The resurgence of social gatherings, celebrations, and tourism activities is bolstering the on-premise consumption of hot drinks in Vietnam. Besides, new product launches and marketing campaigns by leading companies and the expansion of hotel, restaurant, and café (HoReCa) chains are accelerating the recovery of the country’s hot drinks sector. As a result, Vietnam’s hot drinks market will expand to VND106.5 trillion ($4.3 billion) by 2027, registering a compound annual growth rate (CAGR) of 9.1% over 2022–27, says GlobalData, a leading data and analytics company.

GlobalData’s report, ‘Vietnam Hot Drinks – Market Assessment and Forecasts to 2027’ reveals that the other drinks category will register the fastest value CAGR of 9.7% over 2022–27, followed closely by hot coffee with a projected CAGR of 9.6%.

Tim Hill, Key Account Director at GlobalData Singapore, comments: “The easing of the Zero COVID-19 policy, and the improving economic conditions unleashed pent-up consumer demand for out-of-home dining occasions, social gatherings, and celebrations in 2022. Moreover, café operators, such as Starbucks, Phuc Long Coffee & Tea Co, Viet Thai International, The Coffee House, and Chuk Coffee & Tea introduced novel menu offerings. As a result, on-premise consumption of hot tea and hot coffee rebounded in Vietnam in 2022.

“Similarly, product innovations by leading hot drinks manufacturers, such as Nestlé Vietnam and Vinacafe Bien Hoa, bolstered retail sales of hot drinks. Consequently, Vietnam’s per capita expenditure (PCE) on hot drinks increased from $22.4 in 2017 to $29.9 in 2022, surpassing the Asia-Pacific average of $22.2. However, Vietnam’s PCE lagged the global average of $34.5, indicating there is more room for growth.”

Bobby Verghese, Consumer Analyst at GlobalData adds: “As Vietnam is one of the leading global producers of tea and coffee, particularly the Robusta coffee bean variety, the market is flush with cheap products. Despite spiraling inflation posing a concern for the hot drinks sector in 2022, the rising global consumption of affordable instant coffee and expresso blends spurred demand for economical Robusta coffee beans. However, as adverse weather undermined coffee harvests in Vietnam, Brazil, and Colombia, Vietnam’s Robusta coffee stockpiles shrank, sending prices soaring. Manufacturers and foodservice operators struggled to absorb rising product/menu prices in 2022.

“Among distribution channels, convenience stores accounted for the largest share of hot drinks sales in 2022, benefitting from the normalization of shopper behavior after the authorities eased the COVID-19 restrictions. Hypermarkets & supermarkets, and food & drinks specialists also performed. Vinatea, Unilever, and Nestlé Vietnam were the top three companies in the Vietnamese hot drinks market in value terms in 2022.”

Hill adds: “As consumers revert to full-time onsite education and work, and foreign tourist arrivals rebound, on-premise sales of hot drinks will increase steadily in 2023. Moreover, café operators, including Starbucks, Phuc Long Coffee & Tea, and Trung Nguyen, are gearing up to launch new outlets. New value-added products, such as bubble tea, and marketing promotions will stimulate the sector’s value sales.”

Verghese concludes: “As inflation subsides, and the economy gains more momentum, more middle-class consumers will trade up to specialty coffee and tea in the coming years. However, the sector’s premiumization will be constrained by the availability of cheap offerings in mass retail and traditional tea and coffee shops, which eclipse the organized sector. As a result, Vietnam’s PCE on hot drinks will rise to $41.7 by 2027, lagging the global average of $67.7.”