McDonald’s Enters Vietnam in Burger King Contest: Southeast Asia
Feb 6, 2014
McDonald’s Corp will enter a new Southeast Asia country for the first time in two decades when it adds a Vietnam restaurant this weekend to catch up with chains including Burger King Worldwide Inc.
The world’s largest restaurant chain starts service in Ho Chi Minh City Feb. 8. The first branch in Vietnam’s biggest city will have 350 seats, said Henry Nguyen, owner of McDonald’s local partner Good Day Hospitality.
Nguyen, son-in-law of Prime Minister Nguyen Tan Dung, said expanding the chain to at least 100 branches within a decade was an achievable, if tough, goal. Vietnam’s appetite lured Berkshire Hathaway Inc.’s International Dairy Queen Inc. to open in Ho Chi Minh City last month, joining a field of U.S. brands that since 2010 has added CKE Inc.’s Carl’s Jr.; Domino’s Pizza Inc.;Dunkin’ Brands Group Inc.’s Dunkin’ Donuts and Baskin-Robbins; Popeyes Louisiana Kitchen Inc., Subway Restaurants, and Starbucks Corp.
“McDonald’s in Vietnam is going to be packed with parents, many of whom will not be eating because the food doesn’t appeal to them but who will be happy because watching their kids munch away on burgers makes them feel they’re part of something positive and modern,” said Markus Taussig, an assistant business professor at the National University of Singapore and a former Vietnam resident.
Burger King has 29 restaurants in the nation after opening its first in 2011, while Yum! Brands Inc.’s KFC fried chicken chain has been in the country since 1997.
Burger King doesn’t comment on its competitors, said Bryson Thornton, a spokesman for the Miami-based company. Vietnam is “key to our global development goals,” he said.
McDonald’s profile puts the Vietnamese consumer market on a global stage, says Paul Stoll, who helped set up the Vietnam Tourism Association that includes hotels and tour operators.
“It’s a global brand that people are familiar with, and that gives people confidence,” said Stoll, who’s also chief executive of Celadon International Hotel Management Joint-Stock Co. in Ho Chi Minh City. “People want to see a kind of global presentation that they are familiar with. McDonald’s everyone knows. That’s what Vietnam needs.”
There are about 400 McDonald’s in the Philippines, 260 in Malaysia, 195 in Thailand, and 150 in Indonesia, said Linda Ming, a Singapore-based communications director for the company. Vietnam is the first Southeast Asian market since the company opened its restaurant in Brunei in 1992, she said.
“If you look at these comparable markets, we’d love to be there in the near-but-not-too-distant future,” said Nguyen, 40. “This is an organization that eventually will have thousands and even tens of thousands of employees.”
Nguyen was born in the city then known as Saigon before leaving as an infant as the Vietnam War ended in 1975. Raised in the U.S., he worked at McDonald’s in Virginia in the summers of 1988 and 1989 and graduated from Harvard University before returning to Vietnam in 2001. He eventually became the managing general partner of technology fund IDG Ventures Vietnam.
McDonald’s got about 68 percent of revenue outside the U.S. in 2012, compared with 49 percent in 2000, according to data compiled by Bloomberg. McDonald’s shares gained 0.5 percent to $93.58 at the close in New York Feb. 5.
“People in Vietnam love big, impressive brands, and cheesy marketing like Ronald McDonald or some other character in a suit running around works well in an emerging market like this one,” said Craig Jackson, the Ho Chi Minh City-based general manager of Al Fresco’s Group Vietnam, which operates 40 restaurants in the country.
Vietnam has averaged economic growth of 6.6 percent this century quadrupling its per-capitaincome to $1,896 last year from $402 in 2000, according to International Monetary Fund estimates. The gain has given the country middle-income status, according to the World Bank.
Opening 100 McDonald’s within 10 years is “very do-able,” said Ralf Matthaes, the Ho Chi Minh City-based managing director for the Mekong region for market research company TNS Vietnam.
“Income levels and disposable income in Vietnam have been rising steadily,” said Matthaes. “They will target middle-income Vietnamese, which means household incomes of between five hundred and a thousand dollars a month, and they’ll do very well. Kids are number one. They’ll be selling to the kids’ birthday party market.”