There’s nothing particularly new with coffee places opening in Phnom Penh. There is a different brand of coffee shop at just about every corner.
But the recent launching of the Starbucks Reserve brand in Phnom Penh seems to mean something significantly more for both the international F&B franchise sector, and local urbanite Phnom Penh citizens.
Been There, Done That
With 45 years of experience in the coffee industry, Starbucks has managed to open around 22,519 stores worldwide (as of June 28, 2015). The brand has become one of the world’s most recognized, through intensive advertising campaigns and aggressive product placement.
Fast-forward to October of 2016, another branch just opened to serve the Cambodian public in Phnom Penh’s BKK1 district. It was launched under the high-end “Reserve” brand of the company.
If the market can prove profitable for Starbucks, other international F&B and consumer goods franchises may look to enter the Cambodian market place as well
The new branch features two floors and 650 square meters filled with local craftsmanship, including a mural centerpiece depicting the Cambodian Folklore of Sovann Maccha.
Starbucks Cambodia has partnered up with a local NGO – Cambodian Children’s Fund – as part of its long-term community investment. They said, “We take a thoughtful, disciplined approach to growth in Cambodia that is locally relevant and in line with our company’s values. Our growth story is not just about expanding our store count in the market.”
Something Brewing:
Yet Starbucks’ opening of another high-end coffee place doesn’t only signal a positive outlook for the F&B industry…
It also transcends into real estate. A few months back, the World Bank declared Cambodia a lower-middle income country – where Cambodians currently have an average yearly income of between $1,026 and $4,035.
So, locals are now able to afford items that have a higher price tag, according to the Bank.
With this rise in consumers’ expendable incomes, Starbucks isn’t worried about the huge difference in price of their coffee compared to local ones. The local coffee costs about $0.74 (and sometimes as cheap as $0.25), while a small latte from Starbucks is $2.95.
If a cup of coffee is any indication of rising incomes, then sectors like real estate might follow a similar trend. Investors may be getting closer to a market in which the local population can afford resale units and higher rental rates. The current lack of a secondary market, resale and rental, for new development units is proving one of the biggest risks of the Cambodian market for pure investors.
Furthermore, if the market can prove profitable for Starbucks, other international F&B and consumer goods franchises may look to enter the Cambodian market place as well – spurred by this signal of consumer confidence and affluence.
So while Starbucks opening in BKK1 has been warmly welcomed by local cafe enthusiasts keen to try an international flavor, its significance for investors may have longer lasting influence.