The day Starbucks brews tea in Vietnam: learning from the coffee leader's localization

Starbucks, which has operated as a coffee specialty chain in Vietnam for 13 years, has officially added milk tea (locally called "trà sữa") to its menu. The lineup combines black tea, oolong tea, and roasted green tea as bases, paired with toppings such as oat milk, cold foam, and konjac powder, stepping into a tea beverage market already crowded with established chains like Phuc Long and Gong Cha. The company's local head frames it as "not a direct confrontation with existing chains, but simply an expansion of the beverage category," but the fact that the world's largest coffee chain has taken on a signature local drink is not insignificant. For Japanese companies considering beverage and food businesses in Vietnam, this offers a live example answering the question of "how far to go with menu localization."

The move Starbucks made "outside its core business"

What was launched this time is a lineup of milk teas based on three types of tea leaves. For a coffee chain to treat a non-coffee product as a flagship-level item marks a symbolic shift for Starbucks Vietnam. The company's local head has commented that, for now, it will prioritize "gathering customer feedback and improving the experience" over sales targets, suggesting this is more a test rollout aimed at market learning than at revenue contribution.

What's interesting is that, while denying a direct confrontation, the product itself steps right into the topping-competition arena. Oat milk and konjac-based toppings are areas that Phuc Long, Gong Cha, and Koi The have honed locally. On the surface it's framed as "adding options," but in effect it's a move to claim the same shelf space as local chains.

Why is the coffee giant moving into tea now

Behind this lies the accumulation of localization Starbucks has pursued over the past few years. Since overhauling its management in late 2023, the company has progressively rolled out products tailored to Vietnamese tastes, such as salt coffee and coconut coffee. Milk tea is an extension of that, in a sense the finishing touch on its localization.

Vietnam's tea beverage market is rooted less as a drink and more as a culture of socializing and lifestyle. From students to office workers, there is a broad base of people who choose "trà sữa" as their afternoon drink. The judgment is to capture, through its existing store network and brand power, demand that a coffee-only lineup had been missing. That Vietnamese coffee culture itself runs deep can be seen from the scale of local chain Highlands Coffee, which has reached 1,000 stores and sells 100 million cups a year. Within that enormous dining and beverage demand, Starbucks has come to reinforce its weak tea category.

The market size is not "$1.7 billion" — the verified figure

One thing worth noting when discussing this entry is the market-size figure. According to research by Singapore's consulting firm Momentum Works and payment startup Qlub, Vietnam's bubble tea ("new-style tea drink") market is worth about USD 362 million a year. This puts Vietnam third in the region, within Southeast Asia's overall annual market of about USD 3.66 billion.

Some sources describe Vietnam's standalone tea beverage market as "$1.7 billion class," but the figure confirmed across multiple sources is around USD 360 million a year. For Japanese companies assessing business viability, it is safer to base estimates on this verified level rather than get pulled along by an inflated market-size figure. In terms of store network scale, Starbucks Vietnam has about 125 stores across 16 cities and provinces (as of early 2025) — an overwhelming minority compared with local milk tea chains that number in the thousands of stores.

How locals and the industry see it

F&B industry experts point out that established players such as Phuc Long, Phe La, Gong Cha, and Koi The already have a deep understanding of customer preferences and consumption habits, and suggest that Starbucks "will get lost in the crowd unless it differentiates itself not through a topping contest, but as a Starbucks-style premium milk tea." Given that local chains have the edge in both price and store density, the view is that Starbucks has no choice but to compete on brand experience.

There's a certain irony in the lineup of competitors. The former head who led Starbucks Vietnam for more than a decade now runs its rival Phuc Long. The picture of someone who knows the ins and outs of local beverage practice standing on the opposite side illustrates just how tough an opponent a foreign entrant faces in the local tea market. On social media, opinions are split, mixing cool reactions such as "I don't get why you'd drink milk tea at Starbucks" with curious ones like "I'll try it once for the buzz."

Implications Japanese beverage and F&B companies should take away

The practical lesson Japanese companies can take from this case is a design philosophy: "how far to absorb a local signature category while protecting the core of the brand." Starbucks has stepped into the weaker tea category deliberately, building on its own strengths — brand, store experience, and quality control. Rather than fully localizing and getting dragged into a discount price war, it is trying to redefine tea as a premium-priced experiential product.

Japanese beverage makers and restaurant chains launching products in Vietnam face the same question. Should they bring in Japanese flavors and methods as they are, or prepare a separate line of products connected to the local "trà sữa culture"? Starbucks' answer leans toward the latter. Inserting a product that carries the company's own identity right into the heart of local demand — this kind of compromise is a realistic landing point for foreign entrants into a local food culture market. The trend of dining formats themselves spreading into regional cities is also visible in data showing Vietnamese fast food expanding to 1,156 stores with a clear shift toward regional cities, and product design needs to account for tastes not just in urban centers but in the regions as well.

Ripple effects on the tea beverage market and where competition heads next

Starbucks' entry means more to existing chains than simply "one more price competitor." By pushing a premium positioning, it could shine a light on the upper price tier of milk tea, a band that has so far been thin. While Chinese chains have dominated the market with low prices, that model too is starting to show signs of a turning point. Mixue's move to scale back in Southeast Asia and head toward the US and South Korea suggests that a war of attrition built purely on low prices is nearing its limits even in Vietnam. As the low-price segment becomes saturated, room still remains in the mid-to-high price tier, where experience and quality can set a brand apart.

For Japanese brands, this "opening in the upper tier" is a hint. Japan's own tea context — green tea, roasted green tea, Japanese ingredients — pairs well with products sold through story rather than price competition. The premium milk tea tier Starbucks is trying to carve out is an area where Japanese F&B companies have room to enter through their own distinctiveness.

Practical points to keep in mind

• The market size for Vietnam alone is roughly USD 360 million a year. Avoid business plans based on inflated figures, and run estimates on this verified level instead.
• Vietnam's local tea beverage market has an established set of practices around toppings and preferences. Rather than joining a discount price war, it is more realistic to aim for the upper tier through brand experience or distinctive ingredients.
• For localization, a compromise of "one's own identity plus local context" works better than "full localization." A test rollout through a separate line or limited launch, to gauge reaction first, is effective.
• In terms of store network, the company trails local chains in numbers. Whether it can leverage existing store assets and brand recognition will determine the success of a late entry.

Summary: how to design the next move

Starbucks' entry into milk tea is a textbook case of a foreign company stepping into Vietnam's food culture market. It keeps its core brand intact while cutting into a local signature category through a premium approach. This design is something Japanese companies about to launch beverage or food products in Vietnam can use as a direct reference. The realistic next steps are: (1) choose one category to target in Vietnam and observe the local practices around it (flavor, toppings, price tier), (2) roll out a limited product carrying the company's own strengths on a small scale and gauge the reaction, and (3) judge business viability based on verified market-size figures. Not taking market-size numbers at face value, and instead working out how to connect one's own story to local tastes, is the winning approach for a late entrant.

Sources

• VietnamBiz, "Starbucks Vietnam does not see milk tea as a direct confrontation with existing chains"
• The Investor, "Vietnam spends USD 362 million a year on bubble tea" (Momentum Works/Qlub survey)
• Momentum Works, "Southeast Asia's USD 3.66 billion bubble tea market"