Not to everyone’s taste

Vietnam’s fast-food segment has become much more competitive as a huge number of chains arrive in the country, but some are now reviewing their business activities while others are departing. 

Analysts say that as Vietnam is an emerging market, investors need to follow a reasonable path in order to reap the benefits. Most fast-food brands in Vietnam are “giants” but not all can succeed here. 

“Meeting the tastes of customers, which are rapidly changing along with the development of society, is one of the biggest challenges for any business,” Mr. Nguyen Huy Thinh, General Manager of McDonald’s in Vietnam, told VET.

Learn to compete


fast-food chains, vietnam economy, business news, vn news, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, vn news, Vietnam net news, Vietnam latest news, Vietnam breaking news

McDonald’s opened its first outlet in Vietnam in 2014 and quickly found favor. Mr. Nguyen Bao Hoang was appointed to bring the Big Mac to Vietnam as a Developmental Licensee, with the contract signed the result of cooperation with the UK-based international law firm, Allen & Overy, and the result of a “rigorous” selection process, the fast-food giant said. 

McDonald’s attracted 20,000 customers and earned around VND1.5 billion ($71,130) in revenue in its first two days in the country. Similar to Burger King, it also adopted an ambitious plan to have 100 stores within a decade. But four years on, it is yet to expand beyond Ho Chi Minh City.

It has introduced Western breakfast dishes such as egg muffin, sausage, hotcakes, and hash browns in a bid to win over picky Vietnamese palates, though it remains doubtful that such fare is appealing to local people. 

In fact, “studying the tastes of Vietnamese customers is an important factor for every fast-food business,” Mr. Thinh said. 

“Customers are not afraid to try new food, but customer demand doesn’t stop at simple food. There is also a desire to experience quality service in beautiful spaces.”

Burger King introduced the Whopper to Vietnam in 2011 through opening its first outlet at Tan Son Nhat International Airport in Ho Chi Minh City, and had an ambitious plan to open 60 outlets within its first five years. 

It has invested $40 million in developing its chain in prime locations in major cities and provinces, but closed two outlets, in Tan Binh district and District 3 in Ho Chi Minh City, last year, two in Ho Chi Minh City and Hanoi in 2015, and one in Da Nang in 2014.

Burger King Vietnam declined to comment for this story but in an interview with local media, Mr. Johnathan Hanh Nguyen, a representative of the franchise, said the US fast-food chain would not exit from Vietnam. 

“Some shops might have closed, but new shops will open,” he was quoted as saying. Analysts, meanwhile, believe that Burger King is meeting problems in Vietnam as its strategy of “Taste is King”, imposing US tastes in Vietnam, is not suitable. 

Its hamburgers, which stand at a price disadvantage compared to local “banh my” (bread and fillings), are simply not favored by Vietnamese. 

While the “King of Branded Goods” previously revealed the secret of his franchise as being “location, location, location”, it is unfortunately just one of many factors in winning in the fast-food segment.

Many analysts also said that Vietnam’s Western-wannabe attitude has changed, and that local people have turned their backs on foreign fast-food after their curiosity was sated. Many local customers said the prices at foreign fast-food restaurants are too high and the food not really suitable. 

“Not meeting the needs of the target audience is one cause of failure in the food and beverage (F&B) field,” according to Ms. Nguyen Phi Van, Chairman of Retail and Franchise Asia.

Change & develop

In contrast to Burger King and McDonald’s, KFC, Lotteria, and Jollibee have become popular in Vietnam by adapting to local tastes, though all struggled in their initial years before finding success. 

Jollibee was the first to arrive in Vietnam, followed by KFC and Lotteria. KFC opened its first outlet in Ho Chi Minh City in 1997 and faced trouble at the time, as local consumers were unfamiliar with the concept of “fast-food”. 

Outlet numbers grew slowly, reaching 17 after seven years. It then adjusted its strategy, in particular changing its menu, for example by adding rice and vegetables to its signature fried chicken. By 2011, it had 100 outlets. 

Though facing major challenges in Vietnam and incurring losses for the first seven years, it now has more than 140 outlets in 19 cities and provinces and employs some 3,000 people.

South Korea’s Lotteria, belonging to the Lotte Group, was also early on the scene, opening its first outlet in 1998. By late 2012 it had 140 outlets then 207 by 2015, opening an average of 20 each year. 

But it then opened just four new outlets in the first half of 2016. Regardless, Lotteria remains one of the leading fast-food brands in the country, with over 210 outlets in 30 cities and provinces and, though slow, outlet numbers continue to rise. 

The success of Lotteria is due to its extensive network of outlets, its diverse menu, and its dynamic marketing activities.

The first on the scene, Jollibee, opened its first outlet in Vietnam in 1996 but has perhaps struggled more than KFC and Lotteria to gain a foothold in the country. By the end of 2012 it had just 25 outlets. 

In the 2012-2015 period, though, it grew quickly, opening nearly 50 new outlets, reaching 73 by the end of 2015. It now has around 80 stores in Vietnam and has also changed its menu to make it suitable with Vietnamese taste buds.

General speaking, efforts to localize menus have made these brands more attractive among local people. 

Localizing the menu encourages people to walk through the front door, and once inside they may be open to trying something different, according to Mr. Robert Tran, CEO of business advisory firm the Robenny Corp. 

Moreover, customers can purchase a rice meal for only VND35,000 ($1.6) or a burger for VND49,000 ($2.2) at lunchtime. 

More and more people, especially the younger generation, have started having lunch at fast-food outlets rather than at street stalls or small eateries, as they can enjoy a meal at an affordable price amid air-conditioned comfort. 

Mr. Hoang also told local media that it is no easy task introducing a brand such as McDonald’s to Vietnam. 

“I therefore had to be very careful when conducting research,” he said.

Vietnam presents a host of other obstacles for foreign fast-food brands. Mr. Thinh said that the appearance of more and more franchises in the country enhances the level of competition in the industry. 

“Challenges in location, workers, and product and service quality are all problematic for enterprises when making decisions,” he said.

Mr. Nguyen Hong Lam, Managing Director of Jollibee Vietnam, told VET that the search for premises that are consistent with the needs of the company’s business leads to higher costs. 

Analysts also say that local brands possess advantages that their foreign counterparts don’t, such as affordable prices and a comprehensive understanding of consumer behavior in the country.

VN Economic Times



Link http://news.c10mt.com/search/label/vietnambreakingnews and http://news.c10mt.com


Links Topics : http://news.c10mt.com/2017/07/not-to-everyones-taste.html