Strength

Masan’s broad F&B distributions’ system

Masan Consumer is currently one of the few companies in Vietnam that owns a distribution
system for both the food and beverage industries. They have grown to nearly 180,000 retail
points for food products and 160,000 for beverage products with nearly 3,000 sales staff. This
extensive network shows the strength of their distribution network in the countryside, where they
have the strongest coverage and market reach strategies, and helps them to gain access to speed.
Get to market faster when launching new products and promotions (DNS Lookup, n.d.).
After entering the beverage industry, Masan integrated the distribution systems of Vinh Hao and
Vinacafé Bien Hoa into our broader distribution system. From August 2020 they have integrated
and established a sales team for all Masan Consumer products, not separate from the beverage or
food industry and from February 2021 they will develop the sales team for innovation items with
more than 1,000 employees. As a result, we can bring new products to market more efficiently
and solve the distribution problems unique to the beverage business.

Having quickly and strongly developed and expand the system chain throughout many
provinces and cities. However, Phuc Long's ambition does not stop there, the destination of
this brand is to step out into the world. With Masan's support, this path is getting easier
and easier.
Cooperating with Masan, Phuc Long seemed to grow more wings when Masan had strong
enough financial resources to support, plus experience in the food field. In addition, Masan is
also completing a closed system including production, distribution, retail, export... and has
continuously carried out many M&A deals over the past time. According to the introduction, the
chain will officially serve at Phuc Long USA store in July 2021 in Garden Grove, California,
USA.
Appearing in Hanoi after other famous coffee brands such as Highlands Coffee or The
Coffee house, Phuc Long's revenue in the last 3 years has achieved the highest growth
compared to 5 other large coffee chains.
Before selling shares to Masan, Phuc Long has continuously grown strongly in revenue and
profit in the past 5 years. In 2019 alone, the chain achieved VND 779 billion in revenue, an
increase of 65% compared to 2018, equivalent to the remaining Top brands such as The Coffee
House (VND 863 billion) and Starbucks (VND 783 billion) (Anh, 2021).
 Mr.
Tran

Bang Viet – CEO of Dong A Solutions encourages the promotion of this new kiosk model:
“Currently, for the coffee group that provides a medium-sized experience space or higher, 60-
70% of the total cost is spent on the kiosk for space and labor. These costs do not bring financial
efficiency to the business, if eliminated; customers will be able to buy cheaper products, while
the business is both more efficient and less dependent on other factors. The key is how Masan
and Phuc Long will organize the realization of the kiosk model” (Brands Vietnam, n.d.)
Masan also possesses 98.8 % Vinacafe Biên Hòa. The combination of Vinacafe and Phuc
Long is quite promising also due to the growth of café and tea consumption in VN
The world's leading brand valuation firm Brand Finance has just announced the list of the most
valuable brands in Vietnam in 2016. In which, Vinacafé Bien Hoa occupies the two most
prestigious positions as the company with the most valuable brand value. largest image in
Vietnam and in the top 50 most valuable brands in Vietnam 2016 (CĐ, 2016).
In 2020, Vinacafé Bien Hoa won the "National Brand - Vietnam Value" for the 7th time in a row
and was voted in the Top 10 prestigious companies in the food and beverage industry for the
fourth time in a row (Báo Thanh Niên, 2021).
The combination with VinMart+ to open Phuc Long kiosk chain here can be considered as
a breakthrough for Masan because other large retail beverage companies such as
Highlands Coffee or retail food such as McDonald's have only applied a small number of
kiosks right in front of the main store, not yet combined with external brands

The space behind this coffee shop is about to be opened by Highlands Coffee

McDonald's has also brought a small kiosk with hamburgers and coffee to sell in front of its store
at Hoang Dieu Street - District 4. However, this new model may not be effective or depends too
much on the location of the store, so McDonald's is still not scaling out across its chain (Như,
2020).
Product advantages
Product diversity is one of Phuc Long's strengths, when it comes to providing customers not
only with prepared coffees and teas, but also bottled, canned and bag-type tea and coffee
products.

Self-sufficient
CEO of Phuc Long states: “In 2007, Phuc Long owned a tea plantation in Thai Nguyen. Because
I personally find Thai Nguyen Tea to be competitive in terms of taste, appearance and
characteristic water quality, but like teas in other localities, the control of residue ingredients
according to hygiene standards Food safety of the world, Thai Nguyen tea still suffers the same
fate of "not meeting standards". Having clearly defined the goal of maintaining and protecting
the inherent natural quality of Thai Nguyen tea, I quickly decided to invest in building a tea-
processing factory in Thai Nguyen. Phuc Long hopes that by setting up the factory right in the
raw material area, we can maintain the "quality" of Thai tea completely while minimizing the
conditions for farming, harvesting and processing tea in order to ensure overall quality
management issues. At the same time, in 2007, Phuc Long invested in a tea and coffee
processing plant in Binh Duong, which is equipped with many modern equipment and machines,
with HACCP certification - the process ensures food safety and hygiene standards products, with
the goal of ensuring the supply of quality products, serving the domestic market and meeting
export demand. Also from here, Phuc Long Tea has fully met the standards to be present in
fastidious markets such as the US, Japan, Indonesia, the Philippines...” (Phúc Long Coffee &
Tea, n.d.).
This can eliminate almost all of the bargaining power of supplier since they are their suppliers.
Price competitive advantage
Compared to other coffee shops, the price in Phuc Long is very reasonable, for example with
milk tea, the selling price in Phuc Long is about 25,000 VND - 45,000 VND / 1 cup, accounting
for 50 - 70% of the price from Trung Nguyen, or 30% - 50% of the selling price of Starbucks and
The Coffee Bean & Tea Leaf, it is clear that Phuc Long's price is somewhat lower than its
competitors. Therefore, it is difficult for customers to put pressure on Phuc Long's price.
However, Phuc Long also needs to build more advertising campaigns to pull customers back to
them and turn them into their close customers.
Member card offers
Customers who accumulate 100 new points will receive 1 free glass of water of the choice of
medium size (M) (within the limit provided by Phuc Long).
Birthday offer: free cake portion. Offer is updated on the first day of the birthday month.
VIP card
Accumulated points: From 400 to less than 1000 points
Condition: Accumulate 400 points within 12 months
VIP card privileges:
10% discount on drinks and cakes and 5% off other Phuc Long products (*)
Customers who accumulate 100 new points will receive 1 free glass of water of choice of
medium size (M) (within the limit provided by Phuc Long. Offer will be updated to your account
within 24 hours after reaching 100). additional points.
Birthday offer: free cake portion. Offer is updated on the first day of the birthday month.
(*) Note: the discount is only applied when the customer uses the card directly at the store
Diamond Card
Accumulated points: Over 1000 points
Condition: Accumulate 1000 points within 12 months
Diamond card privileges:
15% discount on drinks and cakes and 10% off other Phuc Long products (*)
Customers who accumulate 100 new points will receive 1 free glass of water of choice of
medium size (M) (within the limit provided by Phuc Long. Offer will be updated to your account
within 24 hours after reaching 100). additional points.
Birthday offer: free cake portion. Offer is updated on the first day of the birthday month.
Phuc Long's membership card mechanism can be found to be quite attractive and thus more or
less can increase switching costs, especially when other big brands like Highlands Coffee only
apply incentives, or Starbucks has a relatively high price for regular use. regularly use the service
to accumulate card points

Weakness
Good location comes with high rental expense
Although the revenue is high, Phuc Long still doesn’t seem so profitable because they "bite their
teeth" to rent a beautiful space and invests heavily in media advertising campaigns. This
inadvertently pushed the business into the scene of great revenue but poor profit. As a result
when cooperating with Masan, the first benefit that Phuc Long receives is the store system and
huge customer base from VinMart + chain and thousands of new selling points with beautiful
premises. If they do not perform well enough, the rental could become their burden.
High brand recognition means high responsibility
Phuc Long has ever since built a strong brand recognition, evidence is their revenues' growth rate
and its wide appearance in Vietnam. The fact that this company has built a strong foothold in the
hearts of customers, which goes along with the question of how to maintain efficiency because
familiar customers will easily recognize the differences in their product and service quality as
they have experienced many times.
The fact that they have encountered this problem not only once. Mr. Huan, an "intrinsic"
customer of Phuc Long 4-5 years ago, said: "I used to be a crazy fan of Phuc Long 4-5 years ago.
It's over now. Drinks are bad now".
Mr. Huan added that in the past, the small shop in Mac Thi Buoi was fragrant, delicious, very
quality and clean. Now one for each shop. Some days it is bitter, some days it is sweet. "The
product management is bad. Peach tea seems to attract teenagers, but coffee lovers like me see it
going down," Mr. Huan shared.
Phuc Long's "ex lover" thinks that Lam Boi Minh's company is studying in the West, expanding
the scale of operations, but the management "has not arrived". "For example, the store is opposite
Starbucks, the glass is on the 2nd floor, if the Western cafe is blurred, the lower part will be
blurred, and customers sitting will look down on the street. But in Phuc Long, the glass is plain
white, anyone passing by will look up and know the lingerie trend this year," said Huan.
Inconvenience in “no parking lot”
One of the backward that customer experiences in Phuc Long is that they do not have a parking
lot, no matter what size. For example, Phuc Long Pham Hong Thai, which is located in 42A
Pham Hong Thai, Ben Thanh Ward, District 1, Ho Chi Minh City, has no space for vehicles.
People have to find a place nearby that runs the parking service, charging from 10-20.000
vnd/time.
A customer names Anh Tuyet also complained about the parking space of Phuc Long stores.
This customer thinks that the lack of parking space when enjoying the drinks of this cafe chain is
very inconvenient, both takes time for guests and sometimes "has to walk tired feet" from the
parking lot to the store (Cafebiz.vn, 2016).

Opportunity
Kiosk at Vinmart brings a big opportunity to reach customers easier, because of not only
the brand name but also making the best use of Vinmart’s location (Inherited from
Vingroup which is a giant in terms of real estate)

Talking to VnExpress, Mr. Truong Cong Thang, General Director of Vincommerce said that he
has experimented with opening 4 Phuc Long kiosks in VinMart+ stores in Thu Duc City. This
cooperation helps implement the Point of Life consumer ecosystem development strategy that
Masan is aiming for, turning each VinMart+ store into a destination for all ages and daily
necessities.

"Masan and Phuc Long aims to open 1,000 similar kiosks in the next 12 months," Thang said,
adding that he expected that by 2025, the food and beverage chain would contribute 500 million
USD in sales collected into The CrownX – a subsidiary of Masan (VnExpress, 2021).
Even if we do not mention Vinmart, Phuc Long's 15 current stores in Saigon are already all
located in "dreamlike" locations. Half of them are located on major roads of District 1, the most
central district of the City. In the "less" central districts such as Tan Binh, Phuc Long is also
located right at the roundabout of Cha Ca Mausoleum, a traffic point that is always busy with
people passing by.
Bright future for Phuc Long thanks to the increase in tea and coffee’s consumtion in
Vietnam

Vietnamnet summarizes that the total tea and coffee consumption in Vietnam is estimated at 2.3
billion USD and is expected to grow by more than 10% per year. Which, branded tea and coffee
retail chains account for only 25%, including big brands such as Highlands Coffee (over 300
stores), The Coffee House (over 150 stores), and Starbucks (over 70 stores). In addition, the
F&B sector is in a period of increasingly fierce competition.
Therefore, Masan's investment will be the driving force for Phuc Long to make a breakthrough
compared to the previous development period.
A continuous shift in organic consumption

Health is also an important issue in Vietnam, often outranking other general concerns, such as
income and job security, according to a 2020 Nielsen Global Consumer Confidence Survey. This
survey also noted many consumers indicating their willingness to spend extra income on
products that can guarantee health benefits. The “Vietnam Insight Ebook 2021” (Kantar World
Panel) reported that 79 percent of Vietnamese consumers surveyed were willing to pay higher
prices for healthier foods. A Vietnam Report Group survey on the purchasing behavior of
consumers in Ho Chi Minh City (HCMC) and Hanoi in 2019 showed that 51.5 percent of the
focus group would choose products of organic origin, while 45.6 percent would base their
purchases on price.
With ingredients imported from Thai Nguyen (self-sufficient), the Phuc Long brand is associated
with the image of safe and quality products, thereby attracting more customers to use the
product.
Benefit from trade agreements
Thanks to the trade agreements like WTO or CPTPP that Vietnam signed, opportunities are open
for Phuc Long to expand import and export its’ tea to markets through other countries. This is
even more auspicious since Vietnam currently ranks 5th in the world in tea exports, and 7th in
global tea production (Cổng thông tin điện tử Bộ NN và PTNT, n.d.).

Threat
Tax policy proposal on sugar beverages
Vietnam is facing the issue of increasing overweight and obesity, particularly among children
and adolescents in urban areas. As a result, the government of Vietnam recently introduced a
proposal to impose a special consumption tax on sugar-sweetened beverages (SSB) in Vietnam,
as the drinks are causing negative health consequences for Vietnamese people. Research aimed
at evaluating the impacts of a 10% special consumption tax on SSB in Vietnam using the Almost
Ideal Demand System (AIDS) model. It found that a 10% SSB tax would reduce SSB
consumption by 11.4%. Consumers will switch to substitutes, leading to an increase in the
consumption of milk by 2.3%, beer by 2.5%, dried tea by 2.2%, and wine by 1.7%. However, in
the short run, the tax could lead to a decrease in consumer welfare due to higher SSB prices.
Increasing inflation forecasted
Global prices have surged in 2021 as economies gradually resume operations after disruption due to the
impact of the COVID-19 pandemic in 2020. The report said global food prices Demand has increased
40% since the pandemic began, which has hit low-income countries hard.
In an analytical chapter of the World Economic Outlook report titled "Fears of Inflation" recently released
by the IMF, it stated: "House prices have increased sharply and the shortage of input supplies persists in
the region. In advanced and developing economies, prolonged food price pressures and currency
devaluations in emerging markets could lead to higher inflation.”
FocusEconomics Consensus Forecast panelists expect inflation to average 2.9% in 2021, which is up 0.1
percentage points from last month’s forecast. For 2022, the panel projects Vietnams’ inflation to average
3.7%, the highest in the last 5 years. (Person, 2021).
GDP growth comes with more demands
 Vietnam took just 11 years (from 1995 to 2006) to double its per capita GDP from USD 1,300 to
USD 2,600 (according to McKinsey & Co, 2014). A joint report released in 2016 by the
Vietnamese government and the World Bank suggested that Vietnam could achieve upper-
middle-income status by 2035 with a per capita income of more than USD 7,000, which is in the
range of what Malaysia or South Korea experienced in the mid-2000s.

This shows that peoples’ lives are changing and there might be more demand for food, beverage,
and services. This is also a good opportunity for Phuc Long to develop new products and
services to meet a large number of potential customers.
Highly competitive environment
F&B industry provides products that meet customers’ basic needs, especially beverages. Since
the world is moving faster, grabbing a cup of coffee at a coffee shop before going to work or
school seems to be a habit for most young people. It is just one of many reasons why people go
to coffee shops and that’s why the number of new coffee shops opening in Vietnam is rising at a
very high pace.
Take an example, despite restructuring its Board of Directors, The Coffee House also announced
further expansion this year. By the end of Q1, the chain had more than 176 stores nationwide.
Under its plan, it will open at least 50 new stores by the end of 2021 and an ambitious 1,000
stores by 2025.
In addition to the parallel development of Trung Nguyen Legend stores operated by the group
itself, 16 new Trung Nguyen E-Coffee stores have opened since the beginning of 2021. Through
a concession, Trung Nguyen has now nearly 1,000 stores in Vietnam and will continue to expand
its presence in all localities until reaching more than 3,000 stores nationwide.
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