VF Franchise Consulting

Fast food giants flock to Vietnam, frightening domestic businesses

May 1, 2013

VietNamNet Bridge – The public attention these days has been concentrated onthe opening of the first Starbucks shop in HCM City and the fellow-countryman,Dunkin’s Donuts. Will there be a new wave of foreign fast food giants flocking to Vietnam?

Vietnam, fast food, giants, Starbucks, investment

When opening the first Starbucks shop in Vietnam in early February, Starbucksstated that it would have hundreds of Starbucks shops throughout the country inthe future, according to Bloomberg.

Meanwhile, the Wall Street Journal has reported that Dunkin’s Brands Group, theowner of Dunkin’s Donuts brand, has signed an agreement on a franchising deal toVietnam Food & Beverage Company to develop a Dunkin’s Donut chain in Vietnam. Itis expected that the first shop bearing the brand would be opened in HCM City.

It’s obvious that both Starbucks and Dunkin’s Donut are the giants in theirfield. The former has 18,200 shops throughout the world, while the latter has10,000 shops in 32 countries and territories, including 1,450 shops in SouthEast Asia.

Baskin-Robbins, an ice cream brand also belonging to Dunkin’s Brands, has beenpresent in Vietnam since January 2012 already, which has had 13 shops here.

Dunkin’s announced its plan to march towards the Vietnamese market just a coupleof weeks after the information about Starbucks flooded local newspapers.

The US AP newswire has commented that the US food chains have been trying topush up their growth by increasing their presence in Asia. Starbucks said Chinamay exceed Canada to become its second biggest market, just to the US, in somemore years.

Thoi bao Kinh te Vietnam quoted its sources as saying that in 2012, Starbucks’share price increased by 17 percent, while Dunkin’s Brands increased by 33percent.

In fact the landing of the foreign giants in Vietnam has been anticipated.Vietnam now has 8 million people classified as “urban middle-class consumers.”The figure is expected to increase to 44 million by 2020 and to 95 million by2030.

The middle class consumers, as defined by Nielsen, are the households with thedaily spending of $10-100 per capita per day. The rapid increase of the group ofconsumers would lead to the consumption boom in the future, which means thatVietnam is a fertile land for foreign food brands. McDonald’s has also revealedits plan to come to Vietnam.

The appearance of the foreign giants in Vietnam has raised a worry that theywould, sooner or later, collapse the Vietnamese food chains, which are clearlyinferior to foreign in both experience and finance capability.

Pham Viet Anh, President of Left Brain Connectors, in an article on VnExpress,wrote that in principle, the US Starbucks would not confront directly withVietnamese Trung Nguyen, because they are in completely different areas.Starbucks targets urban youth with modern lifestyle and office workers, whileTrung Nguyen targets “real coffee drinkers.”

However, the common thing that both Starbucks and Trung Nguyen would need is theretail premises. Since retail premises always play a very important role indoing business, they would have to compete fiercely to scramble for advantageouspositions. In the completion, the rivals with weaker financial capability wouldbe the losers.

The so called “Vietnamese coffee culture” may change more or less in the futurewith the appearance of big foreign brands like Starbucks, Gloria Jeans or CoffeeBean. Especially, the biggest changes would occur with the youth, who have gotfamiliar to the western style. They go to café not to enjoy cups of coffee, butto enjoy the new way of relaxing and meeting friends.

However, Anh does not think that there is no room in the market for domesticbrands. Foreign giants have their advantages, but they cannot cover all themarket segments. Meanwhile, there always exist different groups of clients anddifferent classes of consumers who have different demand and lifestyles.

Compiled by C. V

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