January 05, 2024 | 08:00 GMT+7

Bright outlook for Phuc Long Coffee & Tea following M&A deal

Gia Huy -

Finding the right partner lights up a vital road forward for Phuc Long’s potential growth and further expansion, according to its founder Mr. Lam Boi Minh.

The Phuc Long Premium store at 87 Xuan Thuy Street in Thao Dien ward, Thu Duc city in HCMC.
The Phuc Long Premium store at 87 Xuan Thuy Street in Thao Dien ward, Thu Duc city in HCMC.

Through many ups and downs over the past 50 years, his passion has been not just to create a top-of-mind coffee and tea brand for Vietnamese people but also to sustain his “spiritual legacy” for the following generations. After more than five decades, Phuc Long’s founder expects his coffee and tea chain will thrive in the next stage under new management. “Mergers are like marriages, and Phuc Long finding the right partner will determine its mission in the local market and cultivate its success overseas in the future,” he said. In recent years, this “marriage” has been a phenomenon and an outstanding merger and acquisition (M&A) transaction in Vietnam.

Strategic move

Prior to the M&A, Phuc Long Coffee & Tea owned more than 70 flagship stores in major cities with brand recognition nationwide. The company did not conduct any franchising because its founder wanted to control product quality. “We have built a firm foundation for the brand, with high value from Vietnam’s coffee and tea culture allowing Phuc Long’s products to reach younger customers,” Mr. Minh said.

To maintain the business’s core values and further promote its performance, Phuc Long’s founder insisted on handing over the beverage chain to a partner who had more robust capabilities and financial resources to take it to the next level of development. “If we want to go fast, we go alone, but if we want to go far, we need to go together,” he emphasized. “Thus, it is necessary for Phuc Long to be operated by a local market leader, and I hope our tight cooperation with the Masan Group will be favorable and endurable.”

After taking over, the Masan Group said it aims to make Phuc Long Heritage (the operator of Phuc Long Coffee & Tea) Vietnam’s No. 1 coffee and tea retail brand within the next few years, given the “outstanding efficiency per store unit along with the acceleration of opening new points of sales.”

The group has aggressively multiplied the Phuc Long kiosk / mini model integrated within its supermarket chain since 2021 to achieve this target. When this direction showed inefficiencies, a restructuring of outlet numbers enabled the beverage chain to improve its performance, with Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) surging 33 per cent in the third quarter of 2023. At the same time, Masan returned to scale up Phuc Long’s flagship stores to 147 outlets this year with a target of opening an additional eleven stores by the end of this year, the company disclosed.

To some extent, the kiosk / mini store is still a good model for a food and beverage (F&B) chain when it is consistent with limited quantity and suitable locations. Moreover, this should also come with how the product quality is guaranteed during processing. “Our partner is a conglomerate doing diversified business sectors, so they may face certain obstacles in running a new F&B business, especially in the current context,” Mr. Minh said.

Resilience for a bright future

Mr. Lam Boi Minh, Founder of Phuc Long Coffee & Tea.
Mr. Lam Boi Minh, Founder of Phuc Long Coffee & Tea.

Looking ahead, Phuc Long’s founder still finds optimism and strongly believes in his partner’s competence in navigating the F&B chain. It can’t be denied that Phuc Long Heritage is now managed by an experienced team. “Delivering a suitable strategy amid these market headwinds is not simple, but I know they will have more precise solutions than me,” he said.

“In any circumstance, I will stand ready to accompany them in tackling the challenges to build the next growth strategies for Phuc Long Heritage over the years to come,” he went on. “As Phuc Long is the target of my devotion, its greater achievements in the future will deserve what we spend today. With my knowledge and experience, I think we can talk together and continue cooperating cordially in operations and business activities to create more synergy.”

Vietnam is among the world’s leading countries in terms of coffee and tea exports, thanks to its product quality and quantity. Along with the country’s large consumer market and suitable materials at reasonable prices, F&B brands still have many significant opportunities and a lot of room for growth. Facing increasing competition in the local market, however, F&B brands need creativity in generating new products to differentiate themselves from others. Success will come if brands encompass specialties and signatures that fit local culture and consumers’ tastes, according to Phuc Long’s founder.

Likewise, Phuc Long Heritage should maintain its mission of entering and expanding into new markets in its next stage of development. “This plan could be realized and bolstered in more favorable market conditions, now that the company needs to focus more on internal operations and product research and development (R&D) to ensure product quality before aggressive expansion,” he said.

A senior Masan executive told a recent shareholder meeting that no matter how much technology develops, people are always the most crucial factor in determining success because technology can’t take customers as the center of the journey. Phuc Long’s founder also recommended that human resources management and training be the core value and mission of all businesses, following a similar way of creating value for their consumers and pursuing a similar vision of sustainable growth.

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