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Starbucks to take on Vietnam coffee culture

A woman holds a Starbucks takeaway cup in London Oct. 24, 2012.

SUZANNE PLUNKETT/REUTERS

Starbucks will take on the traditional coffee culture of Vietnam next month when it opens its first outlet in the Communist-ruled country.

The Seattle-based company will open its debut coffee shop in Ho Chi Minh City in early February, it said on Thursday, increasing its presence across Asia to 12 countries.

With the move, Starbucks will join other US chains including Subway and Yum! Brands' KFC and Pizza Hut already operating in the southeast Asian nation.

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In the fourth quarter of 2012, Asia-Pacific brought in revenues of $198-million (U.S.) for Starbucks compared to $2.5-billion from its Americas division. However, Asia is Starbucks' fastest growing retail market, with fourth-quarter revenues rising 23 per cent year on year.

The company aims to boost its Asia store count from 3,300 to around 4,000 by the end of this year, which will include reaching 1,000 outlets in mainland China.

Starbucks said in December that it expected China to become its number two market behind the U.S. by 2014, and by the following year it hoped to have 1,500 stores across 70 Chinese cities. It currently has about 700 mainland shops.

Unlike in China, where the U.S. company must convince a country of tea-drinkers to switch to coffee, Vietnam has a long history of drinking and producing the caffeine-heavy black liquid. Coffee shops are commonplace along the streets of the big Vietnamese cities.

Jinlong Wang, Starbucks' Asia-Pacific president, said he was "very excited" about the company's entry into Vietnam, with its "emerging middle class consumers who want to enjoy international products".

Mr. Wang said the company was considering Hanoi and other major cities as potential future locations. Starbucks currently has more than 200 stores in the Philippines and more than 140 in Indonesia.

Hong Kong-based Maxim's Group, which runs Starbucks' stores in Hong Kong and Macau, will operate the brand's outlets in Vietnam.

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Vietnam is the world's second-biggest producer of coffee beans after Brazil, although more than 90 per cent of production is for export. While most of the coffee is the low-grade robusta used in instant coffee, a small but growing number of farmers are moving to grow higher quality arabica beans, which command a loftier price.

Starbucks plans to work with local coffee farmers to promote the arabica industry, said Mr. Wang.

Despite the large production base and the prevalence of coffee shops, Vietnam still consumes, on a per-capita basis, far less coffee than some of its neighbours, such as Thailand.

Starbucks, in partnership with the Tata group, recently opened its first stores in India, another traditionally tea-loving nation. It plans to add a New Delhi location early this year to its three outlets in the commercial capital of Mumbai.

But as it expands in Asia, the chain will not be relying just on coffee drinkers. In November, Starbucks paid $620m for Teavana, a US-based chain of tea-houses, which it hopes will help build its presence in India, China and the Middle East.

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