Vietnam's Coffee Powerhouse: Highlands Coffee Leads with Diversified Store Strategy

Introduction

In the rapidly evolving Vietnamese coffee market, Highlands Coffee has emerged as a leading brand, leveraging its diversified store network to achieve impressive financial results. With a robust expansion strategy and a strong presence across Vietnam and beyond, Highlands Coffee has solidified its position in the competitive Vietnamese F&B market. This article delves into the company's successes, challenges, and strategies, highlighting why it remains a dominant player in the region's thriving coffee culture.

Diversified Store Network: The Key to Success

Highlands Coffee's strategy centers on creating a widespread and diversified store network. By the end of 2023, the company operated over 850 outlets in Vietnam and other countries, marking a significant expansion from its base of 605 stores in 2022[1][2]. This aggressive growth is built on a model that emphasizes convenient locations, including office buildings, shopping centers, and street-front areas, making it easily accessible to consumers across various segments.

Expansion Strategy

Aggressive Store Expansion: Highlands Coffee has consistently increased its store count, opening new locations in prime spots to maximize foot traffic and visibility.
International Expansion: The brand has expanded beyond Vietnam's borders, establishing a presence in countries like the Philippines, where it operates over 50 outlets[2].
Innovative Store Formats: Highlands has explored new store formats, such as to-go kiosks and coffee carts at petrol stations, which require lower investments but high returns due to their strategic locations[3].

Financial Performance and Operational Efficiency

Highlands Coffee has reported mixed financial results recently. Despite opening numerous new stores, the company experienced a 5% year-on-year decline in revenues in the third quarter of 2024, amounting to approximately PHP569 million (US$10 million)[1][3]. However, the brand maintained a strong EBITDA contribution to its parent company, Jollibee Foods Corporation, indicating effective cost management.

Key Financial Highlights:

Revenue Growth: Although same-store sales declined by 3.7% year-on-year, the overall revenue from Highlands Coffee remains substantial due to its extensive store network[1].
EBITDA Contribution: Highlands Coffee contributes significantly to Jollibee Group's EBITDA from coffee and tea operations, reflecting its operational efficiency[1].
Market Dynamics: The Vietnamese beverage market experienced a 13% increase in revenue in the previous year, reaching VND118.26 trillion, showcasing a strong demand environment for Highlands Coffee to operate within[1].

Competitive Landscape in Vietnam

The Vietnamese coffee market is highly competitive, with multiple brands vying for market share. Highlands Coffee faces stiff competition from local players like Phúc Long and Trung Nguyên, as well as international chains such as Starbucks.

Competitors Overview:

Trung Nguyên Legend: Known for its aggressive expansion plans, including international markets like China and the US, Trung Nguyên maintains a substantial presence in Vietnam[2].
Phúc Long: Phúc Long has seen significant growth, especially with its new flagship stores, and aims to become the second-largest beverage chain in Vietnam[2].
Katinat Saigon Cafe: This emerging brand is gaining popularity, especially on social media, and has been rapidly expanding its store count in prime locations[2].

Strategic Initiatives and Innovations

Highlands Coffee has implemented several strategic initiatives to maintain its market leadership:

Innovations and Investments:

Coffee Roasting Factory: The company invested VND500 billion in a coffee roasting factory in Bà Rịa – Vũng Tàu, enhancing its supply chain capabilities and ensuring consistent quality across all outlets[2].
Menu Diversification: Highlands offers a streamlined menu, focusing on core products while also providing packaged goods to cater to the takeaway market[4].
Marketing Strategies: Utilizing a market-based pricing strategy, Highlands appeals to a broad customer base with products priced between 30,000 and 70,000 VND, making it accessible to various income levels[4].

Conclusion

Highlands Coffee's success in Vietnam and beyond is a testament to the effectiveness of its diversified store strategy, strategic investments, and operational efficiency. Despite facing challenges in a competitive market, the brand continues to be a leader in Vietnam's vibrant coffee culture. With ongoing expansion and innovation, Highlands Coffee is poised to further strengthen its position in the region's dynamic F&B landscape.

As the coffee market in Vietnam continues to grow and evolve, brands like Highlands Coffee will play a pivotal role in shaping consumer preferences and driving market trends forward.

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