Decoding the "Phuc Long phenomenon"

In a separate report on the milk tea market, Momentum Works and qlub showed that Vietnam is the third largest milk tea consumer market in Southeast Asia with a scale of 362 million USD. Milk tea is a product that is easy to copy and Vietnam is a price-sensitive market.

The habit of drinking tea has become a cultural feature in people's lives, with a variety of products consumed such as packaged tea, fruit tea, and milk tea.

Market size worth $3.1 billion
According to Statista statistics, the tea market in Vietnam is worth 3.1 billion USD in 2022 and is expected to reach approximately 3.7 billion USD in 2025.

However, Momentum Works’ research highlights that price is not the only factor that influences a customer’s beverage purchase decision. Instead, the decision to choose a brand depends on the product range in the store, as well as the number of stores of the brand.

Established in 1968, Phuc Long is a tea and coffee brand favored by young people, notable for its drinks that combine the strong and distinctive flavors of tea and coffee, combined with trend-leading brewing methods.

May 2021 was a turning point for Phuc Long when the consumer-retail giant Masan Group spent 15 million USD to own 20% of the shares of this F&B chain. After two additional share purchases in 2022, Masan controlled the Phuc Long chain at a rate of 85%.

From a drink considered a "specialty" of Ho Chi Minh City, after just over 1 year of "coming under one roof" with Masan, this F&B chain is now present in 27 provinces and cities.

Under Masan's management, Phuc Long has expanded its point of sale system from 72 stores in January 2022 to 860 points of sale by the end of September 2022 with diverse models such as flagship stores, mini stores and kiosks inside WIN and WinMart+ stores.

Phuc Long kiosks inside the first 27 WIN stores had a 116% increase in daily revenue compared to kiosks at WinMart+ stores, showing significant synergy with the WINLife ecosystem.

Masan hopes that Phuc Long will not only contribute to revenue growth by cross-selling through a seamless in-store customer experience and integrating a loyalty platform, but can also become a driving force to attract young customers to its retail chain.

In the first 9 months of 2022, Phuc Long achieved VND 1,143 billion in revenue and VND 199 billion in profit before tax, interest, depreciation and amortization (EBITDA). The impressive contribution to Phuc Long's revenue and profit is its flagship stores.

Flagship stores achieved VND761 billion in revenue and VND233 billion in EBITDA in 9M2022, contributing nearly 67% to revenue and demonstrating the potential to become a growth driver for Phuc Long.

The profit margin of Phuc Long’s flagship stores shows impressive results, ranking among the top in the world even when compared to the Starbucks chain. In the domestic market, the revenue per flagship store of Phuc Long is estimated to be 2-3 times higher when compared to other F&B brand stores.

It is expected that in the fourth quarter of 2022, Masan will continue to open 30 new flagship stores to increase revenue and profit. In addition, in the coming time, Masan Group's leaders will focus on continuing to improve the operational efficiency of kiosks inside WIN stores and research and develop mini-store models in areas with high customer traffic with take-away needs.

Online channels contribute 35% of sales

The large scale of offline sales points is the advantage for this tea and coffee brand to compete on the online channel in the race to catch up with new consumption trends in Vietnam. With the "going on two legs" strategy, on the one hand, Phuc Long consolidates its leading position in the market in terms of offline sales points, and on the other hand, accelerates the development of the online channel.

Integrating with Masan helps Phuc Long increase the coverage of packaged tea and coffee products through the Win and WinMart+ channels. At the same time, the advantage of Phuc Long flagship stores and kiosks helps this F&B chain minimize the delivery time of milk tea, fruit tea, and ready-to-drink coffee to customers.

Currently, revenue from online channels including delivery applications (Grab, Now, Baemin...) is contributing 35% to Phuc Long's total revenue. The majority of Phuc Long's customers are young customers, living in urban areas and proficient in using digital services.

According to the survey, Gen Z (1997 - 2012) and Millenials account for 25% of Vietnam's population. This is also the generation with the highest demand for F&B products and services, willing to pay high for convenient experiences that suit personal preferences and tastes.

Source: https://www.masangroup.com/vi/news/masan-news/What-makes-Phuc-Long-a-phenomenon-in-Vietnam.html