FOREIGN TRADE UNIVERSITY

HO CHI MINH CAMPUS

---------***--------

MID-TERM REPORT
Course: Principles of Economic Management

Topic: NESCAFE’S MARKET IN VIETNAM ANALYSIS

Group 11
Group members:
Member Student ID

Trần Kiên Nghị 2113153042

Huỳnh Quốc Minh 2111113157

Phạm Minh Quân 2113153051

Phạm Thế Quang 2113153050

Huỳnh Gia Bảo 2115113029

Nguyễn Vũ Nhật 2115113191

Class ID: 196

Lecturer: Phạm Thanh Dung

TP.HCM, tháng 12 năm 2023

 Table of Contents
EXECUTIVE SUMMARY..................................................................................................................4
INTRODUCTION................................................................................................................................6
BACKGROUND SUMMARY............................................................................................................7
ENVIRONMENTAL ANALYSIS.......................................................................................................8
1. Macroeconomic Analysis – PESTLE model.............................................................................8
1.1. Political.............................................................................................................................8
1.2. Economics..........................................................................................................................8
1.3. Social.................................................................................................................................8
1.4. Technological....................................................................................................................9
1.5. Environmental..................................................................................................................10
1.6. Legal................................................................................................................................11
2. Microeconomic Analysis - Porter’s 5 forces...........................................................................11
2.1. Bargaining Power of Buyers:..........................................................................................11
2.2. Bargaining Power of Suppliers:......................................................................................11
2.3. Competitive Rivalry:........................................................................................................12
2.4. Threat of New Entry:.......................................................................................................13
2.5. Threat of Substitutes:.......................................................................................................14
3. Opportunities and threats of Nescafe in the Vietnamese market:...........................................14
3.1. Opportunities for Nescafe:..............................................................................................14
3.2. Threats to Nescafe...........................................................................................................15
INTERNAL ANALYSIS...................................................................................................................17
1. STRENGTHS..........................................................................................................................17
2. WEAKNESSES.......................................................................................................................18
ANALYZE NESCAFÉ’S ECONOMIC MANAGEMENT FUNCTION - PLANNING..................19
1. Accounting and Financial capital:...........................................................................................19
2. Human Resources:...................................................................................................................19
3. Supply Chain:..........................................................................................................................21
4. Marketing & Sales:..................................................................................................................23
5. Technology:.............................................................................................................................24
APPLICATION OF THEORY..........................................................................................................26
CONCLUSION..................................................................................................................................27
RECOMMENDATION......................................................................................................................28

2
REFERENCES...................................................................................................................................29

3
 Table of Figures
Figure 1. Vietnam and Thailand GDP per capita 2016-2021 (USD) (Source: Trading Economics).18
Figure 2. Indexed coffee cash income and yield changes, 2018-2022...............................................20
Figure 3. Progress toward helping 10 million young people around the world have access to
economic opportunities by 2030 (millions) (Nestlé, 2022)................................................................22
Figure 4. Nestlé’s progress against their commitment in 2022 (data assured by EY).......................23
Figure 5. Compliance with the Nestlé Marketing Communication to Children Policy.....................24

4
 EXECUTIVE SUMMARY
This report provides an in-depth analysis of Nescafé's market position within the Vietnamese coffee
market, examining its current strengths, weaknesses, opportunities, and threats (SWOT analysis).
Furthermore, it delves into the company's economic management strategies, marketing plans, and
technological advancements, providing insights into their operational effectiveness and future
growth potential.
Nescafé enjoys several significant advantages in the Vietnamese market. Its strong brand reputation
and established distribution network ensure widespread awareness and accessibility of its products.
Additionally, the company's commitment to continuous innovation in product offerings and its
focus on social and environmental sustainability resonate well with contemporary consumer values.
Notably, sourcing coffee beans from renowned Vietnamese highlands like Buon Ma Thuot and Na
San fosters a sense of local connection and authenticity. However, Nescafé also faces certain
challenges. Intense competition from established players like Coca-Cola, Unilever, and Mondelez
International necessitates constant innovation and strategic differentiation. Furthermore, cost-
conscious consumer behavior in Vietnam can limit the adoption of premium coffee products,
requiring Nescafé to maintain competitive pricing strategies. Additionally, high rental costs for
commercial spaces can impact operational margins, demanding efficient resource allocation.
The Vietnamese market presents substantial growth opportunities for Nescafé. The country's
booming economy, coupled with rising disposable income and an increasing urban population,
creates a favorable environment for the expansion of convenient and premium coffee beverages.
The growing demand for such products among young consumers aligns perfectly with Nescafé's
target audience and product portfolio. Additionally, the rapid growth of e-commerce in Vietnam
offers a valuable platform for expanding online presence and reaching a wider audience. Despite
these opportunities, Nescafé faces certain threats. Intense competition within the market
necessitates continuous product development and marketing efforts. The availability of diverse
substitutes such as tea, iced coffee, cappuccino, hot chocolate, and plant-based beverages requires
Nescafé to clearly differentiate its offerings and cater to specific consumer preferences. Moreover,
the evolving legal framework for electronic transactions necessitates compliance and adaptation to
ensure smooth and secure online operations. Nescafé has implemented various economic
management strategies to ensure long-term sustainability and growth. The Nescafé Plan 2030
focuses on creating regenerative agriculture, empowering women and youth, and providing
economic opportunities. This commitment to social impact fosters positive brand perception and
resonates with socially conscious consumers. Nescafé's marketing strategies are tailored to the

5
Vietnamese market. The company focuses on research and development of new products to cater to
evolving consumer preferences. Additionally, it leverages production and acquisition links to
optimize cost efficiency and ensure product availability. Finally, Nescafé invests in research and
development of packaging to enhance product presentation and environmental sustainability.
Nescafé also actively embraces technological advancements to improve operational efficiency and
enhance product quality. The implementation of the Nescafé Plan techniques ensures consistent
quality standards for coffee beans. Additionally, the company leverages digitalization to connect
with consumers, monitor market trends, and optimize supply chain operations. Furthermore,
Nescafé invests in enhancing innovation capabilities to maintain its competitive edge and develop
new products that align with consumer needs.
Nescafé currently holds a strong position in the Vietnamese market and possesses significant
potential for further growth. To capitalize on this potential, the company should continue to focus
on innovation, digital marketing, brand loyalty, sustainability, training and development, and
strategic partnerships with local businesses. Additionally, advocating for fair trade and ethical
practices can further strengthen Nescafé's reputation and foster positive brand perception. By
adopting these recommendations and implementing effective strategies, Nescafé can solidify its
position as a leading coffee brand in Vietnam and contribute to the sustainable growth of the coffee
industry.

6
 INTRODUCTION
The global coffee industry is a dynamic and competitive landscape, with established players like
Nestlé constantly striving to maintain market dominance. In this report, our group will delve into an
in-depth review of Nestlé's Nescafé in the Vietnamese market.
Using various frameworks and models, such as the PESTLE model, Porter’s 5 forces, SWOT
analysis,.. the study aims to analyze how Nestlé’s Nescafé is perceived in Vietnam, the potential
growth and the opportunities and threats to Nescafé’s expansion in the Vietnamese market.
Additionally, we leverage relevant economic principles to assess Nescafé's pricing strategies,
production costs, and overall market performance. This analysis will shed light on the product's
economic viability and identify potential areas for optimization.
By combining these diverse frameworks and methodologies, our report aims to provide a
comprehensive and insightful review of the Vietnamese market of Nescafé. This analysis will offer
valuable recommendations to Nestlé for optimizing the product's performance and ensuring its
continued success in the ever-evolving coffee industry.

7
 BACKGROUND SUMMARY
Nestlé is a worldwide renowned name in the Food and Beverage industry with a rich and diverse
history, standing as a testament to innovation and strategic expansion. Founded in 1866, Nestlé's
reach and portfolio has expanded significantly, encompassing a vast array of products across
various categories, including coffee, dairy, confectionery, pet food, and more (Travel through Our
History Timeline, n.d.). Today, Nestlé boasts over 2000 brands, with iconic names like KitKat,
Maggi, Nescafé, Nespresso, and Häagen-Dazs holding household recognition across the globe.
Integral to Nestlé's success is its flagship coffee brand, Nescafé. Launched in 1938 as a response to
a surplus of coffee beans in Brazil, Nescafé revolutionized the coffee industry with its instant coffee
format (About Us | Nescafe Global, n.d.). Developed by Max Morgenthaler, Nescafé offered a
convenient and accessible alternative to traditional brewing methods, quickly capturing the hearts
and taste buds of consumers worldwide. The iconic red and yellow logo became synonymous with
quick and delicious coffee, propelling Nescafé to become a global phenomenon.
Nestlé's arrival in the Vietnamese market in 1995 marked a significant moment for both the
company and the country. Following Vietnam's economic reforms and opening to foreign
investments, Nestlé seized the opportunity to establish its presence in this burgeoning market.
Initially, the company focused on dairy products, leveraging its expertise in this sector and catering
to the growing demand for high-quality dairy products in Vietnam. However, Nestlé quickly
recognized the potential of the Vietnamese coffee market and expanded its portfolio to include
coffee, confectionery, and other categories.
In the early 2000s, Nescafé recognized the growing demand for convenient and premium coffee
beverages among Vietnamese consumers. This led to the introduction of Nescafé Latte, a ready-to-
drink coffee beverage offering a creamy and flavorful latte experience. While it initially faced
challenges due to its higher price point compared to traditional coffee options, Nescafé Latte
successfully captured the attention of younger consumers and urban professionals seeking a
convenient alternative. Today, Nescafé Latte enjoys significant brand recognition and market share
within the ready-to-drink coffee segment in Vietnam.
ENVIRONMENTAL ANALYSIS
1. Macroeconomic Analysis – PESTLE model
1.1. Political
Vietnam stands as a politically stable country in Southeast Asia. With a government system
characterized by one-party rule under the Communist Party of Vietnam, the nation has maintained
internal political consistency and relative stability over the years. Economic reforms and open-

8
market policies have propelled Vietnam's rapid development, contributing to its political stability.
The sustainable policy, which has positioned Vietnam as a reliable and steadily growing presence in
the region, has created conditions for FDI being increased and global manufacturing. In addition,
Vietnam has fostered sustainable agriculture policy aiming at net-zero carbon emission at COP26
since 2018. This has received a positive attitude from many domestic and foreign companies,
especially Nestle, who is a pioneer in sustainable development activities in the field of regenerative
agriculture. Furthermore, Vietnam has implemented a 2% VAT reduction policy to stimulate
domestic demand for economic development after being heavily affected in all aspects by the covid
19 epidemic and economic recession. Moreover, Vietnam has participated in many free trade
agreements and communities, creating many chances for global integration and development.

1.2. Economics
Vietnam’s GDP is expected to increase by 5-5,2%% in 2023 compared to 2022. Although Vietnam
is affected by the difficult situation of the world economy such as tight monetary policy, high
inflation rate, increased interest rates, signs of economic recovery are clear in the last quarter of
2023: Shifting supply chains and global investment capital flows; Chinese market reopens; Services
and consumption increased quite well; Public investment is promoted, fiscal risks are at a moderate
level, policy space remains; Inflation and interest rates are decreasing, the basic exchange rate is
stable, and bad debt risks are under control. This is a ideal opportunity to boost consumer demand
again.

1.3. Social
Vietnam is a developing country with a fairly rapid urbanization rate. According to the results of the
study, the urbanization rate in our country has increased rapidly from 30.5% to about 40% from
2010 to 2023. In addition to the transformation of urban space and economic space, urbanization
also contributes to improving the quality of life, creating an image of Vietnamese urban areas of
spacious, green, clean and beautiful, modern civilized life. . The quality of life in urban areas is
gradually improving, the unemployment rate and poverty rate are decreasing; The development of a
number of urban areas has created a driving force for socio-economic development in rural areas.
The unemployment rate of the working-age force in urban areas tends to gradually decrease, from
4.3% in 2010 to 2.97% in 2022. The percentage is nearly three times lower than in rural areas. The
average life expectancy of the whole country increased from 73.3 years in 2015 to 73.7 years in
2020, in which regions with a high level of urbanization have a higher average life expectancy than

9
other regions. This leads to a more number of wealthier households, who require higher demand for
more quality products. In addition, The trend of a healthy lifestyle is becoming more popular,
especially among young people. They are also increasingly serious and determined in finding
solutions to help improve their health comprehensively, including choosing nutritional products to
improve physical and mental health. Therefore, today's products require higher quality and health
assurance.

1.4. Technological
The Covid-19 pandemic has brought many changes to the economy, but it has contributed to the
breakthrough growth of e-commerce. Vietnam has become one of the most potential e-commerce
markets in the ASEAN region. According to a report by the Vietnam E-commerce Association
(VECOM), the average growth rate of e-commerce in the period 2016 - 2019 is about 30%. The
scale of retail e-commerce for consumer goods and services increased from 4 billion USD in 2015
to about 11.5 billion USD in 2019. VECOM's Vietnam E-commerce Index 2021 report also cited
information in the Southeast E-commerce report. Asia 2020 of Google, Temasek and Bain &
Company shows that Vietnam's e-commerce in 2020 increased by 16% and reached a scale of over
14 billion USD. Of which, the online retail goods sector increased by 46%, ride-hailing and food
technology increased by 34%, marketing, entertainment and online games increased by 18%, and
the online travel sector alone decreased by 28%. . It is forecast that in the period from 2022 - 2025,
Vietnam's e-commerce will increase by an average of 25%/year, reaching 35 billion USD in 2025,
accounting for 10% of total retail sales and consumer service revenue nationwide. From now until
2040, about 95% of shopping transactions are expected to be through e-commerce (e-commerce). In
2022, the number of Vietnamese people buying online will reach more than 51 million, an increase
of 13.5% compared to the previous year, total spending on online shopping will reach 12.42 billion
USD. 73% of consumers said they regularly shop on e-commerce shopping platforms and 59% said
they have repeatedly ordered or shopped on international websites. According to a recent report by
Ninja Van (the leading shipping company in the market in Southeast Asia), Vietnam accounts for
15% of the total online shopping market in Southeast Asia, second only to Thailand at 16%. % and
on par with the Philippines. In addition, Over the past few years, social media has become popular
in the daily lives of most Vietnamese people along with Vietnam's increasing smartphone and
internet penetration rates. According to Google statistics, currently 97% of Vietnamese users search
for information through handheld devices such as smartphones and tablets. According to market
research firm ComScore (USA), Vietnam is currently one of the countries with the largest online

10
population in the ASEAN region. Data from the General Statistics Office also shows that the
number of internet users in the country increases rapidly each year. This is considered an ideal
condition for social networks to appear and quickly become popular in Vietnam. Along with the
development of the internet, social networks are considered one of the most influential internet
applications, especially for young people in both urban and rural areas today. Therefore, companies
need to adapt to the contemporary trend and expand their market, especially on e-commerce
platforms.

1.5. Environmental
Vietnam's tropical monsoon climate and fertile soil create an ideal environment for diverse
agricultural activities, with a special emphasis on thriving coffee trees and many other production
activities. By the end of 2021, there are more than 20 coffee growing provinces, mainly
concentrated in the Central Highlands (accounting for about 90% of the country's coffee area).
Vietnam has become the world's leading coffee producer and exporter; which ranked first in the
world for many consecutive years in the production and export of robusta coffee. In 2021,
Vietnam's coffee exports will reach more than 1.56 million tons, worth more than 3 billion USD.
The country's climatic conditions combined with nutrient-rich soil create an environment favorable
for agricultural productivity. In the period from 2008 to 2020, the agricultural GDP growth rate
reached 3.01%/year, the GDP scale (according to adjusted scale, calculating comparative prices) of
the entire industry increased 1.4 times. Agricultural labor productivity reached 55.9 million
VND/person, more than 4 times higher than in 2008. The scale of agricultural exports increased by
an average of 8.01%/year; in 2020 it reached 42.34 billion USD; in 2021 it reached 48.6 billion
USD. Vietnam's agricultural products are present in 196 countries and territories. However, amid
these agricultural advantages, Vietnam is facing a significant environmental challenge—CO2
emissions. Although the country has made commendable strides in reducing carbon emissions,
levels remain worrying. This predicament highlights the urgent need for corporations to play a key
role in achieving the shared goal of zero CO2 emissions. Recognizing the urgency, businesses must
proactively adopt sustainable measures, invest in environmentally friendly technology and
collaborate on innovative solutions to cut carbon emissions and contribute for a more
environmentally sustainable future. In doing so, they can align their operations with global
initiatives and help propel Vietnam towards a greener and more sustainable trajectory.

11
 1.6. Legal
Vietnam's legal framework for electronic transactions may not comprehensively address all
emerging issues in this rapidly evolving domain. Potential gaps in the law could lead to
challenges, and these may, in part, arise from a lack of awareness among users and businesses.
As technology advances, new complexities in electronic transactions may not be explicitly
covered by existing regulations, leaving room for uncertainties and potential disputes. Raising
awareness and continually updating legal frameworks to keep pace with technological
advancements will be crucial to ensuring the smooth and secure progression of electronic
transactions in Vietnam.

2. Microeconomic Analysis - Porter’s 5 forces

2.1. Bargaining Power of Buyers:
Nestlé supplies products through various retail and online channels. Particularly, carriage and
forward agencies, distributors, wholesalers, retailers, and salesforce are involved. Individual
consumers have little power when the volume of goods consumed per consumer is considered.
However, the availability of numerous comparable options with no switching costs gives customers
bargaining power. In the case of Nescafé, the power of buyers varies depending on the distribution
channel. In retail stores, especially those that deal with larger volumes and can shift to competitors'
products if they are unsatisfied with their margins, buyers have moderate power (MBA Skool Team,
2020). However, in locations where Nescafé's products hold a dominant position, such as vending
machines, the buyers' power is lower. That being said, cumulatively due to diverse product range
and branding in all categories and worldwide dispersed operations and being leader in innovation,
Nestlé has a competitive advantage over competitors in its customer’s mind.

2.2. Bargaining Power of Suppliers:

Nescafé's main inputs include coffee beans, milk, and packaging materials. The bargaining power
of suppliers can affect the production costs. In the case of milk, since Nestlé is the trend setter and
sets compliance standards and sourcing framework for its suppliers, suppliers have little influence
on Nestlé as it buys in bulk due to its revenue (Portersfiveforcesteam, 2023). The same can be said
about the inputs of coffee beans. In the food and beverage industry, Nescafé owes the largest share
of the market requiring a greater number of supply chains. This triggers it to be an idyllic buyer for
the suppliers. Any of the providers has never revealed any grumble about cost and the bargaining
power is likewise low. Additionally, a significant number of acquisitions of its suppliers support the

12
idea that due to its size being much larger than that of its suppliers, it can simply integrate
backward.

2.3. Competitive Rivalry:

Major Competitors and Their Strengths and Weaknesses
The coffee landscape is dominated by established brands, each with distinct strengths and
weaknesses that pose challenges for Nescafe. Coca-Cola Company, with its global brand
recognition, diverse beverage portfolio, and effective distribution channels, is a formidable
competitor. However, its limited focus on coffee products and less emphasis on health and wellness
create opportunities for Nescafe Latte to differentiate itself.
Unilever, with its extensive product range, strong presence in both food and personal care segments,
and commitment to sustainability, is another significant player. However, its lack of specialization
in coffee compared to Nestle and the market saturation of some product lines present areas where
Nescafe can capitalize.
Mondelez International, renowned for its iconic brands like Cadbury and Oreo, boasts global reach,
distribution, and a strong focus on innovation. However, its limited presence in the coffee market,
less emphasis on health and nutrition, and vulnerability to changing consumer preferences offer
opportunities for Nescafe Latte to gain an edge.
PepsiCo, with its diverse beverage and snack portfolio, strong marketing capabilities, and robust
supply chain, is a major competitor. However, coffee products are not their primary focus, their
emphasis on natural and organic ingredients is less pronounced, and their intense rivalry with Coca-
Cola presents challenges.
Pricing Strategies, Marketing Efforts, and Product Differentiation
Nescafe employs a multifaceted approach to pricing, marketing, and product differentiation to
maintain its competitive edge. Its pricing strategy is based on perceived quality, offering affordable
options for specific market segments, introducing bundle packs, and utilizing different prices for
various SKUs to reach a broader audience. Competitors also employ competitive pricing strategies,
penetration pricing to enter new markets, and skimming pricing to gradually lower prices over time.
In terms of marketing, Nescafe leverages its global brand recognition, emphasizes the health
benefits of its products, and continuously introduces new latte variations and plant-based options to
appeal to diverse consumers. Competitors use various marketing channels, position their products as
healthy and natural, and run targeted campaigns to engage consumers.

13
Nescafe differentiates itself through quality, offering a range of latte flavors, and committing to
sustainable practices. Competitors build strong brand loyalty through consistent quality, focus on
product innovation, and highlight responsible sourcing practices.

2.4. Threat of New Entry:

In evaluating the Threat of New Entry within the latte market, Nestlé stands as a formidable
competitor, benefiting from a well-established brand reputation and a diverse product portfolio.
New entrants face the challenge of significant product differentiation to compete with Nestlé's latte.
The creation of a unique selling proposition (USP), involving innovation in flavors, ingredients, or
sustainability practices, becomes crucial for new brands.
Nescafe’s strength lies in substantial financial resources for research, marketing, and distribution,
creating a barrier for new brands that may lack the capital required for large-scale production and
marketing. Overcoming this challenge involves securing investment or finding cost-effective ways
to launch, with opportunities lying in focusing on lean operations and gradual expansion.
Nescafe’s advantage in economies of scale due to its global reach poses another barrier for new
brands striving to achieve cost efficiencies at a smaller scale. While Nestlé benefits from an
extensive distribution network, providing a strength, new brands encounter challenges in securing
shelf space and reaching consumers, necessitating the building of relationships with distributors and
retailers. Opportunities for new brands exist in leveraging online platforms and direct-to-consumer
models.
Where Nescafe has already complied with regulations in various markets, present a strength, while
new brands must navigate complex food safety, labeling, and advertising rules. Challenges include
understanding and adhering to local and international regulations, with opportunities arising from
ensuring transparency and ethical practices. The strength of Nestlé's loyal customer base becomes a
barrier for new entrants, requiring them to overcome brand inertia and build trust.
Opportunities for new brands lie in offering superior quality or unique experiences. In summary,
while new entrants bring freshness and innovation to the latte market, they face substantial
challenges related to scale, distribution, and brand recognition when compared to the established
presence of Nescafe.

2.5. Threat of Substitutes:

Examining the Threat of Substitutes reveals various alternatives that pose potential challenges to
the latte market. Tea, characterized by diverse flavors and affordability, emerges as a notable

14
substitute with global availability in both loose leaf and bagged forms. Iced coffee, offering a
refreshing alternative at a lower price point, is commonly found in coffee shops and supermarkets.
Cappuccino, with its distinctive strong coffee flavor, presents an alternative available in coffee
shops and cafes. Hot chocolate, synonymous with warmth and indulgence, is comparable in price to
lattes and commonly found in cafes and as a packaged mix. Plant-based alternatives, including oat
milk and almond milk, contribute to the landscape of substitutes with varying taste and texture,
increasingly available in coffee shops and grocery stores. The quality, price, and availability
differentials among these substitutes underscore the dynamic landscape and potential challenges for
the latte market.

3. Opportunities and threats of Nescafe in the Vietnamese market:

3.1. Opportunities for Nescafe:
Booming Economy: Vietnam's burgeoning economy, characterized by rising disposable income,
creates a fertile ground for products like Nescafé. This expanding consumer base with increased
purchasing power presents a substantial opportunity for Nescafé to expand its market share and
drive sales growth. With more disposable income available, consumers are increasingly willing to
spend on premium offerings, including convenient and ready-to-drink beverages like Nescafé. This
presents a significant opportunity for the brand to capture a larger share of the market and drive its
financial performance.
Urbanization and Convenience: The rapid urbanization trend in Vietnam fosters a growing
demand for convenient and ready-to-drink beverages. This shift in consumer preferences perfectly
aligns with Nescafé convenient packaging and ease of preparation. The increasingly fast-paced
urban lifestyle necessitates convenient and time-saving solutions, which Nescafé effectively
provides through its readily available and easily consumed product. This alignment with evolving
consumer preferences presents a valuable opportunity for the brand to expand its reach and solidify
its position in the market.
Digital Transformation and E-commerce Boom: The rapid growth of e-commerce in Vietnam
offers a valuable platform for Nescafé to reach a wider audience and expand its online presence.
This digital transformation provides a convenient and accessible channel for consumers to purchase
products, potentially leading to increased sales and brand awareness. By leveraging the e-commerce
boom, Nescafé can expand its reach beyond traditional retail channels and tap into a vast online
market.

15
Coffee manufacturing and processing facilities: With abundant natural resources, a growing
skilled workforce, and a low-cost labor force, Vietnam is an attractive destination for foreign
enterprises in the coffee processing sector. Nestlé, a leading company in the F&B sector, purchases
20 to 25 percent of Vietnamese coffee each year for processing and then both domestic
consumption and export. Foreign enterprises may also benefit from supportive government policies.
For example, according to Decree No. 57/2018/ND-CP, the Vietnamese government will support up
to 60 percent of the investment budget, capped at US$625,000, for enterprises investing in
Vietnam’s agriculture sector. Projects linking enterprises and farmers in production and agriculture
could also be subsidized under Decree No. 98/2018/ND-CP (Nguyen, 2023).

3.2. Threats to Nescafe

Intense Competition: The Vietnamese coffee market is highly competitive, with established
players like Coca-Cola, Unilever, Mondelez International, and PepsiCo vying for market share. This
competitive landscape necessitates continuous innovation, effective marketing strategies, and
competitive pricing to maintain a strong foothold in the market. To excel in this competitive
environment, Nescafé needs to constantly innovate its product offerings, develop effective
marketing campaigns, and maintain competitive pricing strategies.
Buyer Power and Brand Switching: The abundance of coffee brands available to consumers
empowers them with significant bargaining power. This ease of switching brands poses a threat to
Nescafé's market share and necessitates a focus on building brand loyalty and offering compelling
value propositions. Consumers have a wide range of coffee brands to choose from, giving them
significant bargaining power in the market. To mitigate this threat, Nescafé needs to build strong
brand loyalty through consistent quality, effective marketing campaigns, and engaging customer
experiences.
Prevalence of Substitutes: A wide range of substitutes readily available in the market poses a
threat to Nescafe's sales. Tea, iced coffee, cappuccino, hot chocolate, and plant-based alternatives
offer consumers diverse options to satisfy their caffeine and beverage needs. To counter this
challenge, Nescafe Latte must highlight its unique value proposition, emphasize its quality and
taste, and explore ways to differentiate its offering from readily available substitutes.

16
 INTERNAL ANALYSIS
1. STRENGTHS
Vietnam is renowned for having a huge market size which is 98,2 million people (2021). In
addition, the market growth of ready-to-drink (RTD) coffee segment is 21.44% (2023-2025).
The strength of the coffee market in Vietnam is evident in several key aspects. Firstly, the buying
power, indicated by the GDP per capita, stood at a robust 3409 US dollars in 2021. This signifies
a substantial level of economic affluence among the populace, potentially translating to increased
consumer spending on goods such as coffee.

Figure 1. Vietnam and Thailand GDP per capita 2016-2021 (USD) (Source: Trading Economics)

Moreover, the market access score, standing at 61.8 and ranked 72 out of 162 (Moderately free),
underscores a relatively open and accessible market environment. This level of market access can
be conducive to trade and business operations within the country, creating opportunities for both
domestic and international market participants.
Additionally, the skill levels in the business and technology sectors further accentuate the
strength of the coffee market in Vietnam. With a business skill level of 42% categorized as
Emerging, there is evident potential for growth and development in the business landscape,
potentially leading to enhanced business activities related to the coffee industry. The technology
skill level, rated at 65% and deemed Competitive, signifies a strong and mature technological
ecosystem, allowing for the implementation of advanced technologies in the production,

17
distribution, and marketing of coffee products. Globally ranking 35th in technology skill level in
2022 emphasizes the international competitiveness of Vietnam's technological capabilities,
presenting favorable conditions for the coffee market's advancement.

2. WEAKNESSES
Although having a huge market size, this market’s revenue is quite moderate which is 16.43
million US dollars (2023). Moreover, one of the weaknesses within this market is the intense
competition among coffee producers. Foreign or new companies venturing into the Vietnamese
coffee market will face stiff competition from both local and other international brands, spanning
from coffee chains to street-side cafes. With an estimated 338,600 eateries and cafes by the
conclusion of 2022, Vietnam boasts a plentiful supply of affordable and delightful coffee
establishments.
Vietnam stands out as one of the most cost-conscious areas in Southeast Asia. As indicated in the
2022 Food and Beverage Business Market Report by iPOS, the majority of Vietnamese
individuals are comfortable spending between US$1.70 and US$2.97 on coffee, placing it within
the mid-range pricing when compared to popular beverage brands like Highlands Coffee, Phuc
Long, and The Coffee House. Few consumers are open to paying more than US$2.97 for their
beverages, posing a challenge for higher-priced foreign coffee chains aiming to establish a
presence in the market.
As per the 2022 Vietnamese Real Estate Report, in the previous year, the rental cost for commercial
shopping spaces was approximately US$100 per square meter per month in Hanoi and US$130 per
square meter per month in Ho Chi Minh City. This, combined with the cost-conscious consumer
behavior in Vietnam, may lead foreign brands to downsize or exit the Vietnamese market.

18
 ANALYZE NESCAFÉ’S ECONOMIC MANAGEMENT FUNCTION -
PLANNING
1. Accounting and Financial capital:
In an effort to speed up the switch to regenerative agriculture and boost income and productivity,
Nescafé is testing out financial assistance initiatives with coffee growers as part of the Nescafé Plan
2030. These experimental projects comprise creative financial assistance programs, such reviving
coffee patches and offering conditional monetary incentives for implementing regenerative
agricultural techniques.
As a result, in Vietnam, net cash revenue from coffee rises despite a decrease in yields per hectare.
Here, higher coffee prices spread across large production volumes made a significant difference.
Progressive rates of intercropping in Vietnam may contribute to declining coffee yields per hectare
(as less area is dedicated to coffee) from an index of 100 in 2018 to 97 in 2022, but they also help
farmers maintain a diversified income stream which improves overall economic resilience (the
indexed cash income increase from 100 in 2018 to 147 in 2022).

Figure 2. Indexed coffee cash income and yield changes, 2018-2022

2. Human Resources:
Since the first Nescafé Plan was carried out in 2010, youth matters have always been one of the top
priorities in order to fulfill the Nescafé’s goals of improving livelihoods. Although the new Nescafé
Plan 2030’s goals are a little bit different from the old ones, which focus more on creating
regenerative agriculture, women and youth empowerment is still a crucial objective to create a
better social condition.
To achieve the goal that has been settled, a lower-level plan called “The Nescafé Youth Initiative”
was built up with activities such as mentoring and equipping next-generation farmers with savvier

19
land management skills, enhanced cultivation technology, methods to safeguard against climate
change and more knowledge on product quality to maximize capital.
Later, a new Nestlé needs YOUth program is set up to cope with the new goals. This initiative has
three pillars of activity: Employability, Agripreneurship and Entrepreneurship.
- Employment and employability: Delivering employment, internships, apprenticeships, and
training to young people in order to provide them access to economic opportunities.
- Agripreneurship: Empowering youth to become farmers, manage their farms as businesses,
and include regenerative agricultural practices to facilitate a fair transition to regenerative
food systems.
- Entrepreneurship: Promoting social and economic advancement by giving youth the
knowledge, expertise, and mentality needed to turn ideas into successful businesses.
Up to now, the company is still on schedule to assist 10 million youth in obtaining employment
opportunities by 2030. With the Nestlé needs YOUth campaign, they were able to provide 1.73
million chances in 2022, which include up to 125000 farmer training on regenerative agriculture
practices (reaching 31000 women and 12000 young people). This brings the total to 5.62 million
since the first public announcement in 2017.

20
 Figure 3. Progress toward helping 10 million young people around the world have access to economic opportunities by
2030 (millions) (Nestlé, 2022)

3. Supply Chain:
Nescafé set up the goals of doing a business that is resilient to climate change, improving incomes
and building stronger coffee communities (Nescafé, 2022). Therefore, Nescafé works with coffee
farmers on sustainability practices and makes use of local ingredients: Fresh selected coffee beans
from the famous highlands of Vietnam such as Buon Ma Thuot, Na San (Báo điện tử Tiền Phong,
2023). Nescafé has been helping coffee farmers to adopt best practices to achieve greater
productivity and efficiency. The Nescafé Plan 2030 continues the Nescafé sustainability journey
that began in 2010. By enabling regenerative agriculture practices, they are helping to improve
farmer livelihoods, their communities, and the environment.
Philipp Navratil, Senior Vice President and head of Coffee Strategic Business Unit said that they
have made great strides thanks to partners and dedicated teams. In 2022, 87% of their coffee was
responsibly sourced, and since 2010, they have distributed more than 270 million improved coffee
plantlets to farmers (Nescafé, 2022). Some strategic planning relating to manufacturing is Products
from 100% quality Nescafé Plan coffee beans; Reducing CO2 greenhouse gas emissions; and

21
Recycled coffee grounds. To be specific, Nescafé’s plan by 2025 is to reach 100% responsibly
sourced coffee; and sources 20% of their coffee through regenerative agriculture methods. Their
plans by 2030 are to source 50% of their coffee through regenerative agriculture methods; and 50%
greenhouse gas emissions reduction (Nescafé, 2022).

Figure 4. Nestlé’s progress against their commitment in 2022 (data assured by EY)

Moreover, Nescafé plans to make progress on their deforestation - free commitment. During the
process of executing the operational plans, by the end of 2022, 99.1% of their primary supply
chains for meat, palm oil, pulp and paper, soy, and sugar were assessed as deforestation-free. In
terms of packaging and circularity, Nescafé’s vision is to be that none of their packaging including
plastic ends up in landfill or as litter. They plan to move beyond peak virgin plastics, reducing the
volume used while the business continues to grow. Nescafé has an operational plan to support their
vision and addresses both product designs and infrastructure systems. By reducing unnecessary
packaging, designing better ones for recycling and reuse, modeling a fair collection system, and
supporting good regulation, Nescafé aims to support the transition to no waste in landfills or nature.
For example, the Henniez bottled-water plant in Switzerland produces renewable energy by
collecting and burning manure from local cattle in biogas plants, together with spent coffee grounds
from Nespresso. In addition to Nestlé’s system, they need to foster large-scale change throughout
their supply chain to support a transition to regenerative food systems (Nestlé, 2023).

4. Marketing & Sales:

Nestlé advertises their products according to strict policies – especially when it comes to how they
communicate with children and how they promote breast milk substitutes. These include the Nestlé

22
Marketing Communication to Children Policy and the Nestlé Policy and Procedures for the
Implementation of the WHO International Code of Marketing of Breast Milk Substitutes. In
addition, they publish an annual compliance report on their policy for implementing the WHO Code
on the Marketing of Breast Milk Substitutes (Nestlé, 2022). To be specific, in 2022, they announced
“Responsible marketing” plans to update their Marketing Communication to Children Policy with a
commitment not to market confectionery, ice cream or water-based beverages with added sugars to
children below 16 years of age, becoming one of the first in the industry to adopt such strict
standards. There were no material sanctions over CHF 10 million due to products’ labeling or
marketing violations. Nestlé identified 116 cases of non-compliance with their breast milk
substitute marketing code in 2022. By January 2023, they had implemented and published their
updated policy on the responsible marketing of breastmilk substitutes with a commitment to
unilaterally stop the promotion of infant formula globally for babies aged 0-6 months (Nestlé,
2022).

Figure 5. Compliance with the Nestlé Marketing Communication to Children Policy

Moreover, in 2023, Nestlé's directional plan is to launch guidelines for brands to help them speak
more inclusively in their marketing and communications. This will help the market teams to create
advertising and other promotional activities that reflect local contexts and align with Nestlé’s wider
goals on diversity and inclusion. From 2023, the Nespresso AAA Sustainable Quality™ Program
Gender Equality Index will measure progress against ten KPIs in three categories. These tools will
guide Nespresso’s interventions in the various AAA countries. In line with Nespresso’s gender
equality strategy, it will strive to increase the number of female agronomists to 40% by 2025 and
50% by 2030. Having achieved their commitment to increase the percentage of women in their top
200+ executive positions to 30%, they will continue their efforts to aim for parity in all
management positions (Nestlé, 2022).

23
In many countries around the world, especially Vietnam, Nestlé has implemented long-term and
strategic marketing plans for their products: Research and develop new products; Production and
acquisition links; Research and development of packaging.
The Nestlé brand has grown strongly because they have continuously researched and developed to
create new products that are highly convenient and groundbreaking. From coffee products, Nestlé
has launched many different brands of instant coffee to meet the different tastes of consumers.
Typically, Nescafé 3 in 1 helps consumers save time during the preparation process because it is
instant coffee. Besides, it also meets the familiar taste and scent of customers who enjoy homemade
coffee, a product that combines coffee, milk and sugar.
Nestlé is considered a large corporation with many branches spread around the world. It is
successful thanks to its strategy of alliances and acquisitions in research, development and
production. The group has employed a broad-based strategy focusing on the Asia region that
includes manufacturing different products for each country. This will not take too much human
resources and investment capital. Specifically, Nestlé recently acquired Indofood - the largest
noodle manufacturer in Indonesia. The main purpose is to expand sales in the Indonesian market
and next time they will seek to export Nestlé products including Indonesian food to other countries.
Finally, each market will have its own penetration strategy and marketing strategy so that each
product line is suitable for each country and corresponds to the product packaging. In Vietnam,
Nestlé's rival instant coffee brand is G7. Nestlé quickly launched packaging that hits the
Vietnamese people's psychology of "Vietnamese people use Vietnamese products" along with the
"100% Vietnamese coffee". This will attract consumers both in terms of message and purchasing
behavior (Navee Corporation).

5. Technology:
With the techniques of Nescafé Plan, a sustainable coffee farming project that Nestlé Vietnam
implements in key coffee growing provinces, coffee quality is controlled right from the quality of
seedlings, cultivation, harvesting, and post-harvest preservation. This process ensures that coffee
beans are obtained from the natural fruit of the coffee tree, with safe physical and chemical
indicators, free from heavy metals, pesticide residues, microbial indicators, toxic substances and
fungal factors. The best coffee beans, without defects or broken beans, are selected and evaluated
according to 4C international coffee standards and then produced in closed line with the group's
strict quality management process (Nestlé Việt Nam, 2018).

24
Another prominent plan related to technology is connecting through digitalization. Connecting
through digitalization is accelerating digitalization, using data and technology to unlock
efficiencies and growth opportunities. Nestlé is taking advantage of rapid shifts in consumer
behavior by amplifying their digital-centric businesses and scaling digital capabilities. Artificial
intelligence and remote assistance allow them to be more agile and flexible in their
manufacturing sites and supply chains. They see enhancing digital capabilities as a success
factor. Across each of their categories, digital ecosystems are unlocking new avenues for insight,
innovation, and sustainable profitable growth. The company is scaling direct access to consumers
to enhance personalization in their marketing and direct-to-consumer offerings for greater
engagement and loyalty. E-commerce sales grew by 15.1%, accounting for 14.3% of total Group
sales (Nestlé, 2022).
Nestlé’s innovations in packaging technology also play a role in improving sustainability. In
2021, they introduced paper-based packaging for several brands, paper cups and straws, and bio-
based lids and scoops. They also reduced the use of virgin plastics and unveiled prototype 100%
rPET Perrier bottles made using a novel recycling technology (Nestlé, 2021).
Moreover, Nestlé invested in enhancing innovation capabilities. As a result, their unmatched
expertise in nutrition science and technology enables them to deliver innovations quickly and
scale them up across brands, categories, and geographies. The corporation produced the first
commercial batches for shop tests in their R&D facilities to increase speed-to-market. In 2021,
they expanded their R&D facility in Singapore, which develops products and technologies for
Southeast Asia and beyond, supporting brands such as Maggi, Nescafé, Milo, and Harvest
Gourmet. In 2021, they continued to deliver fast innovation by leveraging vast expertise and
global innovation capabilities. Nestlé has maintained the same innovation speed since 2019
despite challenges due to the pandemic. Last but not least, Nestlé also has a detailed plan of
investment in new technologies to increase dairy farm efficiency while reducing emissions and
improving animal welfare (Nestlé, 2021).

25
 APPLICATION OF THEORY
In efforts to improve operational efficiency, reduce redundancies, and enhance productivity,
Fayol's principles can be applied to streamline processes and optimize the division of work
within the organization. Nescafe can apply this theory like this:
Division of work: Nescafe can apply this principle by dividing tasks within organizations,
making sure that everyone has a specific role and sense of responsibility. This can lead to
specialization, thereby improving efficiency.
Authority and responsibility: Nescafe can implement clear lines of authority and responsibility,
ensuring that employees understand their decision-making powers and are accountable for their
actions. This can help streamline decision-making processes and improve organizational
effectiveness.
Discipline: By promoting a culture of discipline within the organization, Nescafe can establish
clear expectations for employee behavior and conduct. This can contribute to a harmonious work
environment and greater adherence to company policies and procedures.
Unity of command: Nescafe can benefit from ensuring that each employee receives orders from
only one superior, minimizing confusion and promoting a clear chain of command.
Remuneration: Nescafe can apply fair and equitable compensation practices to incentivize
employee performance and motivate its workforce.

26
 CONCLUSION
This report paints a nuanced picture of Nescafé's situation in the dynamic Vietnamese coffee
market. It highlights the company's strengths, such as a strong brand reputation, commitment to
innovation, and emphasis on sustainability, which contribute to its widespread recognition and
positive consumer perception. The report also identifies significant opportunities for growth, driven
by a booming economy, rising disposable income, and increasing demand for premium coffee
beverages.
However, the research also reveals challenges that Nescafé must overcome. Intense competition
compels the company to constantly innovate and differentiate itself, while cost-conscious consumer
behavior necessitates competitive pricing. Additionally, the evolving legal landscape demands
compliance efforts to ensure smooth online operations.
Nescafé's internal strategies, including the Nescafé Plan 2030's focus on sustainability, targeted
marketing plans, and embrace of technology, demonstrate a commitment to long-term growth and
adaptation to the changing market dynamics. Notably, the implementation of the Nescafé Plan
techniques ensures consistent quality standards, digitalization enhances operational efficiency, and
investments in innovation capabilities maintain a competitive edge.
Therefore, Nescafé's strong position in the Vietnamese market is undeniable, with significant
potential for further expansion. By capitalizing on its strengths, addressing its weaknesses, and
continuously adapting to market opportunities, Nescafé can solidify its position as a leading coffee
brand in Vietnam. Continued focus on innovation, digital marketing, brand loyalty, sustainability,
training and development, and strategic partnerships will be crucial for achieving this goal. By
embracing responsible business practices and contributing positively to the Vietnamese coffee
industry, Nescafé can ensure its continued success for years to come.

27
 RECOMMENDATION
Continuous Innovation and Product Differentiation: The dynamic nature of the Vietnamese
coffee market necessitates constant innovation. To stay ahead of the curve, Nescafé must prioritize
research and development to create unique and appealing products that cater to evolving consumer
preferences. This includes exploring diverse flavor profiles, incorporating health-conscious
ingredients, and developing functional coffee beverages that cater to specific needs. Establishing a
dedicated innovation team, fostering partnerships with startups, and conducting regular market
research are crucial steps in ensuring Nescafé remains at the forefront of innovation.
Leveraging the Power of Digital Marketing and E-commerce: The booming e-commerce sector
presents a valuable opportunity for Nescafé to expand its reach and drive online sales. To
effectively leverage this platform, a comprehensive digital marketing strategy should be
implemented. This includes optimizing the company's website and mobile app, increasing social
media engagement, and investing in targeted digital advertising campaigns. Building partnerships
with key e-commerce platforms and actively engaging with consumers online through personalized
content and interactive campaigns will further strengthen Nescafé's digital presence.
Fostering Brand Loyalty and Customer Engagement: Building strong brand loyalty is critical
for securing repeat purchases and fostering customer advocacy. Nescafé should implement loyalty
programs that reward customers for their engagement. Personalized recommendations and exclusive
offers can further enhance the customer experience. Organizing engaging events and promotions
can also boost customer engagement and create a sense of community around the brand.
Prioritizing Sustainability and Social Responsibility: Consumers are increasingly drawn to
brands that align with their values. Nescafé's commitment to sustainability and social responsibility
is a key differentiator in the market. The company should continue its efforts in sustainable
sourcing, invest in renewable energy sources, and implement ethical labor practices throughout its
supply chain. Transparent communication of these initiatives, partnerships with NGOs to support
environmental projects, and involvement in community development programs will further
strengthen Nescafé's reputation as a responsible and ethical brand.

28
 REFERENCES
Porter’s Five Forces of Nescafe Cafe a la carte case solution. (n.d.). https://casemba.com/kamran-
kashani/nescafe-cafe-a-la-carte/porters-analysis.php
Portersfiveforcesteam. (2023, February 4). Nestle Porter’s 5 Five Forces: 2022 Detailed
Overview. Porter’s Five Forces.
https://www.portersfiveforces.org/nestle-porters-five-forces/#google_vignette
Nescafe Cafe a la carte case study Porter’s Five Forces analysis. (n.d.).
https://casemarathon.com/harvard/nescafe-cafe-a-la-carte/porters-analysis.php
Team, M. S. (2022, March 18). Nestle Porter Five Forces analysis. MBA Skool.
https://www.mbaskool.com/five-forces-analysis/companies/18372-nestle.html#supplier
Báo điện tử Tiền Phong. (2023). Hành trình từ hạt cà phê trên nông trại đến ly Nescafé cho người
yêu cà phê Việt. [online] Available at: https://tienphong.vn/hanh-trinh-tu-hat-ca-phe-tren-nong-
trai-den-ly-nescafe-cho-nguoi-yeu-ca-phe-viet-post1517824.tpo [Accessed 10 Dec. 2023].
www.nescafe.com. (n.d.). Nâng Niu Sản Xuất | Nescafe Vietnam. [online] Available at:
https://www.nescafe.com/vn/ca-phe-ngon-vi-moi-truong/nang-niu-san-xuat.
Nestlé (2022). Annual Review 2022. [online] Available at:
https://www.nestle.com/sites/default/files/2023-03/2022-annual-review-en.pdf.
NESCAFÉ PLAN 2030 PROGRESS REPORT 2022. (2022). Available at:
https://www.nestle.com/sites/default/files/2023-06/nescafe-plan-2030-progress-report-2022.pdf?
fbclid=IwAR3L19F5pPFwP08QYCZxyJUKgTmHbgezzHvr7ALj81CUewD7Yb-Vne6beiU
[Accessed 10 Dec. 2023].
Nestlé (2022). Creating Shared Value and Sustainability Report 2022. [online] Nestlé. Available
at: https://www.nestle.com/sites/default/files/2023-03/creating-shared-value-sustainability-
report-2022-en.pdf.
Nestlé Việt Nam - Sống Vui Khoẻ. (2018). NESCAFÉ ra mắt sản phẩm Cà Phê Pha Phin.
[online] Available at: https://www.nestle.com.vn/vi/media/nescafe-ra-mat-san-pham-ca-phe-pha-
phin.
Navee Corporation. (n.d.). Tìm hiểu chiến lược Marketing của Nestle - Kẻ thống trị ngành
FMCG. [online] Available at: https://www.navee.asia/kb/chien-luoc-marketing-cua-nestle/
[Accessed 10 Dec. 2023].
Nestlé (2021). Annual Review 2021. [online] Available at:
https://www.nestle.com/sites/default/files/2022-03/2021-annual-review-en.pdf.

29
NESCAFÉ Ready-to-Drink Iced Coffee Latte | Nescafe UAE (no date).
https://www.nescafe.com/mena/en-ae/our-coffees/ready-drink-iced-coffee-latte.
About Us | Nescafe Global. (n.d.). Www.nescafe.com. https://www.nescafe.com/about-
us#:~:text=The%20World
Travel through our history timeline. (n.d.). Nestlé Global.
https://www.nestle.com/about/history/nestle-company-history#:~:text=Ready%3F&text=The
%20Nestl%C3%A9%20company%20history%20begins
Statista (2023). Ready-to-Drink (RTD) Coffee - Vietnam.
The Heritage Foundation (2023). 2023 Index of Economic Freedom.
Coursera (2022). Global Skills Report 2022 Regional Skill Trends.
Nguyen, P. (2023, September 15). Vietnam Coffee Market: Consumers, Challenges, and
Prospects. Vietnam Briefing News. https://www.vietnam-briefing.com/news/vietnam-coffee-
market-a-deep-dive-into-its-consumers-challenges-and-prospects.html/
Rainforest Alliance (2023) Rainforest Alliance & Nescafé: Monitoring and Evaluation Highlights,
2018-2022 | Rainforest Alliance. https://www.rainforest-alliance.org/resource-item/rainforest-
alliance-nescafe-monitoring-and-evaluation-highlights-2018-2022/.
TEN YEARS OF THE NESCAFÉ PLAN. (n.d.).
https://www.nestle.com/sites/default/files/2021-01/sustainable-journey-ten-years-nescafe-plan-
2021-en.pdf
‌Nestlé launches Nescafé Plan 2030 to help drive regenerative agriculture, reduce greenhouse gas
emissions and improve farmers’ livelihoods (2022).
https://www.nestle.com/media/pressreleases/allpressreleases/sustainable-coffee-nescafe-plan-
2030#.

30