Highlands, Trung Nguyên and Phúc Long: The Battle for Vietnam’s Coffee Shops

The battle for Vietnam’s coffee shops is not about coffee, which is cheap and abundant, but about real estate, brand and the willingness of a young urban population to pay five times the street price for somewhere to sit. The chains that have won so far are the ones that understood this earliest and financed it best. This article follows the three names in the title, Highlands, Trung Nguyên and Phúc Long, through their founding, their ownership changes and their current position, then looks at Starbucks, the local challengers and the independent cafés that still sell most of the country’s cups, and asks what a sector this crowded can teach anyone planning a consumer brand in Vietnam. It is part of the Vietnam Company Stories hub.

Why does a country of coffee drinkers have so few big coffee chains?

Because the incumbent is the street. Vietnam has an estimated several hundred thousand independent cafés and carts, selling filter coffee with condensed milk over ice for a fraction of what a chain charges, and they occupy the sites, the habits and the price expectations that a chain has to fight for.

Coffee arrived with the French in the nineteenth century and was adapted to local conditions: robusta beans, which grow well in the Central Highlands, a small metal drip filter, and sweetened condensed milk in place of scarce fresh milk. The result, cà phê sữa đá, is strong, sweet and cheap, and it is consumed at every hour on plastic stools on pavements across the country. The café is a social institution rather than a retail format, and the price point, on the order of VND 15,000 to 25,000 in most cities, sets a ceiling on what most consumers think coffee should cost.

The country’s role as a producer, described in the story of Vietnam’s robusta exports, means beans are never the constraint. What a chain sells is not the coffee but the space: air conditioning, wi-fi, clean toilets, a brand that signals something, and a location on a corner that a young professional or a student is willing to pay for. That turns café chains into real-estate businesses with a beverage attached.

The chains that exist are therefore concentrated in Ho Chi Minh City, Hanoi and a handful of other cities, at price points between roughly VND 40,000 and 100,000 a cup, and they compete for a segment that is growing quickly but is still a minority of coffee consumed. Estimates of the total café market run to several billion dollars a year; the organised chain share is a fraction of that.

How did Highlands Coffee become the market leader?

By choosing the middle. David Thái, who was born in Vietnam and raised in Seattle, opened the first Highlands Coffee in Hanoi in 1999 with a Western café format and Vietnamese coffee, and later repositioned the brand toward a mass-market price point with larger, simpler stores in the best locations available.

The early Highlands was upmarket, an air-conditioned alternative to the pavement café aimed at expatriates and affluent locals, with prices to match. It grew slowly through the 2000s and by 2011 had something like 50 stores. The transformation came in 2012 when Jollibee Foods Corporation, the Philippine fast-food group, acquired a controlling interest through a joint venture, SuperFoods Group, that also held Phở 24 and the Hard Rock Café franchise. Jollibee brought capital and a franchising discipline; Thái stayed involved through the venture for several years.

Under Jollibee’s ownership Highlands cut prices, simplified the menu around a few core drinks, iced milk coffee, iced tea with jelly, and a small pastry range, and moved to a self-service counter model that reduced labour cost. Stores became bigger and more numerous, taking ground floors of office buildings, shopping malls, hospitals and transport hubs. The chain passed 300 stores around 2019 and, according to Jollibee’s filings, exceeded 800 in Vietnam by 2024, with a small presence in the Philippines. Jollibee had also explored selling a stake in Highlands at a valuation reported to be in the hundreds of millions of dollars, and later chose to keep it.

Highlands’ strength is precisely that it is not special. It is reliable, everywhere and affordable relative to the international chains, and it has become the default meeting place in Vietnamese cities in the way that a domestic fast-food chain might be elsewhere. That positioning has left little room for a competitor to squeeze in below it without reaching the street price, and little reason for consumers to trade up.

What happened to Trung Nguyên?

It built the country’s most valuable coffee brand and then spent the best part of a decade in litigation. Đặng Lê Nguyên Vũ founded Trung Nguyên in Buôn Ma Thuột in 1996 as a small roaster and café, and by the 2000s had turned it into a national chain and, more importantly, a packaged-coffee business whose G7 instant brand competed with Nescafé.

The café side was Trung Nguyên’s first success. The brand’s early shops, decorated in Central Highlands style and selling a wide range of roasts, were novel in a market of anonymous street cafés, and a franchise programme took the name to hundreds of outlets, many of them loosely controlled. The company then moved into packaged ground coffee and, in 2003, into instant coffee with G7, a product it launched with a blind taste test against Nescafé in Ho Chi Minh City that became a defining piece of Vietnamese marketing. G7 became a major export brand, particularly to China, and packaged coffee became the bulk of the group’s revenue.

The founder’s persona was part of the brand: he called himself the coffee king, wrote about coffee as a philosophy of national renewal and retreated for long periods to a mountain retreat. In 2015 his wife and co-founder, Lê Hoàng Diệp Thảo, who had run much of the business, sued for divorce and for control of the group. The case ran through multiple courts until 2019 and beyond, with judgments splitting the shares in Vũ’s favour and requiring him to pay her a large cash settlement, and with disputes over the Trung Nguyên International subsidiary continuing afterwards. Thảo launched a rival brand, King Coffee, in 2016.

The litigation froze investment in the café business. While Highlands was opening hundreds of stores, Trung Nguyên Legend, the rebranded café arm, opened a few dozen, with a more elaborate, expensive format that has not scaled. The packaged business remains strong and the brand remains one of the most recognised in the country, but the opportunity to lead the chain market passed. The episode is a case study in how founder-centred businesses handle succession and personal conflict, a theme also visible in the biography of Phạm Nhật Vượng and Vingroup, though with a very different outcome.

Why did Masan pay so much for Phúc Long?

Because it wanted a beverage brand young consumers already loved and a reason for them to enter its stores. Masan bought 20 percent of Phúc Long in 2021 and raised its stake to 51 percent in 2022 in a transaction that valued the chain at roughly $455 million, a very high multiple for a business with perhaps 100 shops at the time.

Phúc Long’s roots go back to 1968, when founder Lâm Bội Minh began selling tea and coffee in Ho Chi Minh City; the modern chain took shape in the 2010s as a queue-generating tea and coffee brand known for its strong, sweet milk tea and its oolong-based drinks. It had a loyal following among students and office workers in the south, a sales-per-store figure that reportedly exceeded Highlands, and a small store count that left room to grow.

Masan’s plan, described in the Masan Group story, was to open Phúc Long kiosks inside WinMart+ minimarts, creating a daily reason to visit and sharing rent. Nearly a thousand kiosks were opened in 2021 and 2022. Most closed by 2023: the kiosks generated too little revenue to cover their staff, they cannibalised nearby full stores, and a minimart shopper buying rice is not in the same mode as a student buying milk tea. Masan wrote down the kiosk investment and refocused on standalone stores, of which there were around 150 to 200 by 2025, including a first store in the United States.

The standalone business remains profitable with high gross margins, and Phúc Long has extended the brand into packaged tea sold through WinMart shelves, which is where the retail synergy has actually worked. The lesson is that a beverage brand and a grocery format can share an owner without sharing a floor.

Why has Starbucks stayed small in Vietnam?

Because it priced itself above the market and never found a reason for Vietnamese consumers to pay the difference. Starbucks opened its first store in Ho Chi Minh City in 2013 through a licence with Hong Kong’s Maxim’s Group and had only around 120 stores a decade later, compared with well over a thousand in Thailand and several thousand in China.

The brand has a loyal urban following and its stores in prime locations do well, but the format has three problems in Vietnam. Its prices, roughly two to three times those of Highlands, put it firmly in the premium tier at a time when the growth was in the middle. Its arabica-based, milk-heavy drinks are not what most Vietnamese consumers associate with coffee, and the chain has been slower than local rivals to adapt drinks to local tastes. And its store development has been cautious, focused on a small number of expensive sites in the two largest cities.

Other international entrants have fared no better. The Coffee Bean and Tea Leaf, Gloria Jean’s and the Australian-founded chain that operated under the Gloria Jean’s licence all opened and shrank or closed. Korean chains have had modest success with dessert-led formats. The evidence is that international coffee brands do not transfer easily to a market with a strong coffee culture of its own and a price ceiling set by the street, in much the way that foreign brewers discovered, as the Sabeco story shows, that owning the leading brand does not guarantee the growth the price assumed.

Starbucks has recently accelerated openings, with new stores in provincial cities and a delivery push through Grab and ShopeeFood, and it remains the reference point for premium coffee. But the market leader in the premium tier by number of stores is not Starbucks; it is the local brands that borrowed its aesthetics at a lower price.

Who are the challengers, and how did they change the market?

A wave of Vietnamese-founded brands, Cộng Cà Phê, The Coffee House, Katinat and Phê La among them, that combined local flavours with better design and reached scale without foreign money. They have taken the middle-premium segment above Highlands that Starbucks never captured.

Cộng Cà Phê, founded in Hanoi in 2007 by singer Linh Dung, built a chain of several dozen stores on a retro socialist aesthetic and Vietnamese drinks, and became one of the few local brands to franchise abroad, in South Korea and Malaysia. The Coffee House, founded in 2014 by Nguyễn Hải Ninh and backed by the retail-technology group Seedcom, was for several years the fastest-growing chain in the country, passing 150 stores by 2019 with a large, wi-fi-heavy format aimed at students and remote workers; it was hit hard by the pandemic, contracted from 2023 and was sold in 2025 to the restaurant group Golden Gate at a reported valuation far below its peak.

The more recent successes are Katinat and Phê La. Katinat, launched in 2016 and expanded rapidly from 2021, took corner sites on major Ho Chi Minh City streets with a distinctive design and drinks such as salted cream coffee, and grew to around 80 stores by 2024, funded by the D1 Concepts group, which also owns San Fu Lou and other restaurant brands. Phê La, founded in 2021, built its identity on Vietnamese oolong tea and highland ingredients and grew to several dozen stores, mostly in the two largest cities. Both brands charge more than Highlands, less than Starbucks and generate queues.

Their impact has been to raise the design standard across the industry and to prove that a mid-premium Vietnamese brand can scale. Whether they can sustain it once the novelty wears off, and once their landlords adjust to their success, is the question the next few years will answer. The pattern of a fast-growing local brand attracting a larger buyer, as Phúc Long did with Masan and The Coffee House with Golden Gate, suggests that consolidation rather than independent growth is the likely path.

What does the coffee-shop war teach founders and investors?

That in a category where the product is a commodity, the winners are decided by site selection, cost discipline and access to capital during expansion, and that being first or most famous counts for less than being cheapest to operate at scale. Highlands is the proof; Trung Nguyên is the counter-example.

For founders, the central lesson is about the cost structure of a physical retail concept. Every Vietnamese café chain that has stumbled did so by signing leases during a boom and discovering that a fashionable brand does not move the rent. Founders who model their business on cups per store per day and rent as a share of sales, and who are willing to walk away from prestige sites, outlast those who model on store count. The second lesson is about ownership. Trung Nguyên’s stagnation was not a market failure but a governance failure; a founder-controlled company with no independent board and no mechanism to resolve a dispute between its two principals lost a decade.

For investors, the sector offers repeated examples of paying for growth that was leased rather than earned. Phúc Long’s valuation was justified by the kiosk plan that did not work; The Coffee House’s by a store-opening rate its economics could not sustain. The businesses that have delivered steady returns, Highlands under Jollibee, are the ones that treated the café as a franchise-style operation with tight unit economics rather than as a lifestyle brand.

For operators arriving from abroad, the message is humility. Vietnam already has a coffee culture, a price expectation and a set of drinks its consumers prefer, and the brands that have grown are the ones that started from those facts rather than from a global template. That is true for cafés and, as the story of Vietjet and the low-cost airline model shows in a different industry, for almost any consumer business that tries to import a format wholesale.

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