The factors affect consumer purchasing behavior of vietnamese branded coffee products in hanoi city

Cohort 2016 – 2018 BY PHAM THU HIEN THE FACTORS AFFECT CONSUMER PURCHASING BEHAVIOR OF VIETNAMESE BRANDED COFFEE PRODUCTS IN HANOI CITY Supervisor: Prof.Dr.. Therefore thesis has foc

Cohort 2016 – 2018

BY

PHAM THU HIEN

THE FACTORS AFFECT CONSUMER

PURCHASING BEHAVIOR OF VIETNAMESE BRANDED COFFEE PRODUCTS IN HANOI CITY

Supervisor: Prof.Dr Pham Thi Lien

HANOI, JUNE 2018Master’s Thesis

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ACKNOWLEDGMENT

First of all, I would like to send my sincere thanks to the lecturers, especially to my supervisor Prof Dr Pham Thi Lien for her devoted attention, lessons and guidance, which have equipped me with key knowledge and essential skills throughout the course More importantly, everything I have learned here would undoubtedly help me tremendously in

my work in the future

I would also like to thank lecturers of International School - Vietnam National University, Nantes University for their useful supporting during my process of studying and researching to complete this paper This course has equipped and improved and added a lot of knowledge about the different areas In addition, the course also helps me to have a relationship, have the opportunity to share information and learn from other students in the program

I am pleased to gratitude respondents for their enthusiastic support and creating favorable conditions for me to have more useful information to complete thesis

Sincere thanks

Author

Pham Thu Hien

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ABSTRACT

Strongly development of the coffee industry shows vital role of this beverage in the our daily life Vietnam is in the top five Asian countries for coffee consumption per capita after Japan, South Korea and Thailand With population of over 90 million people, it has a difference in the coffee culture that older than in other countries This is a lucrative market for Vietnamese coffee companies to exploit and develop their brands But the reality shows that this potential market is to be omitted because Vietnamese coffee enterprises focus on exporting green coffee In a current market economy, the fierce competition occurs among businesses and anyone who wants their products or services to be attended and selected by customers In order to achieve that goal, it is not only base on factors such as good quality products, competitive price, also on other elements that need to be resolved for instance what customers need and want, how their demand change, buying motivation and the personality traits of each customer group as well as the factors directly and indirectly impact on their buying behavior, etc For a long-term, stable development, enterprises need

to understand the psychology, age, occupation, average income, behavior of their customers Therefore thesis has focused on investigating customers’ awareness about Vietnamese coffee brand, their habit and purchasing behavior of Vietnamese coffee products, the factors impact on their buying behavior of Vietnamese coffee products Data collection was conducted in five districts of Hanoi city and used quantitative method with survey questionnaire Based on 250 valid responses from customers, the study identified five components – PRODUCT CHARACTERISTICS, PRICE, PRODUCT MOTIVATION and SOCIAL AFFECTS, PERSONALITY – which explain customer purchasing behavior of Vietnamese coffee products in Hanoi city The relationship between these purchasing behavior components and affecting factors is tested by regression analysis As the result showed except component personality has not met analysis condition and rejected, the rest four components have positive influence on Hanoian customer purchasing behavior of Vietnamese coffee products in which PRODUCT CHARACTERISTICS has the most significant impact on consumers’ buying behavior Base on these findings, the thesis also gives some suggestions for Vietnamese coffee producers for further improve their quality of products and service to satisfy customer demand and taste in Hanoi market

Key words: Vietnamese coffee, buying behavior, affecting factors, impact

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TABLE OF CONTENT

ACKNOWLEDGMENT ii

ABSTRACT iii

TABLE OF CONTENT iv

ABBREVIATIONS vi

LIST OF GRAPHS, FIGURES AND TABLES vii

INTRODUCTION 1

CHAPTER 1 THEORETICAL FRAMEWORK AND RESEARCH MODEL 5

1.1 Concepts of consumer behavior 5

1.2 Purchase decision making process and different types of buying decision 6

1.3 Literature review on the customers’ coffee purchasing behavior 9

1.4 Research models and the the factors affect consumers’ purchasing behavior of Vietnamese branded coffee products 11

1.4.1 Theoretical models of consumer behavior and coffee purchase decision 11

1.4.2 The factors affect consumers’ purchasing behavior of Vietnamese branded coffee products 16

1.5 Research model 22

CHAPTER 2 RESEARCH CONTEXT AND METHODOLOGY 24

2.1 Analyzing Vietnam café industry 24

2.1.1 History and development of Vietnam café industry 24

2.1.2 Categories of planted coffee in Vietnam 25

2.1.3 SWOT analyzing 27

2.2 Analyzing macro environment 29

2.2.1 Political - legal 29

2.2.2 Economic 29

2.2.3 Social - culture 30

2.2.4 Technology 30

2.3 Analysis domestic coffee market and product brand 31

2.3.1 Distribution channel and promotion 32

2.3.2 Purchasing habits and coffee consumption of Vietnamese people 33

2.3.3 Brand awareness 34

2.3.4 Customer satisfaction and loyalty 34

2.4 Research methods 35

2.4.1 Research approach 35

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2.4.2 Designing questionnaire and pilot testing 36

2.4.3 Sample and data collection 39

2.5 Analyzing data plan 40

2.5.1 Reliability analysis by Cronbach’s alpha 41

2.5.2 Exploratory factor analysis 42

2.5.3 Regression analysis 43

CHAPTER III RESEARCH RESULTS 45

3.1 Descriptive statistics 45

3.1.1 Sample demographic 47

3.1.2 Customers’ brand awareness and satisfaction on Vietnamese coffee products 48 3.1.3 Customer’s habit of Vietnamese coffee purchasing and drinking 50

3.2 Reliability analysis and measurement scales 55

3.3 Exploratory Factor Analysis 58

3.3.1 Exploratory Factor Analysis of Affecting Factors Scale 58

3.3.2 Exploratory Factor Analysis of Purchasing Behaviors Scale 63

3.4 Regression Analysis and hypotheses tested results 64

3.4.1 Regression analysis 64

3.4.2 Research model and hypotheses tested results 68

CHAPTER IV FINDINGS AND DISCUSSION 70

4.1 Assessing customers’ purchasing behavior and loyalty of Vietnamese coffee brand products in Hanoi city 70

4.2 The affecting factors on customers’ purchasing behavior of Vietnam coffee brand products 71

4.3 Suggestions for Vietnamese coffee companies to attract more customers and increase sale volume in Hanoi market 72

4.3.1 Promoting customer puchase motivation 72

4.3.2 Improve product characteristics 72

4.3.3 Setting an appropriate price 73

4.3.4 Social affects 73

4.3.5 Personality 74

REFERENCE 77

APPENDIX 1 Interview Guideline 81

APPENDIX 2 Questionnaires 85

APPENDIX 3 SPSS data analysis 91

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ABBREVIATIONS

MARD Ministry of Agriculture and Rural Development

DARDs Department of Agriculture and Rural Development

TTP Trans-Pacific Partnership Agreement

FDI Foreign Direct Investment

BMI BMI research – Fitch group company

GDP Gross Domestic Product

RTD Ready to drink

I.A.M Vietnam Institute of Applied Marketing

IPSARD Institute of Policy and Strategy for Agriculture and Rural Development VBCSD Vietnam Business Coucil for substainable development

VICOFA Vietnam Coffee - Cocoa Association

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LIST OF GRAPHS, FIGURES AND TABLES

Figure 1 1 Consumer behavior model 5

Figure 1 2 Stages of purchase decision making process 6

Figure 1 3 Howard-Sheth Model of consumer behavior 12

Figure 1 4 Nicosa’s Model of purchasing behavior 13

Figure 1.5 A structural equation model of effective variables on selecting chain stores from the customer perspective 14

Figure 1 6 Model factors affecting consumers’ buying decision in selection of a coffee brand 14 Figure 1.7 Model factors affecting consumers’ buying decision of foreign coffee in Hochiminh city 15

Figure 1 8 Research model 23

Table 2 1 Estimate of Vietnam’s coffee area by province 26

Table 2 2 Pilot testing result 39

Table 2 3 Encoded data 40

Table 3 1 Descriptive analysis 45

Table 3 2 Gender distribution among 250 respondents 47

Table 3 3 The customers’ brand awareness of Vietnamese coffee products 48

Table 3 4 Frequency and types of consumed coffee products 50

Table 3 5 The influence level of factors on customer buying behavor of Vietnamese coffee products according to average in come 52

Table 3 6 Test of Homogeneity of Variances 53

Table 3 7 ANOVA analysis 54

Table 3 8 Reliability of mesuament scales 55

Table 3.9.1 Exploratory factor analysis of affecting factors on customer purchasing behavior of Vietnamese coffee products in Hanoi city – KMO and Bartlett’s test 59

Table 3.9.2 Exploratory factor analysis of affecting factors on customer purchasing behavior of Vietnamese coffee products in Hanoi city – Total variance explained 59

Table 3.9.3 Exploratory factor analysis of affecting factors on customer purchasing behavior of Vietnamese coffee products in Hanoi city – Rotated Component matrixa 60

Table 3.10.1 Reliability statistics and exploratory factor analysis of affectin g factors on customer buying behavior of Vietnamese coffee products, 2nd time – KMO and Bartlett’s test 61

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Table 3.10 2 Reliability statistics and exploratory factor analysis of affecting fa ctors

on customer buying behavior of Vietnamese coffee products, 2nd time

– Total variance explained 61

Table 3.10.3 Reliability statistics and exploratory factor analysis of affecting factor s on customer buying behavior of Vietnamese coffee products, 2nd time –Rotated component matrixa 62

Table 3.11.1 Exploratory factor analysis of purchasing behavior scale – KMO and Bartlett’s test 63

Table 3.11.2 Exploratory factor analysis of purchasing behavior scale – Total variance explained 63

Table 3.11.3 Exploratory factor analysis of purchasing behavior scale – Rotated component matrixa 64

Table 3 12 Partial correlation of regression coefficient – 1st time 65

Table 3 13 Partial correlation of regression coefficient – 2nd time 65

Table 3 14 Adjusted R square 66

Table 3 15 ANOVA analyzing 67

Table 3 16 Hypotheses tested results 68

Bar chart 3 1 Respondents’ education and occupation 48

Figure 3 1 Research model result 68

Strongly development of the coffee industry shows vital role of this beverage in our daily life Vietnam is in the top five Asian countries for coffee consumption per capita after Japan, South Korea and Thailand With population of over 90 million people, it has a difference in the coffee culture that older than in other countries This is a lucrative market for Vietnamese coffee companies to exploit and develop their brands But the reality shows that this potential market is to be omitted because Vietnamese coffee enterprises focus on exporting green coffee Moreover, in the context of regional and world economic integration, the presence of many domestic and foreign brands in the Vietnamese coffee market brings more choices to the consumers The coffee drinking habits of Vietnamese people are gradually changing, now they prefer go to coffee shops to enjoy coffee They come here to drink coffee but also to communicate, meet friends, and satisfy their social needs They are more concern about coffee shop space, quality of products and services, prices, etc To respond those demands, Vietnamese coffee businesses also need to study the desires, perceptions, behavioral choices and purchase decisions of their target customers thereby, develop product quality, price and services Each brand of domestic or

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foreign coffee businesses with its own competitive advantage has attracted a certain number of customers Nevertheless, they need to catch their customers’ tastes, their competitive strengths, weaknesses as well as their competitors in order to provide appropriate strategies to satisfy the consumer's demand and expectation

Furthermore, they need to capture the consumption trends to attract customers, build

a strong brand and create competitive advantages Although the penetration of foreign coffee brands gave consumers more choices, meet their different tastes, it has created more pressures on domestic coffee businesses It means that they are forced to be innovated themselves, improve their service quality to better meet local consumers’ needs There are not many studies in the influencing factors on consumer behavior of Vietnamese coffee products, so to better understand purchasing behavior of Vietnamese consumers in general and Hanoi consumers in particular for Vietnamese coffee brands I chose the research topic

"The factors affect consumers purchasing behavior of Vietnamese branded coffee products in Hanoi city"

2 Research objectives, questions and objects

1.2.1 Research objectives

The thesis focused on the influent factors on customers’ purchasing behavior of Vietnamese coffee products The paper determined impact level of these factors on purchasing behavior of Vietnamese coffee products of different customer groups Thereby,

it proposed several suggestions for domestic coffee companies to encourage consumers buy products and improve business efficiency

1.2.2 Research questions

In this study, we will find out the answers to following two questions:

1 What are the main elements affects on the customers’ purchasing behavior of Vietnamese branded coffee products?

2 Which solutions do encourage consumers to buy much more Vietnamese branded coffee products in the current context?

3 Objects, Research scope, data collection and analysis

3.1 Objects: Based on the research objectives above, the objects of this dissertation

included consumer’s purchasing behavior of Vietnamese branded coffee products and the factors influencing purchasing decision on Vietnamese branded coffee products of consumers in Hanoi city

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3.2 Research scope:

About coffee brands in this thesis: research on all Vietnamese coffee brands is a big ambition, however in this study framework, we selected the following several representatives of local coffee brands

 Vinacafe (Bien Hoa Joint Stock Company Coffee): A coffee brand was established

in 1968 and accounted the biggest instant coffee market share in Vietnam Its manufactory produced 3000 tons of instant coffee per year With its market experience and knowledge, Vinacafe is always a heaviest competitor to domestic coffee companies

 Nescafe (Nestle Vietnam): A leading instant coffee brand in the world with 70-year

history It became familiar with most of Vietnamese customers and accounted for significant market share in Vietnam Currently, Nescafe has got an instant coffee manufactory with capacity of 1,000 tons/year that enables company best respond consumer’s demand [2]

 Trung Nguyen café: Established in 1996, Trung Nguyen-a young coffee brand in Vietnam has a spectacular development to become a prestigious and the most familiar coffee brand to domestic and oversea consumers Trung Nguyen won the love of consumers across the country for its exceptional coffee that had been extracted from the finest quality coffee beans, using advanced technology and unique inimitable oriental formulas, and blended with an intense passion for coffee

About survey respondents: The survey respondents are coffee consumers in Hanoi city, where the population’s average income is higher than in the other surrounding areas Therefore, research to find out solutions to encourage consumers in there to buy much more Vietnamese branded coffee products as the basis for applying to other localities is necessary The study is conducted from March to April 2018

3.3 Data collection and analysis

In order to answer the three main research questions, the author uses following research methods for data collecting and analyzing

Secondary data: According to Saunders et al (2009), secondary data is the

information which is collected from public resources such as books, journals, and the internet and this information is collected by previous researchers in line with current studies’ objectives Major advantage of secondary data is less time consuming and lower effort to collect to the researchers [41] In this thesis, second data was collected from books and journals which related to consumer behavior concepts as well as previous empirical

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evidence about the impact of product quality, price, distribution channels and promotions

on consumers' purchasing decisions on Vietnamese branded coffee products Financial statements, annual reports of Vietnam coffee companies in research scope, data published

by VICOFA, reports by independent organizations and actual data of their coffee products and customer care services in Hanoi

Primary data collection and analysis: Primary data is considered as the information

that is self-collected by the researchers without reliance on public sources According to Saunders et al (2009), it has the directly advantages support for the studies but the researchers often take time to collect this information In this study, primary data is collected through survey questionnaires with relevant respondents Specifically, a survey questionnaire was designed to collect the coffee consumers’ assessment who were living and working in Hanoi Then it would be processed by software SPSS version 22.0 with methods such as reliability test cronbach alpha, exploratory factor analysis, one-way ANOVA and multiple linear regression analysis The analysis results would be used as a base for proposing solutions to achieve the research objectives

4 Research’s contributions

Within the boundary of this thesis, the author aimed to explore the factors impact to the customers’ purchasing behavior of Vietnamese branded coffee products Base on evaluating customers’ purchasing behavior of Vietnam branded coffee products as well as the impact level of these factors to their purchasing decision, the author proposed some solutions for domestic coffee companies to encourage consumers to buy much more their products and improve business efficiency in the future Those solutions constituted promoting purchasing motivation, improving product characteristics and price, social affects and personality

5 Research’s structure

Regardless of the introduction, conclusion, reference and appendices the thesis has four major parts as following

Chapter 1: Theoretical framework and research model

Chapter 2: Research context and methodology

Chapter 3: Survey results

Chapter 4: Findings and Discussions

as well as research model and hypotheses were also mentioned there

1.1 Concepts of consumer behavior

Schiffman & Kanuk (2007) defined consumer behavior are the decision making process and physical specific activities, which individuals engage in when evaluating, purchasing, using or disposing of goods and services with expecting to satisfy their needs According to the American Marketing Association, consumer behavior creates the interaction between environmental stimulating factors and human being perceptions and behaviors to change their life In other words, consumer behavior refers to thinking, perceiving and the actions that people do in the consuming process Elements such as comments from other consumers, advertising, pricing, product design, etc probably affect their feelings, thoughts and behaviors

It can be seen that in fact, businesses’ research purposes on consumer behavior are not only identifying their customer needs, habits, and preferences but also planning products differentiation strategies and designing schemes of market segmentation In particularly, providers need to know what their consumers want to buy, why they buy or do not keep using that product, how they buy it and how much etc to offer solutions that motivate consumers to purchase their products and restrict consumers from leaving their existing brands and transfer to other supplier’s brands (see Figure 1.1)

Figure 1 1 Consumer behavior model

(source: Kotler, 2009)

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Kotler (2009) postulated external stimuli affect the consumer's black-box of a mind

to cause his/her responses that might be the choice of product, brand, deliver event time, frequency and amount of purchase The external stimuli were divided into two main groups namely marketing stimulus with 4P factors which laid in the business’s control and remain groups were environmental factors outside the enterprise such as economic, technological, political and cultural Kotler's theory stated that the buyer’s the black box content created the differences in their behavior It included buyer characteristics and decision-making Characteristics regard to attitudes, motivation, perceptions, personality, lifestyle and knowledge Decision-making process includes stages of problem recognition, information search, alternative evaluation, purchase decision and post-purchase behavior Customer behavior was governed by factors such as culture, society, personal style, and psychological factors etc The influence level of each factor on consumer behavior was also different each other [18]

Nowadays, the strong development of coffee industry and the diversity of coffee types and brands made the consumer choice complicated Moreover, countless advertise, promotional campaigns which made describing the feelings in customer minds when they choose a product becomes more difficult However, although the service, pricing and promotion policies were diversified, consumers' selection of Vietnamese branded coffee would depend on how well they evaluate those elements Did those coffee products satisfy their requirements of quality, economic or class value? In other words, whether coffee producers satisfy consumers' needs when using this beverage product Consequently, the analyzing and forecasting of consumer behavior were not only considered as a research variable, but it is important in relationship with influent factors on consumer behavior

1.2 Purchase decision making process and different types of buying decision

The buying decision making process describes as a journey the customers go through before they buy a product For marketers, understanding how customer makes a buying decision will also enable them to align a sales strategy accordingly Kotler and Keller (2009) introduced five stages framework following remains a good way to evaluate the customer’s buying process (see figure 1.2)

Figure 1 2 Stages of purchase decision making process

Evaluation of alternatives

Purchase decision

Post-purchase behavior

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 Problem/need recognition

Understanding the demand for a service or product is the first and most crucial step

in the buying decision process Because if customers do not recognize what product or kind of product they need, they will probably ignore a product purchase At this stage the consumer often sees a significant difference between the current state and desired state In fact, their need is driven by both internal and external stimuli An internal stimulus occurs from basic impulses or customer’s personal perception experience such as hunger, thirst or

a change in lifestyle so on An external stimulus originates from an outside influence, for example a billboard or review from friends for a new coffee brand Once a consumer recognizes his/her need, s/he will to gather information to understand how they can fulfill that want Marketers can create and promote customer demand and encourage them to choose their brand instead of others

 Information search

Having recognized a problem or need, the next step customers may do is the information search to find out what they feel is the best solution In this step the buyer will effort to collect both internal and external information in order to identify and evaluate information sources before making their buying decision Internal research refers to a consumer’s memory or recollection of a product, sometimes triggered or guided by personal experience External research is conducted when a person has no prior knowledge about a product, which then leads them to seek information from personal sources (e.g from friends and family) public sources (e.g google, online forums, customer reviews) or marketer dominated sources (e.g sales persons, advertising) In some cases customer may choose products without any related information, but other times they seek information carefully for identifying all alternative Therefore, when creating content, the marketer should put himself in his customer’s position to present information that will help them arrive at a decision faster and easier

 Alternatives evaluation

During the third stage, all different products and brands options will be evaluated and compared by customer to deliver the benefit that he is seeking The alternative evaluating will different among consumers and buying Sometimes this activity is known as a set of suggestion which include reviewing price, warranties, terms and condition of sale and

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other features so on It is clear that customer took part in extended problem solving If the marketer expects their brand is part of the consideration set for many potential consumers, they need to understand what benefits consumers are seeking and specifically, which attributes will be most influential to their decision-making process For instance, if the customer’s attitude is positive and involvement is high, then they will evaluate a number of companies or brands; but if it is low, only one company or brand will be evaluated

 Purchase decision

While customer has assessed all the alternatives and determined the values of product

or service that will bring to him, an intention to buy the most preferred brand may be formed in his mind However Philip Kotler et.al (2009) found two factors that may be

‘disrupted’ customer’s final buying decision namely negative feedback from other customers and the motivation level to accept the feedback For example, having gone through the previous three stages, a customer chooses to buy a new television but, his friend, a keen technician, shared him negative feedback, he will then be fluctured to change his preference Furthermore, the decision may be disrupted due to unforeseen situations such as out of stock or relocation

 Post-purchase behaviour

The final step of buying process is post-purchase behavior which refers to customer’s satisfaction or dissatisfaction with purchasing It will significantly influence whether he will purchase the product again or consider other products within the brand list Therefore, this stage is vital in retaining customers If customer satisfied, it will lead to brand loyalty, and the information search and evaluation of alternative stages will often be fast-tracked or skipped altogether Kotler & Amstrong (2010) divided buying behavior into four types including complex buying behavior, harmonious buying behavior, habitual buying behavior and variety seeking behavior Consumers have complex and harmonious buying behaviors when they are highly involve in purchasing and aware of the big differences between brands This kind of purchasing behavior is common to expensive, rarely purchased, risky, and self-concept products such as a house, a car Consumers have little knowledge of such products and they have to spend a lot of time searching product information, build trust in it, then formulate an attitude, and then proceed to select the product to buy Harmonious buying behavior occurs when customers noticed a little

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difference in price and brands, they will not spend much time to survey and quickly decide

to buy Their consideration is mainly based on which brands have cheaper prices and more favorable buying conditions Among types, habitual buying behavior and variety seeking behavior are less relevant to customer’s purchase decision This may also due to fact that the commodity products (e.g bread, milk) does not provide much difference between brands, customer find the products best fit for their use and keep on buying them without looking for alternative Hence customers buy them regularly in convenience stores and they do not think much before buying those products For other example, in recent years, coffee shops have sprung up in strip malls and most of streets all over the country Convenience is one reason The other reason is meet the demand If you tired, thirsty and you are looking for relax area, you’re probably not going to shopping around much to find

a good coffee shop Of course, you will go to the one that’s closest to you The same thing may happen if you need something immediately

1.3 Literature review on the customers’ coffee purchasing behavior

The complexity of buying behaviors has made by consumers in the coffee market and the affecting factors their decisions always attract researchers’ attention In the fact that, researches attempted to comprehensively describe a decision-making process of consumers when buying a product Sequentially, starting with relatively stable internal conditions is the basis for need recognition, followed by purchase preparing and then decides relate whether or not to make a purchase and feedback to the decision was given Katona's consumer behavior theory (1964) showed that despite the consumer’s conscious choice, somewhat are still dominated by their reckless habits or impulsive behavior He argued that in most cases, the reason consumers restricted their buying decision-making and maximized their satisfaction was mainly due to lack of product-related information and insufficient capabilities deal with available data at the stage preceding purchase decision He found that the decision-making process of coffee consumers is influenced primarily by economic and psychological factors Based on the study results of 410 respondents, Maciejewski (2016) also reported a fact that only 1/3 of the respondents who were able to buy the product made the purchase decision

Vinasearch has conducted a survey of factors affecting the instant coffee market in Vietnam with nearly 400 samples in Hanoi city and Hochiminh city in 2013 [52] Its

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purpose was to evaluate the customers’ recognition of instant coffee brands, explore their using habit instant coffee, thereby positioning and segmenting instant coffee brands Factors affecting customer instant coffee choices consist of price, customer service, distribution, advertising and product quality The analyzing results showed that product quality was the most influential factor in customers’ selection of instant coffee brand The respondent’s age was directly proportional to their interest in coffee quality There were statistically significant differences in factors of pricing, customer service and distribution between Hanoi and Hochiminh respondents An investigation was implemented by Nguyen Quoc Viet (2016) to evaluate the factors impact consumer’s purchasing decision on Trung Nguyen powder coffee in Hochiminh city as well as pointed out the limited aspects that need to address in developing this product The study used both qualitative and quantitative methods The results of the qualitative research have identified six factors that affect consumers' purchasing decision on Trung Nguyen powder coffee products include product quality, price, place, promotion, taste and culture This finding helped coffee production companies and researchers better understand the market and behavior of Vietnamese coffee consumers

Godiya Jis Jelison (2017) studied the positive influence of sensory appeal, packing along with branding, service quality, environmental protection, perceived health concerns, perceived hedonic value and subject norm towards consumer purchase behavior of coffee consumers in Wattana district in Bangkok, Thailand She collected 210 survey respondents who were regularly consumers at coffee shops and bakery shops, convenience stores, fast food stores and street coffee kios at Thonglor, Ekkamai and Prakhanong areas in Wattana district The result showed that packing along with branding and sensory appeal had positive impact on perceived hedonic value while other factors were not found to have any significant impact on consumer purchase behavior of coffee consumer in there The consumer behaviour of coffee and tea was studied by T.C.Varun et al, (2009) in four districts of Karnataka, India using the primary data from 240 sample households The results revealed that the urban households spent more money to buy coffee and tea powder than rural ones purchased every month The factors like family size and total family income had a positive influence on the demand for coffee in the urban areas In the rural areas, family size had a positive influence on the demand for coffee, while the coffee price

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had a negative impact on the demanded coffee In the case of tea, total family income turned out to be highly significant in the urban areas Sylwia M (2016) presented a research on consumer preferences and behaviour on the coffee market in Poland based on the results of primary research conducted using a structured interview on a group of 800 consumers of coffee and coffee beverages The results obtained allowed the definition of 6 segments of coffee consumers in Poland These segments based on different age groups and have become the basis for the developing a marketing strategy for MOKATE SA – a leader on the coffee market in Poland in the “Cappuccino” category

Trinh Thien Thanh Trung et al (2012) investigated a sample of 230 respondents who came to garden coffee shops frequently in Hochiminh city to identify the factors impact their coffee shop selection The study aimed to help groups or organizations who have a plan open a garden coffee shops or owners of garden coffee shops have a better understanding their customers Thereby, they can build appropriate marketing strategy as well as plans to improve, develop their garden coffee shops Influential factors include landscape, shop’s decorative space, music, prices, diversity menu, special bartender, attractive presentation, service style, free wifi and parking The results showed that the landscape, decorative space and prices are the most influenced factors on customers’ choice of coffee shop Most of them prefer coffee shop with classic design, garden area of

300 square up, artificial waterfall, blue music and the price from 20,000 to 45,000 VND/ a cup of coffee

1.4 Research models and the factors affect consumers’ purchasing behavior of Vietnamese branded coffee products

Since early 1960s consumer behavior has became an intensive research topic among marketing theorists Many research models have been developed to explain the various factors that affect consumer behavior and their decision making process

1.4.1 Theoretical models of consumer behavior and coffee purchase decision

Howard-Sheth Model

The Howard Sheth Model is a sophisticated integration of the various social, psychological and marketing influences on consumer choice into a coherent sequence of information processing It aims not only to explain consumer behavior in terms of cognitive functioning but to provide an empirically testable depiction of such behavior and its outcomes (Sheth, 1977)

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Figure 1 3 Howard-Sheth Model of consumer behavior

The logic of the Howard Sheth model of consumer behavior summarizes inputs in the form of Stimuli There are outputs beginning with attention to a given stimulus and ending with purchase In between the inputs and the outputs there are variables affecting perception and learning These variables are termed ‘hypothetical’ since they cannot be directly measured at the time of occurrence Howard Sheth described buyer’s decision making process with three situations In a case of extensive problem solving, the consumer does not have any basic information or knowledge about the brand and he does not have any preferences for any product In this situation, the consumer will seek information about all the different brands in the market before purchasing The situation of limited problem solving happens when consumers have got little knowledge about the market, or partial knowledge about what they want to purchase In order to arrive at a brand preference some comparative brand information is sought The third case is a habitual response behavior exists for the consumer knows very well about the different brands and he can differentiate between the different characteristics of each product, and he already decides to purchase a particular product (see figure 1.3) The weakness point of model is a absence of sharp distinctions between external variables and other variables Some of variables are not well defined and are difficult to measure too The model is quite complex and not very easy comprehend

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Nicosa Model

This model was developed in 1966 by Francesco M.Nicosia, an an expert in consumer motivation and behavior Her theory attempts to explain buying behaviour by establishing a link between the enterprise and its potential customers

Figure 1 4 Nicosa’s Model of purchasing behavior

It analyses human being as a system with stimuli as the input to the system and the human behaviour as an output of the system The model suggests that message from the first influences the predisposition of the consumer towards the product or services Based

on the situation, the consumer will have a certain attitude towards the product This may result in a search for the product or an evaluation of the product attributes by the consumer

If the customer satisfies with above it may result in a positive response, with a decision to buy the product The Nicosia Model explains in 4 basic areas: Field 1- the consumer attribute and the firm’s attributes The advertising message sent from the company will reach the consumer attributes Field 2- it is related to the search and evaluation, undertaken

by the consumer, of the advertised product and also to verify if other alternatives are variable Field 3 - it explains how the consumer actually buys the product Field 4 - it is related to the uses of the purchased items It can also be related to an output to receive feedback on sales results by organization (see figure 1.4) However the minus points for this model consist of the flow is not completed and does not mention the various factors internal to the consumer The assumption about the consumer being involved in the decision process with no predisposition about the various brands is restricting Overlapping between firm’s attributes and consumers attributes

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Research model of Seyed Mahmoud Hosseini et al, (2013)

Seyed Mahmoud Hosseini et al, (2013) proposed a structural equation model of effective variables on selecting chain stores from the customer perspective

Source: Seyed Mahmoud Hosseini et al, (2013)

Figure 1 5 A structural equation model of effective variables on selecting chain stores from the customer perspective

This study aimed to examine the factors influencing and affecting the behavior of store factors on the behavior of shoppers in Iran The authors investigated customers in different market segments The methods of statistical descriptive statistics were used in this study, collected data analyzing was supported by SPSS and Lisrelt software The study results showed that all factors have directly and significantly impacted on the shop selection The level of impact factors was ranked from the most to the least respectively facilities, images store, facilities image of store (light, music, color), the quality of the goods and services, parking, lay out, closeness to home, price, risk

Research model of Tanja Lautiainen (2015)

According to research model of Tanja Lautiainen (2015) buyer’s selecting a coffee brand was influent by social, personal and psychological factors (figure 1.6)

Source: Tanja Lautiainen (2015)

Figure 1 6 Model factors affecting consumers’ buying decision in selection of a coffee brand

Social factor

Personal factor

Psychological factor

Decision selects a coffee brand

Image of products with brand

Facilities

Parking

Facilities Image of store

Facilities Quality of service and goods

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Research’s findings indicated a relationship existed between social, personal and psychological factors and the decision-making process in coffee brand selection, but it was not credible It can be said that these factors have effect when consumers used different steps in their making decisions concerning coffee purchasing The result showed that family, friends and neighbors are the most important factors that affect on decision making when selecting coffee brand

Research model of Tran Thi Truc Linh (2016)

The research model with seven factors was developed by Tran Thi Truc Linh (2016)

to definite their affecting consumer choice of foreign coffee in HCM city The influence elements comprise the attitude toward foreign coffee choice, subjective norm, perceived financial control, perceived quality, perceived price, distribution network and promotion

Source: Tran Thi Truc Linh (2016)

Figure 1 7 Model factors affecting consumers’ buying decision of foreign coffee in Hochiminh city

The survey was conducted with 210 samples based on the young people at HCM city via the five scale questionnaire The study results determined distribution network and perceived price were the most influence factors on consumers’ buying decision of foreign coffee in Hochiminh city

Attitude

Subjective norm

Perceived financial control

Decision buying foreign coffee Perceived quality

Perceived price Distribution network Perceived promotion

1.4.2.1 Purchase motivation

Purchase motivation is an psychological state that drives customer to identify and buy products or services that fulfill conscious and unconscious needs or desires The fulfillment of those needs can then motivate them to make a repeat purchase or to find different goods and services to better fulfill those needs Buying motivation can also determine the ability of making consumer's purchase decision by the intensity of the buying motivation It is clear that customers’ ability to buy a product will be higher when having a strong purchasing decision A highly valued brand leads to higher purchasing decisions (Dodds et al., 1991, Schiffman and Kanuk, 2000) For example, for the fashion clothing products, branding is a crucial factor because its impact on consumer’s preferences and buying decisions as well as willingness to pay high prices and introduce that brand to other consumers Biagia D D et al, (2008) found that product prices and characteristics are the major factors influencing consumers' product judgment and their purchasing decisions Each product has its own price threshold, if the real price exceeds the acceptable price, the consumer's buying decision tends to decrease Zeitham et al (1996) proposed that, buying behavior is a highly accurate indicator of prospecting business performance Some previous studies have demonstrated that there is a positive relationship between factors of purchase motivation, price, product characteristics, and social affect, personality that influence purchasing decisions So we proposed the first research hypothesis about the factors affect customer’s purchasing behavior of Vietnamese branded coffee products in Hanoi city can be formulated as follows:

H1: The purchase motivation has positively impact on customer’s buying behavior

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1.4.2.2 Characteristics of coffee product

According to coffee experts who are also known as Cuppers, there are four popular criteria to assess the overall quality of coffee product consist of aroma, acidity, body and sweetness It is undeniable that coffee’s attractiveness is derived from its specific aroma that is described as bouquets and reveals the freshness of the coffee It can either be smelled through your nose and mouthfeel When you drink and swallow coffee, your retronasal will feel aromatic volatile compounds drift upward into the nasal passage The coffee aroma can be fruity, nutty, smoky, complex or floral, sometime many flavors come into play together and directly affect the coffee taste Actually, coffee beans with natural aroma is always preferred than coffee bean with artificial fragrance by consumers Acidity

is the second term often used to evaluate a coffee’s final taste such as the sharpness, sour, bitter or pleasing brightness in coffee It is similar to organic acids of fruity, berries and flora flavors, so the acidity of this beverage can be intense, mild or even smooth The term body can be defined as the tactical feeling of coffee on the tongue It describes the physical sense of weight or heaviness that coffee brings when it settles and covers on tongue It is distinguished by the viscosity or thickness of the coffee and the consistency that it leaves

in the mouth Some common texture description of coffee’s body often related to thin, grainy, syrupy, buttery or oily Hence this characteristic is also utilized to identify coffee’s origin and explain for several kinds of coffee bean have got a heavier body than others Sweetness is one of the most desired characteristics of coffee product which is not sugar added to beverage but highlighting the natural sweetness of the coffee achieved by creating the perfect balance of organic acids Coffee beans’s sweetness is compared with sweetness

of cherry fruits During roasting these sugars have been changed and helped offset the bitterness with sweetness

1.4.2.2.1 Packaging design, size and shape of products

Silayoi & Speece (2004) defined that packaging is an integral part of any product and the brand With the main tasks of protecting product and attracting customers’ attention, package can communicate company’s name and image, differentiate the brand from competitors, and enhance the product’s functionality In other words, it provides information related to the product’s characteristics and transmits manufacturer’s message

to their consumers During the purchasing decision, those information brought to customers an overall product perception which assisted them in evaluating and making of the right choice Furthermore, the package is considered as a product that might be recycled after the main product is consumed

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The packaging design is the combination of image, color, style, material, graphics and other components to catch customer’s sight and to sell products faster and stand out among the competitors in the store or at the supermarket Consumers can choose the product right at first sight depends on a lot of these factors which increase value to both package itself and to the product Designers are often use attractive pictures on the coffee package such as mountains, coffee been, luxury houses and cars etc can assist in stimulating lifestyle aspirations [33] Packaging design is based on the design orientation

of the brand identity and positioning system Therefore, the package itself acts as a decisive communication tool and provides consumers with product-related information during the buying decision process Beside that, package size and shape have a strong influence on the purchasing choice especially when the product quality is determined Packaging size should not be too large or too small because it will not guarantee the safety and quality of the product during transportation They should be appropriate and fit within the product they are stored in Moreover, an appropriate shape and size help manufacturers save cost and the consumer have a better think of product volume [39]

1.4.2.2.2 Product quality and origin

There are many debates to what constitutes “product quality”, W.Edwards Deming, a famous consultant on quality proposed “the consumer is the most important part of the production line Quality should be aimed at the needs of the consumer, present and future” From his view point, product quality is determined by what the customer wants and is willing to pay for So product quality is one of determinants of the brand and brings many benefits to the producers It makes the difference and identifying product in customer’s mind; attracts customer’s attention; supports higher pricing and facilitate brand extension

In café industry, the quality of coffee bean comes from a combination of seeds, soil nutrition, weather conditions and the technical care during growing, harvesting, storage, export preparation and transport Another factor that significantly influences coffee quality

is processing that consist of three main methods namely dry, wet and pulp natural processing Each method contributes very different qualities to the finished coffee to meet various customers’ tastes

Product origin is an crucial factor in consumer purchasing decisions because it allows them to directly collect information about the purchased item, retrieve information from the final product to the first place of origin, look at each step in the processing and distribution Consumers will be more believe in products with clear and protected origin

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In some aspects, it is considered as the manufacturer’s commitment who has full responsible for his product in the market Furthermore, authorities will rely on the origin of the products to determine whether they are eligible for tariff preferences or other incentives Different original products will have different preferential import tariffs For example, coffee products originating in America will be entitled a tariff of 0% when imported into markets such as the US, Japan and the EU, while the tariffs applied to coffee products originating in Vietnam from 2.6% to 3.1% in these markets [2, 59]

From above studies we proposed the second research hypothesis of this study namely

H2: The characteristics of coffee product have positively impact on customer’s buying behavior

1.4.2.3 Price

Price is the total amount of money a customer paid for a particular product or service

or sum of benefits value of owning or utilizing the product or service that is selected from customers [23] It is also one factor that contributes to customer’s buying decision process and may be creates profit for businesses Price is usually the first element considered by consumers before buying coffee products because it relate to their affordability Some customers associated the price with quality products; they thought that a high price product will have good quality and vice versa cheap price for low quality products High-priced products are brands with good brand image which are considered important factors before buying Consumers of these brands usually buy them based on brand image and are willing

to pay a higher price when they perceived that is a high quality product Cheap-priced brands tend to be bought with real value, based on consumer perceptions of prices Consumers will often look for cheap price items of brands or alternatives products to get the best value

Price may be the most important factor for middle-income consumers, but brand’s loyal consumers are willing to pay higher for their favorite items, so their purchasing decision is not easy affected by price [9, 51] Customer satisfaction can also be measured

by comparing prices between cost and perceived value If the perceived value of the product is greater than the cost, the consumer will buy that product Price has become an increasingly highlight in customer’s evaluation of service value as well as their overall assessment for retailers [51] Bucklin et al (1998) argued that, prices have a significant impact on consumer choice and purchase rates When they believe that the product has got good price then they will repeat purchase, however if they think the product has got

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unacceptable price they will not buy it again Discounts probably motivate consumers change brands and buy products earlier than their need Therefore we set up the third research hypothesis for this study is

H3: The price has positively impact on customer’s buying behavior

1.4.2.4 Social affect

Social factors can and do have a tremendous impact on consumers’ attitudes and buying behavior because people always communicate with others in their daily lives Turner (1991, p.1) asserted social influence as “the processes whereby people directly or indirectly influence the thoughts, feelings and actions of others” Social factors encompass reference groups, family, opinion leader and culture etc [35]

Family is a social group and all member of a family influence and get influenced by

each other The behavior researcher pointed out that it is one of the most influential and vital buying groups in our society because it has a direct or indirect impact on behavior and attitude of a buyer in a particular situation A face to face interacting on consumed products and/or future planned purchase is carried out frequently by family members Individual’s consumption goals are often connected to the upcoming purchase decision of the family and product being shared This communication has built a fundamental building block in influencing purchase behaviour within a family Moreover, the family environment will enable individuals to acquire values, develop and shape personalities This environment contributes to form ability to develop attitudes and opinions on several topics such as social, political and social relations It can be said that a family is the first place to create awareness about the brand or product and consumption habits (Kotler & Armstrong 2010, p 169; Khan 2006, p 68.)

Reference groups are formed by family, close friends, neighbors, work group or other

people that consumers associate with It can impact a customer in three popular ways Firstly, facilitate a person interacts with new behaviors and lifestyles; secondly, the ideas and imaginations that related to his/her interests might be modified by the reference group Thirdly, the created compulsive conditions probably have influence on the choice of product brands [23] Reference groups communicate through opinion leaders, who influence what others do, act, and buy In the consumer world, this means that if a reference group purchases a product, members associate with that group probably buy the product as well

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Opinion leaders are generally people with expertise in certain areas and have the

ability to influent others Customers are tending to seek the advice from, and be influenced

by expert sources than by non-expert ones because it will help them reduce risk when evaluating products before purchasing [6] Hence, an expert’s message will have an essential influence on the seeker’s buying decision Sweeney et al (2007) studied on the importance of opinion leader’s expertise and opinion leadership on the influence of a sender’s word-of-mouth on an opinion seeker They found that influences of purchasing behaviour are more pronounced when the reliability of the reference source is higher and vice versa In marketing famous persons are often used as opinion leaders although they may not actually know more about a product or service, but they can have certainly impact

on a product’s success and on their own followers

Culture: Behavior researchers classified culture into a external factors group that influence

buying behavior and how a product is marketed In every cultures have their own values that profound effect on buying habits of consumers, so marketing strategies should reflect the targeted culture In advertising campaigns companies should show their product or service contribute to enhance the beliefs, values and customs of the targeted culture These activities would help them increase in sales and opportunities to expand market

Thereby, the fourth research hypothesis was formulated as following

H4: The social affects have positively impact on customer’s buying behavior

1.4.2.5 Personality

Personality is a person’s consistent pattern of responses It is an internal structure in which experience and behaviour are related in an orderly way Personality is a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli [30] It describes the organization of the individual’s distinguishing character traits, attitudes and habits [22] It is typically described as having one or more characteristics such as self-confidence, power, independence, respect, dignity, competitiveness and adaptability Human personality is closely related to product choices and branding Businesses must strive to build brand image that matches the self image of the target market [29]

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Yao, Wu, and Long (2016), Kim et al, (2002) declared that personality traits reflect some personal psychological characteristics which are not easy to be changed and affect purchasing behavior For instance, the coffee culture has been developed for a long time in Vietnam and impact people’s beverage choice In fact, consumers buy products not only because they need to get its functional benefits, but also it can reflect their personalities, preference, social status, lifestyle or psychological demands etc Furthermore, consumers are willing to buy certain goods because they think they fit their personalities [5] Kotler et

al (2012, p 145) researched on the relationship between personality and self-concept He concluded that these two factors interacted with each other and products can reflect the user’s personal traits In addition, Kim et al (2002, p.485) defined that socioeconomic conditions (e.g per capita income, mobility, media access) and consumer values are two important elements affecting the consumer’s personality It is obvious that the socioeconomic conditions and consumer values in Vietnam has big difference compare to that conditions in Japan, France, Thailan so its consumer behaviors is distinguishing Charles, Sarath and Gail (2005) also described that the consumer value is the strong cause resulted in the existing distinctions of different consumer behavior Hereby, the final research hypothesis was proposed

H5: The personality has positively impact on customer’s buying behavior

1.5 Research model

It is fair to say that understanding customer buying behavior process is the key to tell marketers any chance of success When it comes to buyer journey, marketers force to consider a complete purchasing cycle and the influence factors on their consumer behavior rather than just the buying decision especially in prospective studies to find an appropriate marketing strategy or solution for their products and service This research investigates the main elements affect on customer’s purchasing behavior for Vietnamese branded coffee products in Hanoi city We based on the literature reviewed and previous theoretical models proposes a model which reflects the five major elements impact on the customer’s purchasing behavior as shown in figure 1.8 below These elements are independent

variables represented on the left side of the model encompass Purchase motivation,

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characteristics of coffee products and price reflects the customer's positive perception or

assessment on the product and brands in doing purchase behavior

Social affects and personality evaluate the customer's confidence under the impacts and

incentives of the different referendum groups in their ability to perform buying behavior

On the right side of the model the dependent variable is represented by the customer’s purchasing behavior

Figure 1 8 Research model

Personality

Purchasing Behavior

H5

H1 H2 H3H4

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CHAPTER 2 RESEARCH CONTEXT AND METHODOLOGY

This chapter has given an overview description of Vietnam café industry then analyzing macro environment, domestic coffee market and coffee brands would be provided In addition, it would be described detail research methods from preparing data collecting to data analyzing plan

2.1 Analyzing Vietnam café industry

Coffee is Vietnam's second major export agricultural products after rice Therefore, Vietnamese coffee industry keeps an important role in the national economy and has great potential to develop considering from the global market size and its domestic market share Moreover its developing has pulled many other industries of Vietnam such as the processing, engineering industries, and promoting basic infrastructure (e.g roads, schools, coffee purchase stations etc.) A number of services industries has followed comprise supplying seed varieties, plant protection drugs, banking, equipment leasing, etc These have been contributing to the Vietnam economic restructuring towards export, creating more new jobs and increasing incomes for millions of workers, especially in mountainous and delta areas Currently, coffee planted area in Vietnam has reached 645.000 ha, average harvested yield reached about 2.5 tons/ha In 2016, this sector has contributed $ USD 3.4 billion to Vietnam's total export turnover, attracted more than 600.000 labors [20] The report was published by World Bank in 2004 showed that the coffee industry of Viet Nam was dominated by small and medium holders with 85 percent of all farms in Viet Nam being under 1 ha and only 1 percent are larger than 50 ha There is less than 5% of coffee plantation are larges scaled (more than 500 hectares) and these plantations belong to state owned Vinacafe group [53] To better understand Vietnam coffee industry, I will first overview its development history and then use a SWOT analyzing to identify strengths, weaknesses, opportunities and challenges for the Vietnamese coffee industry

2.1.1 History and development of Vietnam café industry

The coffee tree was first introduced to Vietnam in 1857 by the French It was initially planted in some areas in Ha Nam, Quang Binh and Kom Tum provinces Toward the beginning of the twentieth century, coffee trees were expanded and plant largely at Phu Quy- Nghe An by French owners, and later were planted in Daklak and Lam Dong [20] Coronel was the first coffee processing plant in Vietnam and owned by Marcel Coronel, a

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French It located in Bien Hoa, Dong Nai province in 1969 with a capacity of 80 tons per year The coffee production has disrupted due to the war until 1975 then Vietnamese coffee industry took off especially, during 1975 to 2016, the planting area of coffee beans increased from 134.000 hectares to 645.000 hectares, up to more than 30 folds The renewal policy in 1986 has allowed establishing private coffee enterprises and pushed the developing the Vietnam coffee industry Furthermore, the handshake among coffee growers, producers and authorities launched much more Vietnam branded coffee products Many local coffee companies have created their brand image and reputation for their products in both domestic and international markets During this period there were many newly established domestic companies involved in coffee production such as Trung Nguyen Coffee, Nescafe, Highlands Coffee These coffee enterprises continue to create large product brands that were distributed through a coffee shops network The coffee is grown in provinces such as Dak Lak, Lam Dong and Dak Nong Vietnam's coffee is exported mostly, domestic consumption accounts for small part The major coffee export

of Vietnam is still Robusta coffee beans (79%) Other types of coffee exported are Arabica (4.9%) and cherry (0.24%) [11, 52, 55, 59] In the 1990s, Vietnam became the world's second-largest coffee producer after Brazil, but its focus was on robusta beans, which were considered to be of lesser quality than Arabica because of its harshness Vietnam coffee is exported to 70 countries worldwide in which 14 leading markets accounted for 80% of the total coffee export turnover of the country In 2014, Germany surpassed the US to become the largest coffee importer of Vietnam and Belgium was the third largest import market of Vietnam coffee Export of processed coffee, roast/grind coffee and instant coffee were increasing in the past few years, with the strategic markets included China, Russia, Hong Kong, Korea, Japan and the US [2, 11]

2.1.2 Categories of planted coffee in Vietnam

Coffee varieties were planted in Vietnam consist of robusta, abrica, cherry and each coffee type has its own beans with different features to compare with others Robusta coffee is very suitable to the soil and weather condition of Vietnam, especially the Central Highland with basalt soil It is the most popular coffee grown in Vietnam and accounts for 90% the total area as well as the annual productivity Unlike abrica that is mellow and easy-drinking, robusta coffee beans are featured with intense flavor, high caffeine, strong fragrance and non-sour Production of this coffee type is concentrated in 5 key provinces

of Dak Lak, Dak Nong, Gia Lai, Dong Nai and Lam Dong where account for over 96 % of

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the coffee area in Viet Nam (see table 2.1) This is an extremely important material resource (which is widely used to make instant coffee) in the supply chain for many large coffee roasters like Trung Nguyen, Vinacafe, Nestle etc According to MARD’s statistical report 70% of robusta coffee productivity in the world market comes from Vietnam equivalent 1.5-1.7 million ton exported and reached a value of USD 1.5 billion [16] Table 2 1 Estimate of Vietnam’s coffee area by province

Currently, Vietnam’s arabica area is estimated to be in around 40,000 hectares, accounting for 6.5 percent of the area under coffee crop Vietnam’s Arabica coffee is not planted widely, and are mainly grown in some mountainous areas of the Northern Vietnam and the Central officially, concentrating on Lam Dong, Thua Thien Hue, Quang Tri, Nghe

An, Hoa Binh, Son La, Dien Bien provinces Among these planted coffee areas, Cau Dat Arabica is known as the Queen of Vietnamese coffee, which is the most delicious Arabica coffee in the world In addition, the first coffee varieties were grown in Cau Dat like Yellow Bourbon and Typica which sparks interest among many connoisseurs Every year Vietnam also exports about 40.000 – 50.000 tons of Arabica coffee and earns $US 130 million Despite of the low capacity, arabica in Vietnam is still reviewed as a very special coffee thanks to its impressive aroma and scrumptious taste [2,16,53]

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Cherry coffee is very famous for its strong sourness It is not as popular coffee as Robusta and Arabica, but it is very good pest resistant and always provides high productivity Unlike two main types of coffee beans, cherry coffee has very distinguishing flavor and extreme sourness Its beans are very shining and have very pretty golden color When brewing, it has light flavor and a fragrance of cherry This type of coffee is suitable with women by its great combination of idyllic flavor and elegant feeling

2.1.3 SWOT analyzing

Strength:

Vietnam has advantages in terms of natural conditions, weather and land which boost the growth, productivity and provides a unique appetizing and enticing fragrance for fresh-ground coffee Moreover a high growth rate of export output help Vietnam coffee industry

to maintain a stable market share on the world market for coffee products The rate of young Vietnamese people accounted for 60% of population is another advantage of this industry It provides an abundant labor force and cheap with diligent, hard-working, enthusiastic characteristics [49] Open market policy of Vietnamese government contributed to enhance the perception and capacity of Vietnamese entrepreneurs, coffee growers in the production chain Vietnamese farmers have ability to apply new techniques and associate with their experience in coffee cultivating

Weakness:

On the contrary, there still remain several weaknesses which cause limited Vietnamese coffee production yield and its performance in foreign market Even with the title of the second largest coffee producer and exporter in the world, Vietnam's profits from coffee exports are not as high as expected Export structure of coffee type is undiversified and low value mainly due to exporting in the form of green-coffee Vietnam earned USD 2 for each kg of coffee, equivalent to the average price of a cup of coffee in the imported countries while each coffee can able to make 50 cups of coffee Moreover in terms of volume, Vietnam accounts for 20% of the world’s coffee market, but its value only accounts for about 2% of this market [49, 52] For that reason, Vietnamese entrepreneurs can not earn much from export and Vietnamese farmers, the main beneficiaries earn lesser

It is undeniable that coffee quality management in Vietnam is limited and Vietnamese coffee still does not build its strong brands in the world In recent years, Vietnam’s coffee industry has constantly applied new technologies and science, which boost coffee output increase clearly In Vietnam’s several provinces, nevertheless, accounting for 80% of

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coffee output coming from households, they prefer to follow traditional processing with simple technology without any legal consultation, natural drying and use of unguaranteed machines for milling As the result, Vietnamese government needs to find the effective way to encourage these farmers to collaborate with state-owned companies and reliable exporters who applied modern agricultural equipment in order to replace old traditional methods and pursue quality coffee processing

Opportunities:

The Vietnamese coffee industry has great potential to develop considering the size of the global market The global coffee-based beverage market is worth US$500 billion a year while Vietnam’s exports account for just $3.4 billion [49] So there is room for the country to increase exports, especially certification of sustainability for coffee is the advantage for Vietnamese coffee according to research experts from the Ministry of Agricultural and Rural Development Vietnamese coffee growers receive great support from the government and local authorities in raising the export value of coffee Furthermore, joining in TPP agreement brings the great opportunities for Vietnam economy in general, particular for the agricultural department There is no doubt that this change is an appetizing cake for any foreign investor To be more clear, after the TPP agreement gets into effect, the non-tariff barrier within member countries will be activated

in 2018, import duty in the United States, Canada, Japan and other members will reduce to 0% [55] Thus it is absolutely attracts Foreign Direct Investment (FDI) to step in Vietnam’s industry, especially in Vietnam’s agriculture

Thread:

The cheap price and low quality of Robusta coffee market have made Vietnam's ranking in the world coffee market soar, however, its cost was losing the forest and other environmental changes Too much depending on exports, Vietnamese coffee will be fluctuated by the world’s Robusta coffee demand and prices According to BMI’s report in

2014, during a stage of coffee crisis happened from 1989 to 2004, coffee prices stayed quite low [58] That caused heavy losses to manufacturers due to production costs higher than the sale price Some economic analysts concerned that if a overproducing cheap price coffee exceeds reality demand will again cause a downward wave, thereby creating more barriers for producers to expand their business activities The report pointed out challenges that Vietnamese coffee industry will be faced in the near future include aging of coffee growing area; most of coffee area is not properly cultivated; seedlings resource are not

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guaranteed; labor force in the coffee industry was mostly involved in simple preprocessing due to limited deep processing Establishing a sustainable domestic brand is an important requirement for Vietnam coffee producers Without a strong enough coffee brand, the Vietnamese coffee industry will stop at the begin stage of a coffee production chain

2.2 Analyzing macro environment

The macro environment covers external activities of businesses that are not only the relationship among business to customer, businesses to businesses but between countries Each nation has its own political systems, cultures, different legal systems and economic policies Even residents in different region of a nation have different custom and life style,

so it is necessary for coffee entrepreneurs to look at carefully before entry a new market Next I use PEST analysis to determine the implication of political, economic, socio-culture and technological factors within Vietnam coffee industry

2.2.1 Political - legal

The political and legal environment has a great influence on the marketing activities

of the coffee enterprise Doing business in a complete political and legal environment to help them operate safely and equally The stable political environment without conflicts of ethnic, religious and war are ideal conditions for attracting domestic and foreign investment Vietnam is now considered one of the safest political and safe countries in the world to attract foreign investors The legal system regulates the activities of coffee enterprises in Vietnam by laws and decrees including Corporate Law, Foreign Investment Law, Customs Law, Antitrust Law, State Enterprise Law, Advertising Law, Consumer Protection Law etc

High standards relating particularly to coffee producing methods are becoming more important in the industry by an increased demand and rising market value for sustainable coffees such as certified coffee and fair trade coffee, which guarantees a fair price to producers The Vietnamese government has many supporting policies for domestic coffee producers to register the fair trade certification and to encourage them join into Vietnam fair trade network

2.2.2 Economic

The stable growth or recession development of economy have decisive influence to business and production activities of Vietnam coffee enterprises Report by Vietnam industry research and consultancy company showed that Vietnam has a stable GDP growth

in five years from 5.42% in 2013 to 6.81% in 2017 [57] It can be seen that Vietnam is on

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the development momentum with more opportunities, new cooperation and integration, that major impact on Vietnam businesses The high speed of economic growth offers investment opportunities for coffee companies enlarge production and business activities However, growth rate of Vietnam's economy proportional to inflation rate, currency devaluation caused difficulties for the business activities of coffee manufacturers, especially in the procurement of raw materials Furthermore, government allows the businesses and credit organization negotiated interest rate in their loan contract that lead to businesses almost bear a high interest and difficult in capital rotating

2.2.3 Social - culture

Most of Vietnamese coffee manufacturers started up in their coffee home so they easily achieve cultural similarities with raw materials suppliers as well as create Vietnam coffee features in all its products Furthermore coffee industry has a widen consumption market both domestic and foreign markets It is the advantage of Vietnamese coffee entrepreneurs compared to other competitors when set up trading relationships and brand image However, the coffee providers must adapt to a change in consumer attitudes who are becoming toward healthier beverages like tea, that makes coffee a less attractive choice, especially young people The increasing number of alternatives available such as health and energy drinks are becoming competitors in the coffee industry Mintels’ research in 2013 [56] finding on new beverages trends showed that there is an increased diversification of tea, with a trend towards premium and herbal teas They proposed the coffee industry are responded to this attitude changes by providing eliminated cafein (or decaf) drinks, options such as soy milk, and alternative drinks such as freshly squeezed fruit juices, lattes and herbal teas

2.2.4 Technology

In a globalization trend, the rapid development of science and technology is closely related to coffee producing and processing Information exchange between collectors and coffee growers is becoming more and more convenient They can update information of coffee market hourly and save cost of advertising products by the internet Thus, the applicating advanced science and technology will help coffee enterprises in Vietnam have more competitive advantages, better integration into the world economy and vice versa

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2.3 Analysis domestic coffee market and product brand

In Vietnam, the coffee consumption of domestic market is quite low and divided into two distinct segments Roasted /grind coffee (filtered coffee ) accounts for about two thirds

of the consumed coffee, the rest is instant coffee Vietnam used about 5% of green coffee for processing while this proportion in Brazil accounted for 50% Vietnam has got 5 instant coffee brands, whilst Brazil has got 20 brands About roasted/grind coffee, Vietnam has 20 brands, whereas Brazil owned 3,000 brands Domestic coffee consumption in Vietnam accounts for only about 5% of total exports volume, equivalent to 61,000 tons per year in which 9,000 tons of instant coffee and branded -roasted coffee accounted for 35,000 tons, the rest was unknown brand coffee This market’s annual growth rate of 18% with a lead

of instant coffee (+ 22%) and roasted/grind coffee got a slower growth (+ 13%) [57] According to the statistics of the Vietnam Coffee Association in six major cities (only branded products), the market share of instant coffee accounts for 62% in total volume and 65% in value compared to 38 % of volume and 34% of the value of roasted/ grind coffee Particularly, in the Hanoi market and four other major cities (Hai Phong, Da Nang, Nha Trang, Can Tho), the proportion of instant coffee dominant compared to roasted/grind coffee is 91% and 73% respectively In the instant coffee market, evenly split ratio for the three rivals encompass Vinacafe (38%), Nescafe (32%) and G7-Trung Nguyen (23%) Vinacafe is facing a risk of losing market share if its growth rate is only 27% compared to 51% and 88% of Nescafe and G7 respectively in recent years In the roasted/grind coffee market, Trung Nguyen is a biggest player far ahead of other competitors (> 80%) [54, 57]

Nowadays, there is no clear distinction between the popular coffee market and special coffee market in Vietnam Popular coffee products can be referred to Trung Nguyen in Vietnam or Nestle's Taster's choice in the US Special coffee products can be referred to as HighLand in Vietnam or Starbucks in the US Recently, Highland also launched Highland RTD (ready to drink) instant coffee product to take a lead in the coffee drinking RTD market that still in an early stage (about 600,000 liters/year) and need much more marketing activities to change consumers’ coffee habit [52, 57] Several coffee producers participated this market such as Tan Hiep Phat with the VIP brand, Birdy brand

of Ajinomoto Vietnam, and Wonderfarm This involvement and investment have not been effective, providing a convincing reason for consumers to use RTD instant coffees products rather than drink instant coffee at the bar, home coffee However, it is an

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approach and development of a potential market, especially for coffee manufacturers who might be effectively cooperate with a beverage distributor to motivate RTD drink market Because they do not have experience in distributing soft drinks, while companies of producing and distributing soft drinks do not produce instant coffee In the future, both Vinacafe andTrung Nguyen leaders should think to launch a special premium coffee chain

as well as strengthen their position of roasted/grind coffee brand (with Trung Nguyen) instant coffee brand (with Vinacafe) and also extend types of ready to drink products such

as the RTD coffee

2.3.1 Distribution channel and promotion

A distribution channel is the network of individuals and organizations involved in getting a product or service from the producer to the customer Distribution channels are also known as marketing channels or a crucial segment in a circulatory system of a coffee enterprise It aimed to collect and distribute marketing research and intelligence information about the marketing environment; developing and spreading persuasive communications about an offer; finding and communicating with prospective buyers; shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling, and packaging The various channels of distribution play a critical role in a vendor's go-to-market strategy If successfully executed, any distribution channel model can open or expand markets, generate sales and grow a vendor's top line Sales promotion is the persuading process potential customers to buy the product

It is to be used as a short-term tactic to boost sales – it is rarely suitable as a method of building long-term customer loyalty Some sales promotions are aimed at consumers Others are targeted at intermediaries and at the firm's sales force

In the domestic market, the distribution network of VinaCafe and Nescafe outperformed than that of Trung Nguyen It can be explained that for VinaCafe, after merging with Masan, the company's products were added to Masan Consumer's distribution network with nearly 190,000 sale places in Vietnam As a result, Vinacafe's coffee sales volume have increased by 30%, while sale prices have almost unchanged in

2012 The promotion campaigns contributed to those impressive result of Vinacafe's flagship brands such as "Delicate taste time", "Love in words - Tet 2015" with three important milestones (6 years of national brand; join the Southeast Asian vessels; cooperation with Vietnam Airlines) Combining with the effects from Masan's media