Vietnamese fast food gives way to foreign chains

Vietnamese fast food gives way to foreign chains

Foreign companies have come to dominate the Vietnamese fast food market, which is seen by many to have great potential for development.

McDonald’s, the world’s largest fast food franchise has opened its first location in Vietnam, in HCM City. It serves around the clock through their partner Good Day Hospitality. On their first day of operation they attracted nearly ten thousand customers, and they have plans to open 100 new stores nationwide.

Currently, KFC is the foreign fast food chain which has opened the largest number stores in Vietnam. In 1997, KFC launched their first restaurant in HCM City and today has more than 135 restaurants in 19 cities and provinces nationwide in the next 10 years.

Buger King has dozens of restaurants in HCM City, Hanoi and Danang after their first store opened in HCM City in October 2012.

Do My Hanh, Head of the business office of BBQ Vietnam, said KFC and Lotteria have been operating in Vietnam for more than ten years, which has helped to create the habit of fast food consumption among Vietnamese.

According to a branding expert, Hoang Tung, the Vietnamese fast food market has a lot of potential, which has been proven by heavy investment by foreign firms such as McDonald’s, KFC, Burger King, Lotteria, Pizza Hut and Jollibee.

McDonald plans to open 100 new stores in Vietnam in the next 10 years

Economist Nguyen Minh Phong said market surveys indicate positive growth in the domestic fast food sector. The growth rate is forecast to reach 15% this year. However, the strong development of foreign companies has led to fierce competition for local brands, many of which will end up losing ground to rivals.

At the same time as foreign companies are aggressively penetrating the market, domestic companies seem to be taking a business as usual attitude.

Hoang Tung said Vietnamese companies pay little attention to developing Vietnamese fast food brands. It might be that they still consider the fast food small part of the food and beverages sector. KFC took seven years of losses in Vietnam before gaining a foothold, while Vietnamese companies do not seem to exhibit the same wherewithal.

Vietnamese suppliers have also been missing out on the fast food boom. Burger King has stated that it imports all beef from Australia, while McDonald’s imports its pork and potatoes from the US, only buying tomatoes and fresh vegetables from Vietnamese suppliers.

So far, the only Vietnamese baked goods supplier to win a foreign fast food contract has been A Chau Bakery Company for their buns. The director of the company, Kao Sieu Luc, said his firm imports international-standard production machines to meet McDonald’s requirements.

Dr. Dinh The Hien said the food supply system of foreign companies meet the standards of the modern food service industry, but those of Vietnamese companies are still weak, resulting in a situation where only large Vietnamese companies are able to win supply contracts.

At present, Vietnamese ingredients used for KFC products only account for 30%. The rate is 20% for Dunkin’ Donuts.

However, it is in the interest of foreign companies operating in Vietnam to take advantage of the domestic market ingredients to save on transport fees. This presents an opportunity, but local companies must raise their product quality as well as their competitiveness, said Dr. Nguyen Minh Phong.

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