Time for coffee

Proud of its position as a household name in Vietnam, Trung Nguyen Coffee has plans to spread the word around the world.

The important thing to know is that “Vietnam is the number one exporter of coffee in the world,” Jean-Pierre Fettmann, the general manager of Trung Nguyen Coffee boldly proclaims. When asked what makes Trung Nguyen Group a success, he matter-of-factly states: “Because our business is coffee. That’s all. The success is our coffee. We do have the right product, right policies, right distribution, and the right business model. But there’s also a story behind it.”

The coffee culture is ingrained in the history of Vietnam, regaining it even after the war. Fettmann says, “In Vietnam, every second shop is a coffee shop, with small chairs on the street.” The main difference with Trung Nguyen and its competitors is its focus on the pleasure of drinking coffee. Fettmann speaks not of a brand, but a passion: “We are talking to coffee lovers. Coffee is a pleasure. Something you have to appreciate, like chocolate or a good cigar…”

While Nescafé may be synonymous with coffee around the world it is not so in Vietnam. “We are the number one brand in our country,” says Fettmann. “We have two kinds of products: instant coffee and roast and ground (R&G). Our competitor is Nescafé, but for the past ten years we have been ahead of Nescafé in Vietnam.” Surpassing this global coffee giant is a huge feat, especially for a brand merely 16 years old. After Nescafé, Trung Nguyen is the second largest coffee exporter in the world. Reuters and Bloomberg predict it can be the number one in the next 10 years. Fettmann and his team are committed to achieving this. To make this happen, this Vietnamese brand established its hub in Singapore in 2009. The French-born manager explains: “Singapore is the ideal location for international growth. Today, we are already exporting to 40 countries.”

There are two huge geographical markets that Trung Nguyen is focusing on: China and America. But these are two very different coffee markets. China is 80-90% instant coffee, while the US
is 80-90% R&G drinkers. The US accounts for 18 billion coffee drinkers and half a billion and growing in China.

In China, Nescafé holds 68% of the market. Fettmann says Trung Nguyen’s penetration remains minimal, less than 1%. But he points out: “When you go to the street, people know their G7 instant coffee brand. They say: ‘Ah, red and black’,” pertaining to its distinct packaging.

Nestlé sees potential in the Chinese market with only three cups per person, per year drunk, compared with 168 cups of coffee in Hong Kong and 99 in Taiwan. The Chinese are traditionally tea drinkers, but there is a noticeable shift to coffee. Fettmann confirms this trend. “Coffee drinking is becoming bigger in China. The transition is easy because of the hot water culture. It is a simple shift, from tea plus hot water to instant coffee plus hot water.”

While Trung Nguyen has store designs ready for China, Fettmann admits it is premature to open coffee shops there now. He explains: “That is the second step. The primary focus is instant coffee. You have to get maximum exposure in the market first, then you get to the coffee chains.” So once the brand is established in China, Trung Nguyen will be ready to launch its concept for a G7 Express in China. This is a small kiosk with the cup to go and Bahn Mi baguette sandwich manned by one employee. They already have these stores in Vietnam. Requiring less investment than larger stores, these kiosks can easily be opened across China.

Early this year, Starbucks opened a 4,000 sq-ft, two-storey flagship store in Ho Chi Minh City. In turn, Trung Nguyen wants to face its competitor by opening a store on its home turf, Seattle. The Vietnamese coffee company is also aware that to compete with the top R&G brands in the US, it has to adapt its product to suit the American market. Fettmann explains: “They package their coffee in tin boxes. We have some but we have to have an adapted line suited to the American market.”

In addition to China and the US, expansion around the world is in the works. Trung Nguyen has signed a franchise agreement in the United Arab Emirates with the first store opening in Dubai this September, plus two more stores set to open in the Middle East before the year is over. There are interested franchisees in Malaysia, Thailand, Indonesia and the Philippines.

When Fettmann initially spoke with the master franchisee in the Middle East, they had not heard of Trung Nguyen, nor could they pronounce its name. But he convinced them to travel to Vietnam. Fettmann recounts: “Three of them took the plane to Ho Chi Minh City. In the in-flight magazine, they saw Trung Nguyen. When they arrived in the airport, they saw Trung Nguyen. When they drove to the hotel, they saw Trung Nguyen shops. Then they understood what coffee is about in Vietnam and they were convinced.”

While there are a few Asian newcomers in the coffee business, Fettmann is unfazed. “These people are strong with one product, one area, that’s it. They are fighting among themselves.” With Trung Nguyen’s clear goals, Fettmann boldly says: “We want to be in the world, not one small geographical area.”

Producing the finest coffee is its focus. While Starbucks may have created the concept of a third space for its customers to enjoy their coffee, Fettmann says: “Our first space is coffee.” They do not harp on about a brand or the environment where they serve the coffee. For them, it is all about the coffee. As a proof of that, Trung Nguyen sources its own coffee beans from small farmers certified for sustainable practices, with growers receiving guaranteed prices.

Its three brands, namely Trung Nguyen, G7 instant three-in-one and pure black, and Kopi Luwak (civet coffee) undoubtedly have a loyal following in Vietnam. But clearly it is no small player, limited to the Vietnam market. Confident of the quality of its coffee, Trung Nguyen is committed to competing directly with the worldwide coffee giants. On the future of this coffee company, Fettmann concludes: “You have to go where competition is to show you are better.”

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