VietNamNet Bridge – The fast food market has formed in Vietnam, with a series of foreign food chains. Why don’t we see many local brands?

A Vietnamese banh mi store in HCM City.

The invisible war

Fast-food chains seem to be not affected by economic downturn in Vietnam when we see a series of strong brands having entered and are about to enter Vietnam. The large market with 90 million people and the high percentage of population of under 30 is very attractive to domestic and foreign investors.

The second factor contributing to the attractiveness of the fast food market is that food is one of the four basic needs of humans (food-drinks-accommodations-traveling). The industries satisfying these requirements seem to be less affected by economic recession. In addition, the gloomy real estate market in Vietnam has made the rent for retailing spaces much cheaper than the previous years.

This market is attractive but is it fully pink or not? That question is a difficult problem for food chain businesses. The first challenge comes from the “motorbike culture” in Vietnam. As motorcycles are the major vehicles in Vietnam, customers easily find similar food products that are sold along the roads in all cities in Vietnam, rather than going to fast food stores.

Overall, we can say that all the cities in Vietnam are giant fast food stores with all sorts of dishes from rice to bread, noodles, vermicelli, etc.

Competition in the food chains can be understood as the invisible war between modern food chains and hundreds of thousands of family-sized food shops in Vietnam.

The second thing is the price. Currently, it is for sure that the Vietnam Food & Beverages Service Company (VFBS) of the Imex Pan Pacific Group is confronted with this problem when its two fast-food brands Burger King and Domino Pizza have to compete with KFC, Pizza Hut, Lotteria, Jollibee and others.

The third factor affecting the expansion of fast food chains is the scarcity of good retailing spaces in the key areas.

Vietnam, like other developing countries, faces economic uneven between regions. Even in big cities such as Hanoi and Ho Chi Minh City, fast food stores are only available in several zones. The prime locations are normally occupied by the big players such as KFC, Lotteria, Trung Nguyen or Highland. The rent for a good retailing space is very high for the new players.

The major players in the fast food market are mainly foreign corporations which have a lot of experience in the industry. In this market, Vietnamese firms are in a disadvantageous position owing to their short-term thinking and unprofessionalism in operating a food chain. Pho 24 and Highland Café are being sold to foreign companies.

In fact, several domestic brands have gained a solid foothold, such as Trung Nguyen coffee chain and Sushi Bar in HCM City. For successful operation of a food chain, such factors as the concept, management and service guarantee process, menu structure and effective human resource management are very important.

Overall, it is the long-term strategic thinking of the CEO.

How to win at home?

The food chain playground is for the players with long-term vision and power. Related to Starbucks, the opening of a few shops is just for market exploration and assessment. The come of major brands only indicates that the Vietnam market is potential, not meaning that it is a stage for growth.

The Swensen ice cream brand has been in Vietnam for three years. It is developing quietly, slowly but firmly. They're about to open the third store on Vo Van Tan Road, Ho Chi Minh City. Similarly, Baskin Robbins has silently returned to Vietnam and is slowly developing in a sustainable way. We also find similar to Starbucks.

To compete with foreign brands, Vietnamese players need to neglect short-term benefits.

As noted above, the international players are still cautious in development and they are still assessing the Vietnamese market. Thus, the opportunity for local fast-food brands is still a lot.

To compete with foreign brands, Vietnamese firms should note two important points: The first important point is the vision and long-term power. Building a food chain is building a system. The short-term thinking and the goal for short-term benefit will not reap success.

The second important factor is to develop the concept and idea.

In operation, local investors must thoroughly adhere and preserve the idea and concept of their stores. The lessons from Givral when the two brands of Givral and Trang Tien ice cream are owned by the same firm - Ocean Hospitality is worthy. The development of the high-end brand of Givral and the popular brand Trang Tien ice cream in the same store chain is like putting luxury suits together with T-shirts and shorts.

Customers will be confused because the well-to-do customers will feel that Givral products are trivialized while popular customers will feel very afraid when going into a luxury store just to buy some ice cream.

The second lesson comes from Kinh Do stores when customers cannot understand these stores are selling moon-cakes, cookies, fresh-cream cake sale or coffee? No idea, no concept and at the same time selling too many products and services in a chain of stores is the fastest way for making self-made difficulties in operating food chains.

Jollibee is a brand of the Philippines which has been successful in the battle against McDonald's and other brands in its home market. Today, Jollibee has reached markets in the region. The success of Jollibee is not a secret because its CEOs have had long-term vision in competitive and positioning strategy.

The common weakness of famous fast-food brands in the world is that they must maintain uniformity in many countries, leading to less flexibility.

Local brands can take advantage of this to develop when large international players have not shaped the market taste. It is difficult for international brands to adjust ideas and concepts to suit the culture of Vietnam.

Starbucks is a typical example when Vietnamese food chains can still compete well with this famous brand.

Whether CEOs of Vietnamese food chains can overcome themselves to be successful in the home market like Jollibee did in the Philippines?

S. Tung