TRUNG NGUYEN ENTER INTO CHINA MARKET

TRUNG NGUYEN ENTER INTO CHINA MARKET
"If the oil is the energy of the industrial economy, coffee is the energy of the knowledge
economy." Along with other agricultural products such as cotton or cocoa, coffee is the
second most traded commodity in the world (after oil) with great export value.
Why choose Trung Nguyen corporation?
(1) Top Vietnamese coffee brand: During 22 years of development, Trung Nguyen
Legend has been known as a leading brand in the Vietnamese coffee industry with
important contributions to the growth of the coffee brand Vietnamese on the world
market.
(2) International experience: Trung Nguyen Legend’s coffee products have been exported
to more than 80 countries and territories, especially target markets such as the US, Korea,
Russia, and Europe ...
(3) Trung Nguyen positions its coffee brand as a part of Vietnamese traditional culture.
They succeeded in bringing the national culture and values to the soul into each fragrant
"Ban Me" coffee and bringing it to friends in the five continents.
The reason for choosing the Chinese market?
This is a very potential market that any famous coffee brand wants to win.
(1) China has a large market with outstanding advantages in many aspects that our group
will analyze in the following sections.
(2) Compared with other markets such as the US (3, 6 %), Japan (1.7%), China's coffee
consumption has a double growth rate of 30%.
(3) Vietnamese coffee holds an important position in the Chinese market as the largest
supplier in this country with more than 1.4 billion people (nearly 80% of total imports in
the period of 2013 - 2017). On the other hand, Chinese consumers mainly drink instant
coffee, accounting for 99% of the volume and 98% of the value of retail sales. This is


very beneficial when G7 instant coffee is one of the special marks that make up the brand
of Trung Nguyen Legend.

1. Overview of Vietnam's coffee industry and Trung Nguyen group

1.1. Vietnamese coffee industry
Over the past three decades (since the reforms in 1986), coffee has been one of the most
important contributors to the revenue of Vietnam’s agricultural sector in particular and
the overall GDP of the country in general. Two main types of coffee (Robusta and
Arabica) are put into production, of which Robusta accounts for 92.9% of the total coffee
growing area (and 97% of the total output. estimated at 600,000 ha, with the main coffee
growing provinces located in the Central Highlands, with the position as the world's
second-largest coffee producer and exporter, and the leader in terms of Vietnamese
Robusta products to promote their exports. coffee to more than 80 countries and regions,
accounting for 14.2% of the global coffee bean export market share (second after Brazil).
1.2. Current situation of Vietnam's coffee export to China
China is the world's 11th largest coffee market with an estimated value of 9,124 million
USD and is the 11th largest importer in the world with an estimated value of 2,650
thousand bags (in 2019/20). In particular, Robusta imports ranked third in the world with
an estimated 1,500 bags in the 2019/20 crop.
In recent years, Vietnam has continuously boosted coffee exports to major markets,
especially China - the second-largest economy in the world. Vietnam's coffee holds an
important position in the Chinese market as the largest source in this country with more
than 1.4 billion people (nearly 80% of the total imports in the period 2013 - 2017). T
swine to the General Administration of Customs, in the first 7 months of 2020, due to the
impact of translation Covid-19, coffee exports to China Quo c fell 10.18% on ene ng and
fell 6.83 % to metal turnover and volume of 20,910 tons, equivalent to 49 million USD.
1.3 . Introduce common on Trung Nguyen Corporation


On 16/06/1996, Chairman Dang Le Nguyen Vu established Trung Nguyen in Buon Ma
Thuot - the capital of Vietnamese coffee, with the first capital as a bicycle with a strong
belief and will of the age. along with the desire to build a famous coffee brand, bring the
taste of Vietnamese coffee to the world. In just 10 years, from a small coffee company,
Trung Nguyen has emerged into a powerful corporation with 6 member companies in the

fields of tea and coffee production, processing and trading; franchise and modern retail
and distribution services.
Vision: To become a corporation that promotes the rise of Vietnam's economy, keeps the
vocabulary of national economic autonomy, and arouses, proves a desire for Dai Viet to
explore and conquer.
Mission: To build a united human community that follows a set of values of a mindful
lifestyle, bringing about real success and happiness.
Core Values: Absolute faith, community service, human response, solid financial
experience
Trung Nguyen Legend's coffee products have been exported to more than 80 countries
and territories and have been selected as "diplomatic ambassadors" connecting
Vietnamese culture with the world. Outstanding G7 is one of the most loved instant
coffee products and Trung Nguyen is the national brand. Besides, Trung Nguyen now has
a network of nearly 1000 franchised cafes nationwide and 8 overseas shops such as the
US, Japan, Singapore, Thailand, China, Cambodia, Poland, Ukraine.
From a young Vietnamese coffee brand, after 25 years, Trung Nguyen has quickly built
up a reputation, becoming the number 1 Vietnamese coffee brand and continues to bring
initial achievements on the journey realizing global aspirations.
2. China PESTLE-C model
2 .1. Political enviroment
Overview of the Chinese political environment: Before 1997, China was a country that
completely followed the socialist path, but up to this point, they have come up with a new


line called special socialism. China and not much changed until now. This ideology
supports the creation of a socialist market economy but is still dominated and regulated
by the Chinese state. The Communist Party of China is the only ruling party in China
with the basic socialist ideology such as justice, democracy, civilization, but adds a
citizen rating system, or system. Social credit scoring has the potential to limit the
interests of those who do not meet the social credit limit.

 China is considered a relatively safe business and investment environment because the

politics follow the republican regime, democracy, with a single Party leader, so it is quite
stable, fewer contradictions, internal conflicts between the government and the people.
Besides, the situation of security national security is also maintained, ensuring good. This
helps businesses minimize the risks that may be encountered.
The economic relationship between Vietnam and China: Based on the Comprehensive
Strategic Partnership in recent years, the two Parties and States of Vietnam and China
have continuously strengthened and developed their relationship. Inherent friendship is
considered a valuable spiritual property of the people of the two countries. Vietnam China's economic relations in recent years have developed very rapidly, making an
important contribution to the economic growth of each country. Vietnam is China's
largest trading partner in ASEAN and the eighth largest trading partner globally.


 The two countries' political relations are towards peace and friendship, making the
commercial cooperation relationship between the two countries to develop stably and
sustainably. This is good news for Vietnamese enterprises, especially Trung Nguyen,
which has been expanding its product export market to China. This is a place that helps
promote official trade, creating conditions for many high-quality products and goods of
Vietnam to be sold in the Chinese market.
2. 2. Economic environment
GDP: According to preliminary statistics, China's gross domestic product in 2020 will
reach 101.569 trillion yuan, at constant prices, GDP in 2020 will grow by
2.3%. Specifically, in the second quarter to the fourth quarter of 2020, China's GDP
increased by 3 , 2 %, 4.9% and 6.5% respectively over the same period, after seeing the
first quarter decline to 6.8% in the same period due to the photo. Enjoyed by Covid19. Previously, the National Bureau of Statistics of China announced the consolidated
figures for GDP in 2019, reaching 98.6515 trillion yuan. Thus, China's gross domestic
product in 2020 has reached a new milestone. According to a recent assessment by the
Director of National Bureau of Statistics Ning Jizhe, after the first quarter of 2020 was
stalled by the impact of epidemics, China's economy has gradually recovered, GDP in

2020 will reach a growth rate of more than 2. %, and became the world's only major
economy to achieve positive growth.


During the period when the global economy was affected by the new pandemic, China's
economic growth has surpassed most of the countries in the world and it also shows the
economy of the land. the country is recovering from the pandemic. However, this is still
China's record for the lowest economic growth rate in decades.
Interest: In the current period, looking at the context of increasing global economic risks
and many central banks in the world have cut the operating rates. Without exception, the
Bank of China (PBOC) has cut the required reserve ratio by 50 percentage points for all
banks and 100 percentage points for eligible city banks. The PBOC even cut the
compulsory reserve ratio at major banks to 13% and is expected to add 900 billion CNY
(or 126 billion USD) in cash flow into the weak economy. The macro indicators are less
positive.
Exchange rate systems: Although turning over - import between Vietnam and China big
but the payment currency is basically dollar, only a small number of economic contracts
transactions in renminbi, but with This contract was basically the two sides pegged to
each other before. Therefore, the impact of this event on the two countries' trade is not of
concern. Of course, if the yuan is greatly reduced, while the US dollar has increased the
brackish I enterprises import and export, by conversion from the dollar to RMB, the
enterprise will be higher benefits.


Inflation: Weak domestic demand due to the effects of the Covid-19 epidemic also
caused core inflation in China to drop to its lowest level in a decade. Specifically, the
basic consumer price index (CPI) only increased at an annual rate of 1% in February, the
slowest rate since June 2010. Weak demand also makes businesses dare not increase the
selling price of their products. As a result, the producer price index even turned back to
drop 0.4% in February from the same period last year after rising 0.1% in January.

2.3. The international cultural, demographic and social enviroment
Culture: As two neighboring countries with mountains and rivers, Vietnam and China
have quite similar cultures in many aspects such as aesthetics, values, customs, attitudes,
religion... This helps Trung Nguyen is easier to research and develop the market
.
Source: hofstede-insights.com
Power distance (PD): China is one of the countries with the highest PDI in the world (80)
demonstrating that inequality is acceptable and that the decisions of superiors are more
likely to be accepted. received without discussion. Therefore, there will be respect for the
bosses in the company, the elderly, and especially the harmony and courtesy in the
working environment. Therefore, assuming Trung Nguyen sends a Vietnamese manager


to run the branch in China, this person will not face too many difficulties in human
resource management and will also be respected by his subordinates.
Individualism and collectivism: China is a culture of collective high (20), the people
promoting collaboration and comfortable working in groups rather than working
independently. Therefore, Trung Nguyen can let his staff here work in groups in research,
marketing, and sales, which will bring better work efficiency.
Masculinity and Feminnity (MAS): China is a masculine society (66), in other words,
prone to achievement, assertiveness, material rewards, and success. For many Chinese,
leisure time is not so important. This will motivate employees to work hard, strive for
high efficiency. This can also be an attractive point of this market, so Trung Nguyen
needs to encourage and motivate them to develop business here.
Uncertainty avoidance: China has a low level of risk hedging (30), that is, the Chinese
are comfortable with ambiguity, not too harsh on uncertainty. The Chinese are adaptable
and do business well when the majority (70%-80%) of Chinese businesses tend to be
small to medium-sized and owned by families. This can be seen as an opportunity for
Trung Nguyen to change a few things if necessary and manage well the human resources

here.
Long-term orientation: It can be said that China is a very pragmatic culture (87). They
can adapt easily to changing conditions, have a strong propensity to save and invest, be
thrifty and persistent in achieving results. Therefore, this can also be a challenge for
Trung Nguyen as they will not spend too much money on drinks.
Ethnicity and religion: China is a multi-racial country with 56 ethnic groups, many
different beliefs, and religions, but has the common characteristics: attaching great
importance to national traditions, attaching great importance to family traditions, saving...
This may make it difficult for Trung Nguyen to bring their products to the entire
population because they have a high national spirit and will give priority to using their
own products.


Family: The Chinese have a more son preference mindset, which may also be one reason
why Trung Nguyen chose China as his market because coffee is often more attractive to
men.
Traditional values: Traditional Chinese values are largely derived from orthodox
Confucian ideas. China is a market with a long tradition of drinking tea. However, in
recent years, the Chinese tend to see drinking coffee as an expression of a new style,
instead of traditional tea-drinking habits, which is especially popular among young
people. Therefore, the fact that they have not formed a habit of forgetting to drink a
certain type of coffee will be an opportunity for Trung Nguyen to take advantage of
introducing and positioning their products.
Demographics
Population: China is the most populous country in the world with 1,442,651,038 people
(danso.org) as of March 6, 2021, equivalent 18.38% of the total world population.
Sex ratios (2020)
0-14 years: 17, 29 % (male 129,296,339 / female 111,782,427)
15-24: 11, 48 % (male 86,129,841 / female 73,876,148)
25-54 years: 46, 81 % (male 333,789,731 / female 318,711,557)

55-64: 12, 08 % (male 84,827,645 / female 83,557,507)
65 and older: 12, 34 % (male 81,586,490 / female 90,458,292)
 Based on China's age structure, we can see that the age group from 25 to 54 accounts
for a large proportion (46, 81 %). These people are of working age and have a very high
need to meet their friends and partners. On the other hand, young people tend to step out
of the traditional tea drinking culture, so coffee is a popular choice. Therefore, Trung
Nguyen can choose this age group as its target customer.
Birth rate: 11, 3 children / 1000 people (2020)


Death rate: 7.4 people / 1,000 people (2020)
Natural change = birth rate - mortality = 1, 3 - 7.4 = 3.9 (2020)
Net migration: - 0.25 people / 1000 people (2020)
Over increase or decrease in population = natural variability + net migration
= 3.9 - 0, 25 = 3.65 (2020)
Average life expectancy: 76, 96 years (2020)
 In recent years, China’s population structure tends to age markedly with a smaller
number of babies born, a decrease in the number of people of working age, and a higher
proportion of the elderly than the average vase of the world.
Social trends
Family: The Chinese government's abolition of the "One-Child Policy" and instead
permitting the birth of two children has yet to help China raise its birth rate. On the other
hand, a current concern is that women tend to like to be single, enjoy life, to be afraid of
marriage. "No children, no wedding rings, just live peacefully" - These 11 words have
become a catchphrase in China recently.
Healthy: The Covid-19 pandemic made all Chinese people realize that good health is of
utmost importance. Therefore, they are more strict in eating and tend to exercise harder. It
is this higher demand for this food that may be a challenge for Trung Nguyen to fully
satisfy both the taste and value of the health of the Chinese people.
 Coffee is gradually becoming a familiar beverage with Chinese consumers. However,

compared to other major coffee consuming countries, the Chinese market is at an early
stage of development, consumers mainly use instant coffee. Therefore, this will be an
extremely potential market in the future.


2 .4. The technology environment
Today, China is known from being the world's factory to one of the world's new
technological powers. It is the result of well-thought-out, well-thought-out planning and
investing in large sums of money. China has become a giant in many high-tech fields
such as artificial intelligence, IoT, nanotechnology, biotechnology and big data ... From
2002 up to now, every year. This country has obtained more than 20,000 achievements in
the fields of energy, agriculture, environmental protection ... making the capacity of S&T
constantly improving. With 35 million people working in S&T fields, China currently
ranks first in the world in science and technology human resources. Due to being denied
access to advanced American technologies, China is accelerating the development of
"Made in China 2025" technologies.
The UK Research and Innovation Agency (UKRI) has predicted that China will overtake
the US by 2022 to become the world's number one country in R&D investment. In 2017,
the Organization for Economic Co-operation and Development in Europe (OECD)
estimated that China accounted for 23% of the world's total R&D investment. And the
following year, the country's total investment continued to rise to 2.19 % of GDP (it was
2.15% in 2017) - insignificantly more than Europe. China not only accounts for 25% of
the world's R&D personnel, but also ranks second in the world for international patent
applications in 2018 (53,981) , just behind the US (55,981).

Source: sciencebusiness.net


Investment in R&D of China and other countries from 2000 – 2018
After the outbreak of the COVID-19 epidemic, the speed of digitalization continues to

increase rapidly and the shift from offline to online, especially personal shopping, is
becoming a habit of Chinese consumers. E-commerce systems such as Alibaba, Taobao,
Tmall, JD, YiHaodian... and electronic payment are developing and dynamic in China c.
 Catch trend electronic commerce internationally in the context of pandemic Covid-

19 present as well as the realization of aspirations to conquer the globe, Trung Nguyen
Legend has embarked flooring e-commerce Alibaba China. Previously, Trung Nguyen
Legend's products were also widely present on leading Chinese e-commerce sites such as
Alibaba, Taobao.com, Tmall.com, Yihaodian.com, JD.com... Especially, on Tmall.com,
Trung Nguyen has successfully built 2 pioneering stores on this
site.
2.5. Legal Enviroment
Intellectual Property Rights: Recognized and protected in China since 1979.
Accordingly, China must protect copyrights and related rights, rights to other intellectual
property such as inventions, trademarks commercial brands, industrial designs,
geographical indications, integrated circuit designs, foreign trade secrets such as
protection of intellectual property and individual rights to intellectual property ,
organized both at home and abroad.
Trademark Law: Includes general guidelines for managing trademarks, protecting the
exclusive rights of trademark owners and maintaining the quality of products and services
under registered trademarks. Trademark registration in China is a mandatory requirement
for an individual or organization to monopolize the trademark in China. A trademark is
exclusively accepted when the trademark owner commits to apply for trademark
registration in accordance with the trademark registration procedures in China and is
granted the trademark registration certificate by China. Failure to register a trademark
will easily lead to commercial disputes that some Vietnamese businesses have
encountered such as Ben Tre coconut candy, Vinamit - Duc Thanh...


 The realization of intellectual property rights is particularly difficult in China, few

people are aware of intellectual property infringement, or may be protected by local
authorities who do not want to support the work anti - piracy eg. This is also a difficulty
for Trung Nguyen when entering the Chinese market because the intellectual property
law and trademark copyright in China are not strict. Therefore, Trung Nguyen needs to
strengthen the promotion of its brand image, so as not to be confused with other brands,
not to suffer from counterfeiting and poor quality products.
Import and Export Tax Policy: In 2019, China announced an adjustment of import tax
(often referred to as Postal Tax). Including items in Group 1 from 15% to 13%, Group 2
from 25% to 20% and keeping the same 50% tax rate of Group 3. Combining more
measures to adjust VAT to help expand Imports, promote consumption, meet the
increasing needs of life.
In 2020, China proceeds to reduce the MFN import tax rate. Imposing temporary tax rates
on 859 items (excluding items managed by tariff quotas). Abolishing 07 import tax items
belonging to group of information technology products from July 1, 2020. Adjusting the
reduction of MFN tax down to 2 - 13% for groups of machinery and equipment...
 This is a good opportunity for Trung Nguyen to enter the Chinese market.

Food Safety Law: In 2008, China enacted a food safety law to strengthen the regulation
of food safety. The focus of the Law is on the correct use of food, origin, food additives
and containers, packaging materials... the purpose is to protect consumers.
2.6. Ecological Environment
Accompanying the economic leap in the 1990s-2010s with an average GDP growth of
10.5% / year, China suffered from extremely heavy environmental pollution. In March
2014, President Xi Jinping officially launched the fight against environmental
pollution. Tightening emissions policies and water reduction policies were issued in 2014
and 2017 to tighten supply. These policies affect other countries in no small way because
China is the world's factory. Apply policies for environmental protection make the cost of
production in China increased the prices of finished products increased under which

reduces the competitiveness of the imported goods, but the goods affected Enjoy the
benefits of industries such as metals, textiles, plastics...
In addition, China has the potential to become a “green superpower”. According to a
report published by the Dutch company Elsevier, China could achieve 26% renewable
energy consumption by 2030. A report by the Energy Transition Commission (ETC) and
the Institute Rocky Mountain (USA) shows that China has a good foundation to achieve a
balance of carbon emissions when it becomes a fully developed economy by 2050.
Although air pollution, soil and water pollution remains problematic. The problem is
serious in China, which is approaching greener growth.
Along with the government's tightened environmental policies, Chinese consumers are
also very aware of environmental protection when they are ready to strongly boycott
production enterprises that have a heavy impact on the environment water sources, air
sources as well as land. Therefore, any business participating in the Chinese market must
also have a high sense of environmental protection in order to be allowed to participate in
the market and be accepted by consumers here.
3. Competitive environment
3 .1. Market structure
Coffee package:


Coffee shop:

From statistics collected are, we can comment:
- Both of two market or Chinese coffee may be highly concentrated market.
- Barriers to entry in the Chinese coffee market is high
- Low competitiveness
3.2. Porter’s Five Force model


Industry rivalry: High

China is seen as an extremely attractive market, collect the attention of coffee
exporters. Vietnam and Indonesia are the two main coffee exporting countries to China,
followed by Brazil, accounting for 10% of the imports. In addition, China also promotes
self-cultivation and production of coffee and roots mainly in Yunnan province, where
the planted area has tripled in the past 10 years. As for the coffee chain brand, so
far, Starbucks has opened more than 4100 stores in this country, second only to the
US, becoming a familiar choice for the majority of people. In 2017, suddenly a domestic
coffee company - Luckin Coffee - was born and crushed the market immediately with
huge capital and became a "unicorn" startup worth over 1 billion USD in July 2018. In
addition, there are also chains such as Mccafé, Costa, Pacific... In terms of packaged
coffee, Nestle occupies the highest market up to 70%, followed by Starbucks Cor,
Sunstory Holding, Uni - President Cor ... or some Other Vietnamese coffee brands such
as Vinacafe, An Thai...
 Nowadays, the increasing number of coffee brands exported to China is causing
enormous competitive pressure in the industry on Vietnam's Trung Nguyen
brand.
New entrant: Medium


Firstly, coffee beans exported to the Chinese market must meet the standards of the
International Coffee Association (ICO) on moisture, impurities, spoiled beans (young,
thin, black) due to preliminary processing relies heavily on natural (sun-drying) or
manual drying. Second, China is a large and populous country, so it is very difficult to
access supply channels and customers. Therefore, it can be assessed that the barrier to
entering the Chinese coffee market is at medium level.
Threat of substitutes: High
China is still a country associated with tea drinking culture, tea is listed as one of seven
important things in life. Taiwan is regarded as the "cradle" of milk tea, almost all ages are
demand and popular milk tea, with many famous names such as The Alley, Gong father,
Taiwan coco... In addition, a Some other products such as energy drinks , cocoa...

also have a high risk of substituting for coffee . Besides, for coffee products, at
present, many companies tend to produce coffee in cans, bottles (drink right away
without preparation) in order to hit the convenience and suitability busy life of consumers
like Nescafé instant coffee (Nestlé) ...

Power of Buyers: High


Today, Chinese people tend to consider drinking coffee as a new expression of style,
especially young people in big cities. With rich preferences, varying levels of income, as
well as the willingness to pay for a cup of coffee, the demand is increasingly
diverse. However, all coffee companies in the world consider China to be a "lucrative"
market, a "delicious piece of cake", so the competitiveness is increasing. Therefore,
buyers will have more choices.
Power of suppliers: Low
Currently, Trung Nguyen has a very efficient production system when the raw materials
used for instant coffee production as well as other types of coffee originate
from coffee farms approved by the Central Nguyendau investment and administration of
UTZ standards. This material resources each year to provide three-quarters of Trung
Nguyen coffee granules, the remaining receivables purchased from growers coffee. In
other words, Trung Nguyen is also the supplier of input materials for its
production. Therefore, competitive pressure from suppliers is an issue that Trung Nguyen
does not face at present.
4. Rate
Political environment: Average
Economic environment: High
Social and cultural environment: Low
Technology environment: Low
Legal environment: Medium
Ecological environment: Low

Competitive environment: High
CONCLUDE


China is a potential market for Vietnam's coffee industry, but there are also many
difficulties and challenges that Trung Nguyen will face in the process of realizing the
aspirations of global Vietnamese brands in the near future. On the other hand, the
outbreak of the Covid-19 epidemic will be a negative factor affecting Trung Nguyen's
operations in this billion-dollar market when in general, in 2020, China's imported
coffee output will decline decrease due to a deep decrease in consumption. Therefore,
Trung Nguyen needs to have appropriate and effective short-term strategies to overcome
this difficult period, and also need a long-term strategy and foresight to stand and thrive
in the market. This extremely potential in the future. Currently, Trung Nguyen Legend is
gradually asserting its position as the No. 1 coffee brand with strong investment and
determination to realize the global vision.