Vivian Pham Nguyen

Title: CULTURAL DIFFERENCES LEAD TO STARBUCKS’S

STRUGGLE IN VIETNAM

Starbucks Corporation, an American multinational company founded in 1971 in Seattle,

Washington, is a premier roaster, marketer, and retailer of specialty coffee around the world. By
September 2020, Starbucks has about 349,000 employees across 32,660 stores (16,637 company-
operated stores and 16,023 licensed stores) in 83 countries and total revenue of $19.16 billion.
Their products include hot/cold coffee beverages, tea, smoothies, and snacks such as chips,
cakes, sandwiches, etc. About entry into Vietnam, Starbucks officially entered Vietnam’s market
in February 2013 with the opening of its first store in Ho Chi Minh City and currently has 34
stores in Ho Chi Minh City, Hanoi, and Hai Phong. Until 2017, Starbucks was the second chain
in terms of revenue, just behind Highlands Coffee, but the rankings changed in 2018 when The
Coffee House (a newly-entered chain) grew nearly 100% in revenue. According to data, The
Coffee House's revenue reached VND 669 billion in 2018, while Starbucks was pushed down to
the third position with nearly VND 600 billion. After 6 years in Vietnam, Starbucks has only 49
stores, which is far below the neighboring markets: Starbucks has more than 330 stores in
Thailand, in Indonesia more than 320 and Malaysia more than 190. The chain still maintained
growth but was somewhat slower than domestic rivals, and the reasons behind it will be
illustrated below.
Related to Starbucks's struggles in Vietnam, two main failure factors will be analyzed:
The unmindfulness of cultural differences and fierce competition with local brands:
To start with, the issue of cultural differences will be discussed: Culturally speaking,
coffee is a huge part of daily life in Vietnam. Most Vietnamese people drink coffee as their
morning ritual and can have multiple cups of coffee throughout the day. Economically speaking,
Vietnam is the world’s second-largest coffee exporter as it produces over 1.73 million tons of
coffee a year. Therefore, either way, it is undeniable that Vietnam knows its way around coffee
and has its coffee culture. According to research, there are some significant differences between
Starbucks and Vietnamese coffee: Firstly, Starbucks uses Arabica beans, while the coffee beans
used in Vietnam are almost always Robusta. Robusta beans are primarily grown in Vietnam,
have higher caffeine content (2.7%), with a thick lingering taste and higher acidity. The stronger
 Vivian Pham Nguyen

taste, a thicker brew of this kind of bean makes a different, distinctive taste that Vietnamese
incredibly fond of. Secondly, Starbucks often makes their coffee beverages with milk. On the
contrary, instead of normal milk or cream, Vietnamese people like to use condensed milk.
Apparently, super sugary, sweetened condensed milk provides the perfect counterbalance to the
incredibly strong, dark-roasted Vietnamese coffee, makes the combination one of the most
popular coffee drinks in the country. Lastly, it seems like the menu is not adapted to suit
Vietnamese people's tastes. To be more specific, in Starbucks's Vietnamese menu, you can only
find usual coffee, flat whites, and lattes. However, there is a wide variety of coffee drinks in
Vietnamese coffee culture with different combinations, such as black coffee, coffee with
condensed milk, egg yolk coffee, coconut coffee, salt coffee, etc. To sum up, not adapting its
menu to appeal to the local customers is the main issue here for Starbucks. Ignoring cultural
differences and trying to stick with an American menu will not get them anywhere and may push
them off the Vietnam market.
Next, the problem concerning local brands will be explained: Until 1995, American
businesses were not allowed in Vietnam. The resentment of the Vietnam war severed ties
between the two countries for decades. But finally, the relationship was patched up, and
American businesses seized the opportunity as soon as they could. However, like the situation
between American fast-food chains and Vietnamese street food vendors, Starbucks has to face
thousands of local coffee shops in Vietnam. In fact, local vendors control almost 80% of the
restaurant business and shops. Besides the vendors, Vietnam also has many big coffee chains,
namely Highlands Coffee, The Coffee House, Cong Coffee, Trung Nguyen Legend, Phuc Long
Coffee and Tea, etc. The number of shops is an issue, but the bigger matter result in this fierce
competitiveness is the menu, the prices, and (along with the price) the consumers' income. The
menu, as mentioned above, is not being adjusted to suit Vietnamese people's taste buds, and
neither does the price range. About the price, at local vendors, coffee costs less than $1.
Nevertheless, in Starbucks, coffee can be charged $4 or more - this is quadruplicate the local
vendors' price. Last but not least, most foreign brands and chains are likely to forget that
Vietnam is still a lower-middle-income country, and the middle to the upper-class consumer is
still a relatively small segment of the population. 
To solve the problem, Starbucks has tried to adapt to a cultural strategy related to product
localization. Like usual, they offer an ultimate customer experience that puts customer feeling at
 Vivian Pham Nguyen

the top of priority and also promotes the value of "Starbucks Culture". Consumers are put at the
center of the company's concerns and all decisions and actions consider from the consumer's
point of view and focus on the needs of customers. The company offers a welcoming atmosphere
to many young white collars, college students as "a home away from home". Starbucks became a
fashion symbol in Vietnam in just a few years: It translates more than coffee, but brand and
culture. Many young white collars, university students like to spend time in coffee shops and are
passionate about the environment that Starbucks creates where they can work, read, browse the
Internet. To them, Starbucks offers an exceptional cultural atmosphere, with support for
knowledge, respect for the ego, and a bit of Westernization. Although going to Starbucks is still
a ‘once in a blue moon’ experience to most consumers, this strategy does likely to work well on
students and office workers. Starbucks still has a long way to go to fully solve its issues.
To sum up, as far as concerned, this state is not going to change anytime soon and if
foreign brands and chains do not adjust their menu and prices keeping the Vietnamese customers
in mind, it will be extremely difficult for them to own a significant share of the market, if not
impossible. Nonetheless, Starbucks is already finding their way out and it seems like they are on
the right track.

Reference list:
Starbucks Corporation’s 2020 Annual Report from US Securities and Exchange Commission:
Starbucks Corporation 2020 Form 10-K Annual Report, US Securities and Exchange
Commission (Accessed on August 10th, 2021)
Vietnam Economic Times (Accessed on August 10th, 2021)
Tien, Nguyen. (2020). Analysis of Starbucks' entry strategy into Vietnam market. 5. 44-48.
(Accessed on August 10th, 2021)
CNBC (Accessed on August 10th, 2021)
Vietnamese Coffee Culture (Accessed on August 10th, 2021)
Why Starbucks is failing in Vietnam? (Accessed on August 10th, 2021)
Top 9 coffee chains in Vietnam (Accessed on August 10th, 2021)
Business strategy of Starbucks in Vietnam (Accessed on August 10th, 2021)