FOREIGN TRADE UNIVERSITY

HO CHI MINH CAMPUS

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EXECUTIVE SUMMARY
INTENSIVE ANALYSIS OF NORTH AMERICA FOR COFFEE
PRODUCTS: A FOCUS ON AMERICA AND MEXICO
Subject: International Marketing
Class: K57CLC3
Instructor: Nguyễn Thị Thu Thảo
Name: Nguyễn Lê Phương Anh 1801015005
Vũ Long Bình 1801015009
Phạm Ngọc Hảo 1801015021
Vũ Thị Ngọc Ánh 1801015130
Mai Đỗ Hoàng Châu 1801015155
Nguyễn Thu Hòa 1801015310
Nguyễn Thị Ngọc Khánh 1801015378
Nguyễn Thị Thanh Loan 1801015442
Hạ Thiên Long 1801015452

Ho Chi Minh City, March 2021

1. PESTEL analysis and comparison
1.1. Political
In 2020, Mexico ranked 60th/ 190 countries in the WorldBank’s Doing Business ranking,
while the U.S scored 6th/190 countries. The discrepancy between the two countries signifies that
the U.S enjoys strong political stability, rare and predictable changes in legislation, strong
Enforcement of law, while Mexico portrays the reverse.
1.2. Economic
According to OECD, in Mexico, the average household net-adjusted disposable income
per capita is considerably lower than the OECD average of USD 33604 a year. While inequality
of disposable income in the United States is the fourth highest in the OECD, the average income
of the richest 10% is 16 times as large as for the poorest 10%.
1.3. Social - Cultural
Engaging in the US market, Vietnam enterprises can take advantage of language marketing
communication and research (mostly English - an international language); tax incentives (most
coffee bean imports are duty-free, also an unlimited amount). In addition, Coffee tastes and
preferences of the US consumers seems to have more similarities with those of Vietnamese
consumers. Therefore, targeting the US market, firms can more easily produce proper products
that meet their tastes and preferences.
1.4. Technological
The United States of America reaches the 3rd position worldwide, in part due to
performance increases and the availability of new U.S. innovation data. The U.S. improves its rank
in five GII pillars: Institutions (11th); Human capital and research (12th); Infrastructure (23rd);
Business sophistication (7th); and Knowledge and technology outputs (4th)."
1.5. Environmental: As of 2019, with a total natural resource value of 45 trillion U.S. dollars,
the U.S. is the second leading country worldwide based on natural resource value.
1.6. Legal
Imports of coffee into the United States are subject to inspection by the U.S. Food and
Drug Administration. Most coffee bean imports are duty-free, an unlimited amount. Any coffee
that contains syrup or sauces is subject to inspections and special taxes. To Mexico, fair-trade
coffee in Mexico is not a perfect system. Any coffee that contains syrup or sauces is also subject
to inspections and special taxes.
→ The PESTEL suggests that America is a more suitable market for VN’s coffee than Mexico.
2. America’s coffee industry
Overall coffee consumption: In 2018, the total value of the US coffee market reached $87-
88 billion USD, with 62% American are daily coffee drinkers.
Coffee trend: Consumption of “gourmet” coffee (premium coffee) increased by 25% since
2015. Currently, there is a growing interest for eco-friendly coffee products. Millennials and Gen-
Z are willing to pay more for a unique experience of coffee’s taste.
Vietnamese coffee’ presence: Vietnam is USA's top 5 coffee exporters. Diversification of
products and reasonable prices have helped the Vietnamese coffee brand be present in more than
80 supermarkets in 12 states of the United States. About one fifth of the roasted and ground coffee
used by Americans is Vietnam's Robusta. Vietnamese most famous coffee businesses in America
include Trung Nguyen Coffee, King Coffee, Nguyen Coffee, …
 → The US market for coffee is growing extremely fast and Vietnam has a great opportunity
to penetrate the US market with high-quality and competitive-price coffee.
3. Five-force model analysis
3.1. Rivalry among existing competitors
Global-branded coffee chains dominate the market include:
Starbucks Dunkin’ Donuts McDonald’s JAB owned brands

Market share 36% 24% 20% 9%

Price $3 - $5 $1 - $4 $2 - $4 $2 - $4

Distribution mostly in big cities mostly in big cities mostly in big cities mostly in big cities

3.2. Threat of new entrants

The thread of new entrants in the coffee industry is high because the number of hurdles for
market entry is low. There is also no need for massive capital requirements. The skills required are
not highly technical but they are trainable which further makes it easy to enter into the coffee
industry. The 5% growth of the coffee industry attracts the new entrants might make the threat of
new entrants high.
3.3. Threat of substitute products
According to Duke, D., 2018, many coffee drinkers consider tea, carbonated soft drink, hot
chocolate, and energy drinks to be reasonable substitutes for coffee. In addition to these coffee
substitutes, customers can choose to brew their own coffee rather than buy it from a shop. However,
it is also noted that premium and unique coffee experience faces little to no threats from the
substitutes as their consumers are highly loyal.
3.4. Bargaining power of the suppliers
In the US coffee industry, there is the presence of a large number of suppliers (exporters,
local brands) without having any fundamental differentiations. Many coffee retailers even produce
their own coffee beans which puts them in dominant position over suppliers.
3.5. Bargaining power of the customers or buyers.
The bargaining power of customers is high as their loyalty to a brand is not strong enough
due to the non-distinction between coffee brand’s taste. US customers also possess a usual
switching behavior with low to no switching cost.
4. SWOT analysis
4.1. Strengths: Abundant, experienced labor force and favorable natural conditions for
growing coffee and easily participating in the global supply chain.
4.2. Weaknesses: Underdeveloped infrastructure, lack of application of advanced technology.
Besides, enterprises do not pay attention to the process of preservation, processing,
packaging, product brands, making Vietnamese coffee less competitive.
4.3. Opportunities: American people's coffee demand is increasing, especially for instant
coffee. Vietnam's government has policies to encourage coffee exports with large areas
specializing in coffee cultivation and innovative coffee processing technologies
 4.4. Threats: Proportion of deep processed coffee accounts for only 10% of the total export
volume together with the competition with US large enterprises and strict quality standards.
5. Suggesting for doing business in America
5.1. Consumer behaviors - pricing strategy: Capture the gourmet trend while staying sensible:
American consumers are basically not as price-sensitive as others. On average, the
percentage price rise that will lead customers to switch from their current product is at
least 30%; customers from Los Angeles and New York appear to be even less sensitive.
They are, nevertheless, becoming increasingly health-conscious about their daily intakes
and are willing to pay higher for a quality drink with certified origin. For the pricing
strategy, Vietnamese coffee distributors could apply a high markup rate to capture the
“gourmet coffee” trend but at the same time the price should still be reasonable,
accompanied by the product’s quality and taste.
5.2. Promotion channel
TVC and some paid advertising activities (Facebook location ads, Instagram ads, Google
My Business profile) are really popular in the USA to really draw new customers in.
Jump on the delivery bandwagon, online shopping, e-commerce for convenience.
In-store for the display of product samples sold in coffee shops.
5.3. Buying channel and Distribution strategy
Easy accessibility: Opening Coffee outlets in some major states are easily accessible.
City locations: Customers in smaller communities (near the offices and companies) also
enjoy the “gourmet coffee” at affordable costs because the Cafe has set up outlets in the states.
Distributors: The coffee produced on the Cafe’s farms, are distributed through wholesalers
and retailers to customers who wish to use the coffee at home.
5.4. Set up business
In the USA, the licenses change according to the state which makes this process confusing.
Apart from legal procedures, there are processes and steps that must be followed: Finalize the
concepts, location and menu; Understand the margins; Acquiring funds and licenses; Recruiting
staffs…. to ensure its longevity and smooth operations. Therefore, before entering this market,
enterprisers must have sufficient knowledge and detailed plain to avoid sudden struggles.
6. Conclusion
From the three methods of conducting market research, the authors figured that compared
to Mexico, America is a more appropriate market for the penetration of Vietnam’s coffee. Besides
the favorable macro conditions of the US itself, Vietnam coffee retailers, exporters and producers
can take advantage of the low tariff rate, unlimited quota and the inner strength of Vietnam’s labor
force, climate conditions, cultivation land and the special taste of Vietnam’s coffee bean. The
authors also suggest some recommendations for Vietnamese business in the US coffee market.
7. Limitation
The report concentrated on the data prior to the outburst of COVID-19 thus cannot cover
the up-to-date information on these two markets. Moreover, under the time constraint, the results
only demonstrate the most fundamental aspects of the North America market instead of analyzing
it vigorously, thus, this paper can be used for reference only.
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