Taking to the street

2021-01-25_152241
Food trucks and carts are now a common sight along Vietnam’s main  thoroughfares but continued success will require some fine-tuning.
Coffee lovers have been amazed by the Highlands Coffee carts roaming the streets of Ho Chi Minh City, with the famous coffee brand being normally associated with large stores at great locations in big cities. A raft of other major food and beverage (F&B) brands, such as Vinacafe, Trung Nguyen, and Domino’s Pizza, have also been trying this different way of boosting sales and winning over new customers, especially in the context of the F&B market changing due to Covid-19.

Gaining in popularity 

As Vietnam’s largest coffee chain in terms of revenue and a leader in the mid and high- end segment of the retail coffee market, High- lands Coffee first rolled out its coffee carts, or trolleys, in front of large buildings in Ho Chi Minh City last year. “Highlands Coffee is a great example of a successful F&B chain introducing mobile trolleys to cater to their target market,” said Mr. Sean T. Ngo, CEO of VF Franchise Consulting.
Meanwhile, though not owning any outlets, instant coffee producer Vinacafe has also put trolleys on streets. Ong Bau Café, with over 200 stores nationwide, has also found space outside of office blocks and in crowded urban areas in Ho Chi Minh City.
In a similar move, another leading Viet- namese coffee chain, Trung Nguyen, which traditionally operates mid and high-end coffee shops, launched E-Coffee, a small-scale coffee shop franchise targeting take-away customers. “This model, which costs around one-eighth of a normal Trung Nguyen outlet, offers coffee at lower prices and targets low and medium- income buyers who are normally patrons of traditional Vietnamese coffee shops,” a rep- resentative from the Trung Nguyen Group was quoted as saying.
Trung Nguyen Coffee has adopted a similar strategy with its Trung Nguyen Legend and Trung Nguyen traditional, serving premium and mid-scale customer segments, according to Dr. Nguyen Anh Thu, Lecturer of the Digital Marketing program at RMIT Vietnam. “With E-Coffee, Trung Nguyen prefers to use an endorsed brand strategy in order to not dilute the values of Trung Nguyen Legend or Trung Nguyen traditional,” she said. “E- Coffee is a convenient model focusing on dynamic young segments who buy coffee for style at convenient and affordable prices.”
Other fast-food chains have also been active in diversifying their sales channels by expanding into mobile catering. Famous Japanese-style pizza chain Pizza 4Ps has a pizza truck stationed in front of the Oxygen Shopping Mall in Ho Chi Minh City’s District 2. Pizza Hut, a subsidiary of Yum! Brands, has catered to different segments in running different formats: family-style dine-in loca- tions, storefront delivery, and carry-out loca- tions, as well as hybrid locations. Different formats serve different consumer needs, with dine-in locations serving families and groups and others dynamic young segments who prefer convenience and quick service.

Now a trend

Food trucks have become a popular way of revitalizing the tired local dining scene and transforming non-descript areas into vibrant destinations. “Much of this is down to creative would-be restauranteurs with big ideas and small budgets, who see food trucks as a way to test their dishes, without the traditional overheads of a leased restaurant, until they’re ready to make the move,” Ms. Trang Bui, Head of Markets at JLL Vietnam, told VET.
Mr. Ngo, meanwhile, said land prices and rentals are not only expensive but are increas- ing by the day, which makes it even more difficult for many brands to be profitable. “By developing their own mobile stores, they are able to lower their investment and rental costs while at the same time being able to ‘go to consumers’ instead of making consumers go to them,” he said. “This shift in serving customers will continue to thrive not only during these challenging times.”
Street food has always been an important part of Vietnamese culture. As the appetite for trying new dishes grows and consumers actively seek out new dining experiences, Ms. Trang observed that the traditional lines between eating out in restaurants or tucking into street food are blurring. Whether they specialize in luxury noodles, artisan pizza, or tacos with a twist, large and established chains are looking to kiosks and street food trolleys as a way to experiment with take-away sales without having to worry about hiring staff and space. It all adds up to a more exciting local food scene.
Today’s food trucks offer high-quality ingredients and often champion local produce. As they’ve become a familiar sight on major streets, in shopping malls, and at festivals, they’ve attracted a new generation of food- loving consumers and their success has spurred others to follow suit. JLL predicts this will be a new trend for Vietnam’s F&B industry and follow in the footsteps of the regional market. To compete in the long run, however, mobile F&B sellers need to contin- uously upgrade product quality, with a focus on food safety, and take advantage of the flexibility of the model to generate new ideas to attract and retain customers.
The F&B market has changed dramatically due to Covid-19, according to Ms. Thu from RMIT. “Full-service F&B businesses have been facing an uncertain future,” she said. “F&B services were asked to shut down once or twice due to social distancing in different cities around Vietnam. Moreover, many busi- nesses, both in production and services, went bankrupt or closed or reduced the scope of their operations, resulting in people working fewer hours or losing their job. High rentals and high fixed cost structures make it hard for full-service F&B to cope with uncertainty and declining demand.”
Expanding barriers
Street F&B is now an integral part of the economy and is flexible enough to cope with uncertainty and meet increasing demand. With low barriers for entry and increasing consumer demand for affordability and convenience, F&B brands are taking to the street to survive and to expand. With existing resources and F&B expertise, it seems easy enough for them to do so. The question, however, is how to approach the right customers via strategic segmentation, targeting, and positioning. If not, the street F&B model will only be a fad.
2021-01-25_153145
To access consumers, Ms. Thu recom- mended street F&B models focus on values such as convenience, fast service, and afford- able prices. A limited menu is needed, with a focus on menu items with inherent low costs that are easy to make but which are appealing to consumers buying for ‘stylish’ convenience at a good price. To excel, companies should focus on creating brand identity and build a “high-profile” niche in the convenience seg- ment. Moreover, location is key.
Regarding the disadvantages, she empha- sized that companies may have to spread resources across different channels and for- mats. They have to introduce standardization and cope with service standard variability. If not managed properly, the new offering may dilute the original brand. This is why major players prefer to create a new endorsed brand, like Trung Nguyen’s E-Coffee.
“More food brands are now keen to build a name in the street food market,” Ms. Trang said. “Competition between truck concepts shows no sign of abating. It’s a time of greater choice, in both setting and menu. Longer- term, however, their future is less secure than traditional restaurants, and more could be done to safeguard both the small traders working behind the scenes and the vibrant food scenes they create.”
Serving only customers wearing face masks and ensuring social distancing is followed remain prudent practices for all F&B estab- lishments, mobile or not, according to Mr. Ngo. “Food hygiene is critical to ensuring customers feel that the food is safely prepared and safe to eat,” he said. “Employees of food trucks and trolleys must wear face masks and gloves at all times, and be seen to be washing their hands regularly. Many of these are already considered best practices in the F&B world.”
As appealing as the comfort of covered indoor food halls may be, food truck operators value flexibility, according to Ms. Trang. For prospective restaurateurs with low budgets, the model is a way to test the public’s reaction to their offerings. Food carts and trolleys are short-term solutions for F&B chains to venture into new markets, increase brand awareness, and find potential customers looking for something new.
32-33#314_Business_Food trucks_layout
“They also help reduce rental and labor costs, two major burdens for food and beverage businesses, and address the time problem for busy people, who can now quickly get a coffee or a hot meal without having to travel far,” she said. “But they could lose their pop- ularity during the wet season, and so should offer delivery or tie up with online food delivery services to provide consumers with more options.” .
Source: Business Food Trucks – Vietnam Economic Times

Are Education Franchises Profitable?

COVID-19 and The Future of Business

HSBC: Two scenarios for Viet Nam’s economy in 2021