Tech-enabled coffee chains percolate across Southeast Asia

Most travelers to Hanoi, the Vietnamese capital, make it a point to visit Cafe Giang, tucked away in a small alley. They want to taste its signature egg coffee, invented by the late Mr. Giang in 1946. The cafe has only two locations in the entire country – it hasn’t scaled at all.

These local coffee shops continue to stand the test of time, even as coffee chains targeting young customers focus on rapid expansion in the city.

These coffee chains, some of them considered tech-enabled startups, are booming not just in Vietnam but across Southeast Asia. Consumers in the region spent US$3.4 billion on “modern coffee” – referring to non-traditional coffee retailers like the startups mentioned in this story – last year, per a Momentum Works report.

The battle for the region’s taste buds is heating up faster than a freshly pulled espresso, and VC firms are racing to get their fix. Bold, though risky, regional expansion seems to be on the menu for most ambitious chains as they chase sustainable profits in the cutthroat F&B sector.

See also: Clash of the cuppas in SEA as China’s Luckin enters the scene

‘Cold brew’

Much like the rest of the startup world, coffee startups have felt the chill of the tech winter. Funding for the sector exceeded US$112 million in 2021 but fell 63% in 2022, before ticking up slightly in 2023, according to Tech in Asia data.

However, it’s worth noting that US$96 million of the total funding raised in 2021 went to Kopi Kenangan. The Indonesian firm secured the capital in its series C round, which propelled it to unicorn status.

Despite the overall decline in funding, Tech in Asia data shows that in 2023, coffee firms still accounted for more than half of all investments in Southeast Asia’s F&B sector. One of the largest deals last year was secured by Pickup Coffee, a Philippine chain founded in 2022. Its products are priced between 50 and 100 pesos (US$0.90 to US$1.80).

So far, coffee startups have secured US$68 million in disclosed funding this year, with the lion’s share going to Malaysia’s Zus Coffee in a US$57.5 million round. The rest of the investment has been flowing to smaller domestic players.

One of Indonesia’s rising stars in the coffee scene is “mobile cafe” Jago Coffee, which raised US$6 million in series A funding earlier this year. The firm operates a fleet of fully electric coffee carts roaming around Jakarta. Customers can use the Jago app to locate nearby carts, place orders directly, and have their coffee delivered within 15 minutes.

Malaysia’s Koppiku is also gaining traction, with 18 outlets across the country. The company is backed by the likes of AC Ventures managing partner Hann Yeoh and Antifragile Ventures – angel investors also backing Pickup Coffee. Earlier this year, Koppiku raised US$2.5 million in funding.

Regional champions vs. foreign giants?