High rents snap coffee chain dreams in Vietnam
Rising rents are forcing many coffee chains in Vietnam to close outlets and/or scale down operations, industry observers say.
On Monday, Starbucks Reserve Han Thuyen in District 1, Ho Chi Minh City officially downed its shutters. Although it did not give a specific reason for the closure, the company management said they had "carefully considered many factors".
Starbucks's first and only Reserve store in HCMC will move to another location, the U.S. coffee company announced.

Starbucks Reserve Han Thuyen in District 1, Ho Chi Minh City on August 26, 2024. Photo by The Investor/Dang Kiet.
With the closure of Reserve Han Thuyen, Starbuck now has only one Reserve store in Vietnam, located on Nha Tho street in Hanoi.
In 2021, Starbucks Vietnam had closed a store at the REX Hotel near Nguyen Hue walking street, one of the most prime corner locations in HCMC.
Reserve outlets introduce premium coffee flavors prepared by coffee masters. Starbucks Reserve Han Thuyen, in operation for seven years, was a favored destination of tourists as well as coffee connoisseurs.
Its closure, thus, has raised suspicions and speculation that Starbucks decided to move out because of high rentals. The location was a three-storey house covering about 210 square meters.
Data from brokerage and rental sites shows that the rent for a similar space on Han Thuyen street, District 1 is about VND750 million ($30,200) per month, about VND25 million ($10,070) per day and VND9 billion ($361,846) per year.
Another set of closures that created a buzz was that of the famous Vietnamese coffee chain, The Coffee House.
At the end of July, The Coffee House outlets in the Mekong Delta city of Can Tho announced their closure. In August, the chain’s remaining three outlets in the central city of Danang were also planning to close down, local reports said.
As of August 26, The Coffee House had 115 shops nationwide, down 24% from the 150 it had at the end of 2023. According to a representative who did not want to be named, the scaling down of operations was meant to minimize costs and improve business operations to adapt to changing conditions.
Fierce battle
The coffee chain field in Vietnam has always seen fierce battles based on specificities in terms of prices and consumer behavior in the 100-million-strong market.
iPOS.vn's 2023 F&B market report shows that the industry earned revenues of VND590 trillion ($23.72 billion) in 2023, with beverages accounting for 16.52%.
According to a Vietdata report, the Vietnamese F&B market in general and the coffee shop market in particular expanded remarkably in 2023. At the end of 2023, the on-site dining market was estimated at $21.6 billion, an increase of 11% year-on-year.
The UK's leading information platform for the global coffee industry, Allegra World Coffee Portal, once predicted that Vietnamese coffee chains would have a total of about 5,200 shops by 2025.
In fact, the expansion of a series of international and domestic brands such as Highlands, Phuc Long, Katinat, Starbucks and Trung Nguyen indicated that the above forecast was well-founded.
However, the race for market share has shown signs of slowing down after the pandemic, due to shifts in consumer behavior and certain economic impacts.
Several observers have noted that this is not the main reason that coffee chains are losing steam. They have reiterated that high space rentals in big cities like Hanoi and Ho Chi Minh City are the main reason.
Bui Son, director of an office coffee shop in HCMC’s Tan Binh district, said that in the cost structure, the cost for space should account for only 30%, but the rentals of premises in the two big cities are very high, even making up to 50% of the total cost.
He added that this forces coffee shop owners to increase the prices of drinks and spend even more money on promotions to attract customers.
According to the "Global Main Streets Across the World Rankings by Market 2023" report released by property consultancy Cushman & Wakefield, space rents in Dong Khoi street, HCMC stood at $390 per square foot per year ($350 per square meter per month), higher than in Munich, Athens, Dublin and Barcelona.
Dong Khoi moved up one place from 2022 to 13th as rents increased by 17%.
Trang Tien street in Hanoi’s downtown district of Hoan Kiem was ranked 17th at $334 per square foot per year ($300 per square meter per month), up three places and 20% year-on-year.
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