Starbucks seeks to expand in cafe-clogged Vietnam

Wed Jul 23, 2014 7:29am EDT
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By Martin Petty

HANOI (Reuters) - With more coffee shops per square mile than probably anywhere on earth, opening a cafe in Vietnam's capital could be a bit of a gamble. This week, U.S. coffee chain Starbucks is opening three of them.

Vietnam's entrenched coffee culture means Starbucks is delving deeper into what could be one of its most challenging markets yet. The brew is sold cheaply in the simple cafes that line almost every city street, or in the more sophisticated outlets run by local chains Trung Nguyen and Highland Coffee, in which the Philippines' Jollibee Foods Corp has a stake.

Jeff Hansberry, president of Starbucks China and Asia-Pacific, said on Wednesday Starbucks was seeking growth in Vietnam by offering "meaningful service" with "passion and care".

He, however, side-stepped questions on the company's ambitions for Vietnam, and how exactly it intended to compete. The three Starbucks Hanoi cafes add to the eight that have been open since February 2013 in the economic hub, Ho Chi Minh City.

"We've been thoughtful and careful about our entry into this important market," Hansberry told reporters after a ribbon-cutting ceremony at a Starbucks cafe in downtown Hanoi.

"We intend to grow with this exciting and dynamic economy," he added.

Vietnam's economy, however, has lost some of its edge. Once seen as Asia's next emerging market daring, Vietnam is now mired in bad debt, inefficiency and weak retail spending that rose 12.6 percent in 2013, its slowest growth in four years.

A stream of bankruptcies since 2011 continues, with 18,000 closures and 50,000 businesses suspending trade in the first five months of this year, according to official data.   Continued...

Pedestrians walk past a Starbucks store in the Manhattan borough of New York January 24, 2014.  REUTERS/Lucas Jackson