A case study on Trung Nguyen Cafe
I – About the report
The main objective of my report is a case study on Trung Nguyen cafe, the first Vietnamese company that has applied the model of franchise. With the business method of franchising, Trung Nguyen coffee products, which are produced by the best coffee beans from the highland of Buon Ma Thuot in conjunction with modern technologies and company's own skills, were introduced to everybody nationwide and worldwide. It has opened a new cafe chain in Singapore as well, at Changi airport, Terminal 2.
By doing this project, I would like to provide an insight into the business, on how Trung Nguyen Cooperation can ensure that they are strong enough to expand internationally. More specifically, I want to analyze on how they can be succeed in Singapore, the very new and competitive market where Trung Nguyen has to fight with old existing brands such as Starbuck or The Coffee Beans.
As for the first part of the report, I'll introduce more about Trung Nguyen cooperation, their history, their steps… Following by the analysis of their internal and external environments and last but not least, I'll bring in some of my thoughts and recommendations to Trung Nguyen in order to be successful in the new market.
II – An overview on Trung Nguyen Cooperation
Trung Nguyen has been in Vietnam since 1996, more than a decade passed and the company has been achieving a numerous of entrepreneurial prizes and recognitions from Vietnam gorvenrment, Vietnamese Young Enterprise Association… Trung Nguyen now is recognized worldwide as the best coffee brand.
Let take a closer look of Trung Nguyen steps:
• 1996 – Trung Nguyen Coffee company established
Starting from 1996, Trung Nguyen was a small enterprise which processing coffee in Buon Me Thuot city, Daklak province, the largest coffee plantation in Vietnam.
During the year, four young entrepreneurs (Trung Nguyen founders) with a vision of creating a famous Vietnam coffee trademark, established Trung Nguyen Coffee Company and gradually introduced the authentic Vietnamese coffee to the world.
It was a difficult starting in order to raise awareness within the Vietnam population itself, changed the taste of citizens and had a good position in the industry. But with strong determination and ambition, the first step had done perfectly.
• 1998 – Trung Nguyen makes their 2nd step and try to bring New Inspiration
The first coffee outlet opened in 1998 in Ho Chi Minh city, marking Trung Nguyen first presence in Vietnam.
Trung Nguyen's logo and slogan appeared in all streets of Saigon, the largest and modernized city of Vietnam. Awareness was created among the Vietnam population and citizens were amazed by a new coffee style, especially, it was Vietnam brand.
• 2000 – It's time to Flood and Dominate the Vietnam coffee market
After 4 years of creation, over 100 Trung Nguyen franchised coffee houses were set up.
And the first coffee house successfully introduced in Hanoi, the capital of Vietnam. it remarked the long way of traveling of Trung Nguyen from Ho Chi Minh city, South of Vietnam to Ha Noi, North of Vietnam.
• 2001 – Trung Nguyen explores creative inspiration
Trung Nguyen appeared in 61 provinces and cities throughout Vietnam.
Trung Nguyen took 4 years to dominate the market of its home country while Starbucks took up to 15 years.
It's the first time of a coffee brand to have its appearance throughout the country. And Trung Nguyen was really recognized by the citizens.
• 2002 – Going internationally
Not being satisfied with its success in Vietnam only, Trung Nguyen made a move out of the boundary, tried to reach out the bigger market.
The first Trung Nguyen coffee shop was set up in Japan followed by Trung Nguyen trademark was established in Singapore and Thailand on 2002.
2002 was the year of Trung Nguyen, made a turning point in their business .
• 2003 - Expandation
Non-stop, Trung Nguyen expanded to Cambodia and didn't forget to built more coffee shops in Vietnam.
• 2004 – Explotion
Trung Nguyen operated the 2nd shop in Japan and until this time, it has over 600 coffee shops in Vietnam, 121 excusive distributors, 7,000 outlets and 59,000 retail shops in Vietnam. It was such a huge number of a small enterprise at first after 8 years of creation. With all the effort and inputs, Trung Nguyen is as known as the most successful Vietnam company at this point of time.
• 2005 – Recognition
It made a remark of 1000 coffee shops in Vietnam
Trung Nguyen is the only coffee factory granted with the EUREGRAP International Certificate, for its cleanliness and excellence in producing coffee.
• 2006 – Non-stop reaching the peak
Trung Nguyen continued opening coffee shop in Germany, New York, Malaysia, China and launched G7Mart, a super market chain in Vietnam.
B. Trung Nguyen in Singapore
Trung Nguyen opened a franchise in Singapore's Changi Airport, Terminal 2 in September 2008 under the company's new franchising image.
It is a 150sq.m shop in a favourable location, which open on September 5. The shop showcases Vietnam coffee drinking culture and raises more awareness about Vietnam brewed coffee rather than Vietnam green beans. The establishment of Trung Nguyen in Singapore, an island country is part of their strategy to become a competitive brand, besides Starbucks, The Coffee Bean, so on and so forth in the world market.
As for the company foreign affairs manager, she sees Singapore as a gateway of Asia and the world with many important international airline routes. With no doubts, she is sure that it will be a suitable place, referring to Changi airport, for Trung Nguyen to spread its brand name. Moreover, she added that in the first year of operations in Singapore, the company would focus on building a world-class coffee brand- name as well as a new way of franchising, rather than revenue.
The company had previously franchised seven outlets abroad, however the airport location represents the first franchise under Trung Nguyen's new image. While the outlet conforms to international standards of franchising, the difference lies in its distinctly Vietnamese appearance.
By the end of the year, three more shops are expected to be licensed in Singapore.
C. Organization's visions and missions
(Some of the following was attracted from Trung Nguyen Cooperation website)
· Company's mission:
"Creating the leading brand is carried out by bringing to everyone drinking coffee a source of creative inspiration and pride of Trung Nguyen" style that is rich in Vietnamese culture."
Trung Nguyen has a very clear mission of what and where they are heading. Undoubtedly, Vietnamese coffee culture is very wide and consists of different aspects such as pride, inspiration, empowerment… and Trung Nguyen continues improving their products to achieve the excellence of Vietnamese coffee culture.
· Company's vision:
To become a major force in boosting the Vietnamese economy; To uphold stability of the national economy; To partake in the establishment of a Great Vietnam, with hopes of discovering and conquering new ideals.
1 - Inspired Creativity
From an enterprise's perspective, success is related to the quantity and quality of new ideas. As the first key component of Trung Nguyen vision, creativity is the ability for them to improve, in the sense of product, service, price… The managers can see that continuous improvement through creativity is one of the keys to success in business.
2 - Develop and protect our brand
It's very important to protect the brand of Trung Nguyen, know as known as the most famous brand of Vietnam coffee. But if only protecting the brand, Trung Nguyen will just stay still where they are now and can be left behind by other companies, corporation. So by putting the other component “Develop”, Trung Nguyen has fulfilled another aspect for their vision.
3 - Consumer's Orientation
It is a must to orient the consumers about the company, the product and provide the needs of consumers. Trung Nguyen is the very first company, which concerns about customer based rather than only focus on their core business.
4 - Build our success upon our partner's success
With a strong relationship with their partners, Trung Nguyen is not only being successful on their own brand but also creating the market wide for their partners.
5 - Develop strong human resource
Trung Nguyen Corporation has more than 2000 staffs and over 15,000 waiters/ waitresses/ baristas in their franchised shops.
Staffs of Trung Nguyen is well-trained young people, undergone the company's training programmes by professional experienced trainers from Vietnam as well as over the world. They have a very well built fundamental and ready to serve the best product to consumers.
6 - Base on effectiveness.
7 - Promote social responsibility and community development
Not only focus on their core business, but Trung Nguyen also promotes social responsibility and community development by having certain and annual events such as fund raising for poor and needy families, charity fund from the company and a lot more of society service projects.
An In-Depth look
III – External environment of the organization (PEST analysis)
-Different countries with different political status might affect the coffee industry.
- Due to recession and current economic downturn, it can directly reduce the customer's consumption.
- Inflation rate plays a significant part in the market price and customers' willingness to pay the products
Social – cultural
- Coffee is the most popular beverage in the world.
- The demand for coffee shops and quality products at competitive prices are increasing rapidly in countries all over the world.
- There is a coffee culture exists in all countries over the world
- More people now believe that there are health benefits to coffee and that it is good for their health.
- Coffee science is a multidisciplinary field encompasses chemistry, physics, and food science throughout the stages of processing, shipping, roasting, and packaging.
- Nowadays, there is more and more high technology to support the procedure, operating chain of coffee industry as well as in brewing from raw materials to the final fresh products.
IV – Internal Environmental of the oganization
. SWOT analysis
- Trung Nguyen is the Leading coffee company in Vietnam, Best brand of Coffee in Vietnam – world leading country of exporting coffee and be recognized as the Biggest exporter in Vietnam of processed coffee
- Besides, Trung Nguyen is the first Vietnamese company successfully applied a form of franchising in domestic and overseas market
- Trung Nguyen has their own factory for raw materials in Buon Me Thuot city, Vietnam with the most modern technologies.
- Being the first step, Trung Nguyen has a lot of disadvantages such as lack of experience, no reference from other Vietnamese companies.
- As with growing any crop there are unpredictable elements that will affect the production of the crop and therefore the cost of coffee for the coffee franchisee.
- The diversity in the market, which is merely due to the diversity in the customers (age range, hobby…)
- The company has the opportunity to expand its global operations. New markets for coffee such as China and Europe are beginning to emerge.
- Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential.
- A common threat in any industry is an economic recession, which reduces consumers' consumption.
- Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future?
. Marketing strategy
Trung Nguyen is the pioneer among Vietnam companies in branding as well as franchising and the company is the most popular case study that being a good example to others. Somehow, we can say that Trung Nguyen is a successful brand among Vietnam industry but yet; there are still lessons to learn and experience to gain.
One factor that makes Trung Nguyen to be so popular is that they are the first, the flagship within a huge number of Vietnam companies take up this challenges. Trung Nguyen developed its first branding by a very attractive logo and slogan, which then flooded the Vietnam market. The dramatically growth of these retail branded shops created the “Trung Nguyen" as something totally new and never seen before, and was enough to attract the curiosity of consumers. The very good awareness was being created in coffee lovers' eyes and that was the very first step of Trung Nguyen in order to dominate the huge market.
Besides that, Trung nguyen receives a bug support from the Government and the public mass media. We can obviously see Trung Nguyen advertisement day by day in different channels of the television, in public transportation and elsewhere in the city. It's a very effective way of marketing and Trung Nguyen has been very successful by doing so. . It tried to expose the brand as much as possible, owing to being the first and because of the Government support in developing Vietnamese brands and promoting agriculture and export products.
As the flagship among all Vietnam companies, Trung Nguyen is a attraction to journalist, tourist… and it's a good platform to raise up the branding because by then, it's a chance to expose the brand externally.
Thing to be considered, Trung Nguyen seems to be overslept and hasn't done enough to actually build a good branding and high position internationally. Even though there is a rapid increasing in number of outlets, retail shops but there seems to be no proper marketing strategy in different countries, continents for further future.
Trung Nguyen might want to sit down, look back and plan more carefully if they want to achieve success in the near future.
. Franchising strategy
1. Introduction of Trung Nguyen franchise system
Trung Nguyen Coffee is the first Vietnamese company that has applied the model of franchise. Being active and creative, Trung Nguyen has established the franchised shop system nationwide and also in Japan, Singapore, Thailand, Cambodia, Ukraine, German and China with a special style of coffee enjoyment.
Trung Nguyen coffee which produces the best gourmet coffee from the highland region of Vietnam with the usages of high technology and company's skills, they are able to introduce the coffee culture not only in Vietnam but also world wide.
After more than 10 years of development, with about 1000 franchised coffee shops. Trung Nguyen always brings the top quality of its products and gain customers' trust.
It is a rapid increasing in number of Trung Nguyen franchised retail shops, café over the past 7 years, starting from 1997 to 2005.
3. Rights of the franchise recipients (with personal comments)
It's a set of rules and regulations that franchisees must follow when they are participating in Trung nguyen franchise system:
Use Trung Nguyen franchise to expedite business activities in a unique location based on the franchise prestige.
It can be seen very obviously via the way franchisees choose their shop location. As for example, Trung Nguyen franchised shop in Singapore is at Terminal 2, Changi Airport, a very unique location, which will be attracting tourists and passengers.
Exploit the tangible and intangible profit from the prestige of Trung Nguyen to:
-1. - Quickly draw customers.
-1. - Reduce risks in business.
- Save time and cost of shop advertisement so as to focus on the business activities.
This point is the advantages of being a franchisee as well. As for franchisee, once we open the shop, we will have a database of customers from the franchisor. It is also can be called as a quick start for the franchisee to start the business with a proven trademark and formula of doing business, in opposite with having a totally new idea or building the business from scratch. Furthermore, all the needed fundamental for a business such as marketing, advertising… will apparently be there for franchisee so they can save time in order to focus more on the core business. All of these points together, franchisee must be very happy because they can reduce the risk that they are having.
Be sponsored some stuffs directly relating to the product.
In this point, Trung Nguyen ensures that they will sponsor the franchisee packaging of the products, booklets, brochures that describe the products to the franchisee.
Be favored on the price from the prestigious suppliers of equipment, materials and services…that have contracts with Trung Nguyen.
It is a very good platform for franchisee when they can have this relationship with all the suppliers from the franchisor. It's not only saving their time but also providing them a big deal with the best prices for raw materials, equipments…
Provide necessary trainings for shop operation, including:
- Methods ofbrewing coffee and tea
- Guidance to choose appropriate music for each kind of shop.
Franchisee will be received training from franchisor for significant aspect of the business, the procedure or shop operation. Most probably, Trung Nguyen will send their staff to be attached to the new franchised shop and conduct training.
Provide shops with suitable business model consulting. Support the initial business planning.
From their own experiences, Trung Nguyen will provide the franchisee with their best advises, consultant of floor plan of shop for example, or about the business plan, financial statement…
4. Responsibilities of franchise recipients
Not only a set of rules and regulations that franchisees must follow when they are participating in Trung nguyen franchise system, Trung Nguyen has set up a set of responsibilities of franchise recipients. There are some main important points as below:
· Operate the shop's activities by themselves.
There are different countries in different countries (social factors) so that of course, the franchisees have the chance to carry out the operation procedure on their own. It's good to be done that way if not the franchisees will be restricted by the franchisor and there will be lack of room for creativity and improvement.
· Fully participate in Trung Nguyen training courses before and after opening the shop.
Training courses seem to be the most important thing for a franchisee in order to be successful. Through these courses, the franchisee can have the chance to know more about the business structure, the operation system and hence, have a clear idea about the “head” company.
· Follow the design of Trung Nguyen style.
In order to keep the similarity and competency of Trung Nguyen Coffee brand, this responsibility was set up to fulfill the desire of the managers. By doing so, it will create the Trung Nguyen coffee chain in stead of different looks with the same body.
· Pay fees as regulated.
Different types of fee such as operational fee, franchise fee, deposit fee.. will be paid to Trung Nguyen and it has another set of rules related to paying fees.
Keep the confidentiality of Trung Nguyen.
Observation and Conclusion
V – Observation
Apply SWOT in Trung Nguyen Coffee at Terminal 2, Changi Airport Singapore
- Target customer: not only from the side of the passengers who arrive or depart from the airport but also because of the increase in the visitors who accompany the passengers
- Location: Changi airport is a critical element for strategic positioning in the target market. It is of international importance and a shop located there can attract customers from both the national and international market makes the location factor as a key strength for setting-up a coffee shop in the airport.
- Seasonal business: Changi airport caters high level of customers during the periods of holiday making whilst supports only the business travelers at other times. This makes it clear that the business for the coffee shop is seasonal in nature.
- Differentiation by Pricing: the demand for quality products at competitive pricing is an increasing demand at the airport especially from the customers visiting from the far east of the world
- Promotion through embracing culture: The fact that the airport caters visitors from difference culture makes it clear that the coffee shop can attract customers through embracing its promotions reflecting upon specific culture.
- Terrorism: The major threat is the element of disaster that can be caused by terrorist attacks at airport
VI – Some recommendations
A. Placement strategies
1. Trung Nguyen can open more of their retail stores and café in polytechnics, universities, JCs and ITE as they have been doing in Singapore Polytechnic.
By doing so, they can target a huge number of potential consumers which is young adults, the coffee lover.
2. Trung Nguyen can open 1 more café in Budget Terminal, other than only 1 in Terminal 2, Changi Airport.
The reason for it because, as an international student, we will most probably use Budget Terminal to travel so that Trung Nguyen can target the minority but potential customers as well.
3. The most important thing for Trung Nguyen cooperation to take into consideration is to open more shops, coffee stores that can dominate the Singapore market as a whole. Which means they might want to open more at shopping malls, targeting more consumers and be ready to compete with Starbucks of The Coffee Beans…
4. Online sales
Singaporeans are the most frequent online shoppers, buying about six items per month online. So by doing online sales, Trung Nguyen can target a huge number of potential consumers
B. Marketing recommendation
- Having road shows and special advertising and promotion. It can be a road show at the Central area to raise awareness about Vietnam coffee in general and Trung Nguyen, specifically. It is because the Central area (Orchard road mainly) is the junction of tourism and very famous shopping area in Singapore.
- Sample coffee to schools (JC, schools, universities)
- Advertising used transportation: Trung Nguyen coffee can paste their banners, logos on MRT, SMRT, bus service to raise awareness of Singaporeans and the Singapore population in general.
- Using flyers, newsletter to cater a huge population of students, working adults in schools, offices.
VII – Conclusion
Trung Nguyen Coffee is the first Vietnamese company that has applied the model of franchise. Being active and creative, Trung Nguyen has established the franchised shop system nationally and internationally and will be very successful.
Being the flagship of Vietnam franchising system, Trung Nguyen will then make a remark in the entire industry and lead other companies to a new destination. I, personally believe that Vietnam industry in general will have a turning point within this decade.
11. Vietnam Economic Time , Nov. 2005
(Written by Nguyen Trung Thang, CEO of Masso Group)
PROFESSIONAL PROFILING MODULE
Nguyen Mai Huong, 2009