Decoding the Phuc Long phenomenon

In a separate report on the bubble tea market, Momentum Works and qlub showed that Vietnam is the third-largest bubble tea market in Southeast Asia, with a size of $362 million. Bubble tea is a product that is easily copied, and Vietnam is a price-sensitive market.

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

The market size is worth $3.1 billion.
According to Statista statistics, the tea market in Vietnam was valued at US$3.1 billion in 2022 and is expected to reach approximately US$3.7 billion by 2025.

However, research from Momentum Works emphasizes that price is not the only factor influencing customers' beverage purchasing decisions. Instead, the choice of brand depends on the range of products available in the store, as well as the number of stores the brand operates.

Established in 1968, Phuc Long is a tea and coffee brand favored by young people, nổi with its drinks that combine the rich and distinctive flavors of tea and coffee with trend-setting brewing methods.

May 2021 marked a turning point for Phuc Long when consumer and retail giant Masan Group spent $15 million to acquire a 20% stake in the F&B chain. After two additional share purchases in 2022, Masan gained controlling ownership of the Phuc Long chain with an 85% stake.

From a beverage once considered a "specialty" of Ho Chi Minh City, in just over a year since joining forces with Masan, this F&B chain has expanded to 27 provinces and cities.

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

The Phuc Long kiosks inside the first 27 WIN stores saw a 116% increase in daily revenue compared to kiosks in WinMart+ stores, demonstrating a significant synergistic effect on the WINLife ecosystem.

Masan hopes that Phuc Long will not only contribute to revenue growth through cross-selling via seamless in-store customer experiences and integrated customer loyalty programs, but also become a driving force attracting younger customers to its retail chain.

In the first nine months of 2022, Phuc Long achieved VND 1,143 billion in revenue and VND 199 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA). The flagship stores made a significant contribution to Phuc Long's revenue and profit.

The flagship stores generated VND 761 billion in revenue and VND 233 billion in EBITDA in the first nine months of 2022, contributing nearly 67% to total revenue and demonstrating the potential to become a driving force for Phuc Long's growth.

Phuc Long's flagship stores demonstrate impressive profit margins, ranking among the world's best, even when compared to Starbucks. In the domestic market, revenue per Phuc Long flagship store is estimated to be 2-3 times higher than that of other F&B brands.

Masan plans to open 30 new flagship stores in Q4 2022 to boost revenue and profit. In addition, Masan Group's leadership will focus on further improving the operational efficiency of kiosks inside WIN stores and researching and developing mini-store models in high-traffic areas with a demand for takeaway products.

Online channels contribute 35% of sales.

The large scale of its offline sales outlets is a competitive advantage for this tea and coffee brand in the online market, as it races to capitalize on new consumer trends in Vietnam. With a "two-pronged" strategy, Phuc Long is consolidating its leading market position in terms of offline sales outlets while simultaneously accelerating the development of its online channel.

Integrating with Masan helps Phuc Long increase the reach of its packaged tea and coffee products through the Win and WinMart+ channels. Simultaneously, Phuc Long's advantage in flagship stores and kiosks allows this F&B chain to minimize delivery times for milk tea, fruit tea, and ready-to-drink coffee to customers.

Currently, revenue from online channels, including delivery apps (Grab, Now, Baemin, etc.), contributes 35% to Phuc Long's total revenue. A large proportion of Phuc Long's customer base consists of young, urban residents who are adept at using digital services.

According to surveys, Generation Z (1997-2012) and Millennials account for up to 25% of Vietnam's population. This generation also has the highest demand for F&B products and services, and is willing to pay more for convenient experiences that suit their personal preferences and tastes.

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