable for because the current beverage lines include only sweet drinks,
less coffees. Currently, in the consumer's impression, Ten Ren is strong in tea, but
as "tea in milk tea", not tea in particular. This weakness is largely affected by the
misleading communication strategy, not focusing on promoting its strengths on
social networks, not introducing products at the place of sale but merely displaying
the product. Some users don't even realize Ten Ren sells its own tea. Ten Ren's
signature tea is not suitable for the consumer segment of this brand, and in
contrast, those who like Ten Ren's bold teas have no chance to reach them. Ten
Ren has completely failed to make a mark, a unique flavor for everyone when it
comes to Ten Ren.

Big competitors
The time when Ten Ren came to Vietnam market was 2017, it can be considered
quite late when at this time, the milk tea market has been shaped by big brands,
especially brands in the consumer of Ten Ren's high-end products such as Gong
Cha, Koi, The Alley have a firm foothold in the hearts of consumers. This is a big
difficulty for Ten Ren, and also one of the most important reasons why Ten Ren
failed in the Vietnamese market.

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Although it has never talked about its competitor, with the current price and
business model, it is easy to recognize Ten Ren's direct rival is Phuc Long, R&B,
especially Gong Cha and Koi - two brands with very close price and taste to Ten
Ren. Along with the popular trend of milk tea, coffee chains have also started to
expand their products, creating more choices for customers. Ten Ren's competitors
in Vietnam were not only high-end milk tea brands such as Gong Cha, Koi, The
Alley but they also were major coffee chains like Highlands Coffee, Phuc Long,
The Coffee House.

There are a lot of big competitors with substitutes. With availability of close
substitutes, the price of Ten Ren is greater than the price elasticity of demand so
customers tend to choose the brand with lower price. It makes the quantity of Ten
Ren fall and makes investment not efficient. 

High cost
Ten Ren showed frustration in its financial allocation, starting with the decision to
import materials from abroad (mainly tea) to ensure quality. According to Nguyen
Hai Ninh: "Tea material will be imported from Taiwan in the first time and then, if
finding tea in the country that meets the standards, it will take advantage of
domestic resources." However, by the time Ten Ren was closed, no supplier was
able to satisfy this brand, which meant that Ten Ren could not reduce production
costs.

Furthermore, store fee still a difficulty for businesses. Base on a report by a

research unit in Ho Chi Minh City, real estate values in some milk tea trading
routes have increased due to the competitiveness of this attractive drink. Real
estate fever due to milk tea has led to huge operating costs. Great competition, high
operating costs make profit of the milk tea chains drop seriously.

c. Consumers

The determinant of market orientation is the customer, so trying to satisfy the

consumer’s demand and take the consumer as the orientation to explore its value
can bring the external sustainable competitive advantage for the enterprise's
marketing.

Zaithaml, Monroe, Gronroos, Woodruff and others formally put forward the
concept of "customer value" or similar concepts in the late 1980s. These scholars
pointed out that when customers bought the products, they do not entirely rely on
their satisfaction with the enterprise, but through continuous comparison to

11
measure their value and then choose the product or service that can maximize their
own value.

According to the latest data on external consumption behavior by Worldpanel,

Kantar, in the first 6 months of this year in Ho Chi Minh City, milk tea is still the
most popular instant drink after coffee. On average, 1 out of 5 people buy milk tea
at outside stores every 2 weeks. "Remarkably, the young generation of Gen Z
(born in 1997, accounting for about one third of the population of Vietnam) is the"
most active" group with milk tea. Accounting for nearly 60% of these types of
customers' spending on non-alcoholic drinks, milk tea is not only a drink but also
the 'lifestyle' of today's youth ”, Ms. Pham Quynh Trang - Insight Director at
research firm market research Worldpanel, Kantar Vietnam assessment. Gen Z is a
group of consumers who are always looking for new things. Therefore, to stand out
in this fierce competition, brands need to constantly update trends with innovative
and unique ideas and products that bring more new experiences, according to Ms.
Pham Quynh Trang.

We had done a small survey on milk tea habits in 315 students, aged from 15 to 22
years old, and the figure for the frequency of using milk tea in a week of this
subject is amazing.

Frequency of drinking milk tea for young people per week

3%
15%

Every day
42%
1-2 times
30%
3-4 times

No
10%
Promotion time

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The demand for milk tea of today's young people has gradually become a young
culture, but big demand does not mean doing business in this market is easy as
there are more than 100 brands across the country competing with each other. Ten
Ren had tried very hard to create trends in PR for each of its reality stages. At
specific times, it launches product variations with appropriate fruits and
promotions. Although Ten Ren has always had accounting profits, the economic
profits are too low because what Ten Ren does, other brands can do it and even do
better than Ten Ren.

3. Experience from Ten Ren’s failure?

a. Human

The foundation of business must first of all towards human is the core value. No
one can devise a perfect business plan, but people are sensitive enough to capture
changes in the market, detect irregularities and change in a timely manner.
Building a well-structured and highly qualified human resources system is the most
important factor for businesses, especially new businesses. Enterprises not only
must select qualified, experienced, market-sensitive human resources and diners to
cope with all situations, but they also provide flexible plans, especially suitable for
imported products, how to adapt to the Vietnamese market.

b. Strategy

Product
In the milk tea market with so many choices, creating a quality product with a
special and different taste is necessary to build a private brand. Products need to be
invested in creatively, new, constantly changing and updated according to the trend
to suit the tastes of customers. Once a brand wants to attack each type of customer,
the most important thing is to research the user and hit on their emotions. In a
consumer-centric market, create for them the most "familiar" emotions to make
your product or service friendly.

Management Strategy
The milk tea market in Vietnam emerged very quickly with a series of domestic
milk tea brands such as Bobapop, Phuc Long, Tocotoco, Gongcha, Koi Thé. Most
of these milk tea companies expanded their scale slowly, firmly grasp the
Vietnamese market. Therefore, enterprises need to prepare a suitable and flexible
plan that can both grasp the opportunity and take into factors such as infrastructure,
promotion, location, price, and perceptions of customers, ... for a reasonable

13
investment. Although opening multiple stores in a short time will help increase
brand awareness, it requires an experienced management system to avoid mistakes
in the business process as well as serving customers.

Financial Strategy
A company needs to set up the right spending plan in order to survive and thrive.
For example, Phuc Long, they set up a farm with a factory from the very beginning
so the company can completely control the quality and cost of raw materials. As a
result, they get good tea leaves at a low price compared to imported from another
company. In addition, we also have a financial strategy of "offset losses" of the
Trung Nguyen conglomerate chain: the system of their coffee shops lost nearly 24
billion VND in 2018, but the group overall profit was up to 347 billion copper.
However, beyond the aforementioned bookkeeping benefits, economic profit is the
key factor. This is also the reason why The Coffee House decided to stop Ten
Ren's business. Businesses need to make a difference, not be duplicated with any
other brand. In addition, the process of periodically importing raw materials will
also bring certain obstacles. Periodic importation in fixed quantities under
contracts means that if these expected quantities are not consumed, inventory
product will accumulate over the years, possibly expire and throw away. This
potential problem places a heavy burden on the sales team to ensure that the
necessary monthly revenue with stable consumption of each product does not lead
to oversupply and the financial team allocates resources properly. to minimize
excess costs.
PART III: CONCLUSION

Ten Ren closed when The Coffee House had a personnel change. Seedcom founder
Nguyen Hai Ninh has just left the CEO position and transferred the right of CEO
of The Coffee House to the young co-founder Mai Hoang Phuong. Although there
are many regrets, this is a very reasonable and timely decision. Ten Ren had
always stood between the profit and loss, but the failure to find the right business
model is enough to make Ten Ren stop after only 2 years. This is also a warning
sign for brands entering and are about to enter not only the milk tea market but also
the F&B market. Enterprises need to have a process of thoroughly investigating the
market as well as identifying the appropriate customers with product quality and
business model. In addition, in order to adapt to the ever-changing market with a
fast rate of rejection, businesses need to have flexibility in their business strategies
as well as anticipate the trend so as not to be left behind.

14
References

Website:

[1] https://marketingai.admicro.vn/nghien-cuu-thi-truong-tra-sua-viet-nam/

[2] https://nhipsongdoanhnghiep.cuocsongantoan.vn/cau-chuyen-kinh-doanh/2017-
nam-cua-kinh-doanh-tra-sua-3427866.html

[3] https://www.brandsvietnam.com/congdong/topic/13622-Thi-truong-FB-Viet-
Nam?fbclid=IwAR1lwAjiF5j9O-_xMmu9Gl62J8IcsFzngQwhlJxX_xylTEU-
MQCVEGByiJY

[4] https://doanhnhansaigon.vn/thoi-su-trong-nuoc/tra-sua-ten-ren-cay-dang-dong-
cua-1093310.html

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[5] https://vietnamnet.vn/vn/kinh-doanh/thi-truong/100-thuong-hieu-tai-viet-nam-
thi-truong-tra-sua-lieu-da-bao-hoa-551235.html

[6] https://www.atlantis-press.com/proceedings/meess-18/25900573

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