Many leading international food and beverage names, when entering the Vietnamese market, opt for Ho Chi Minh City as a place to do business over Hanoi and the north.
American coffee giant Starbucks has focused on developing the Ho Chi Minh City market since it opened its first store there in February 2013, and its fourth a year later. It was only in the third quarter of 2014 that Starbucks entered the northern market and launched three coffee shops in the capital city. This month, Starbucks opened its fourth store in Hanoi located on the ground floor of the Indochina Plaza in Cau Giay district.
Baskin Robbins, one of the world’s most well-known ice cream brands, signed a master franchise agreement with Blue Star Food to develop the brand in Vietnam, with its first three stores in the second city opening in early 2012. So far, the US ice cream franchise has 16 stores in Ho Chi Minh City, one in the Mekong Delta city of Can Tho, one in the southern province of Ba Ria-Vung Tau, and just one in Hanoi.
Tran Khanh Van, from the marketing office of Blue Star Food Corporation, told Vietnam Investment Review Newspaper (VIR) that Ho Chi Minh City was Baskin Robbins’ main target market in Vietnam as the second city has many ideal spaces, a suitable lifestyle and the ideal weather conditions for developing an ice cream business.
“Compared to Ho Chi Minh City, it is difficult to access suitable locations in Hanoi. Blue Star Food will open Baskin Robbins shops in the central cities of Danang and Nha Trang in 2014, and expects to have 30 stores by 2015. Of these stores, the majority will be located in the second city and some southern provinces, and only one or two more in Hanoi,” added Van.
McDonald’s, which opened its first Vietnamese restaurant in February, has opened three more since, and has even chosen other sites for further expansion. All these restaurants are located in Ho Chi Minh City. Meanwhile, there has been no sign to suggest that the US fast food giant intends to march north.
The first Dairy Queen ice cream shop opened in Ho Chi Minh City. QSR Vietnam, the company that brought the well-known brand to Vietnam, stated at the opening ceremony in January that it would open 60 shops in the next five years, mostly in the second city.
NYDC is an Asian café chain that has established itself in the second city centre over the last six years, with six branches in prime locations. However, it still has not opened any shops in Hanoi.
Commenting on this trend, Sean Ngo, managing director of Vietnam Franchises, a leading franchising and licensing consulting company with offices in Vietnam and Singapore, told VIR that many international retailers would prefer Ho Chi Minh City over Hanoi for several key reasons. It is more open to western and international brands, and to some extent embraces them. Also, it has more private businesses and is generally more open to entrepreneurs, plus it has a larger population of approximately 10 million people, and has the highest GDP per capita in the nation. Finally, it is also home to the majority of foreigners living and working in Vietnam, according to Ngo.
According to Ngo, while the major fast food players are currently in Vietnam, including KFC, Pizza Hut, Lotteria, Jollibee and the recent addition of brands such as Mc Donald’s, Texas Chicken, Burger King and Carl’s Jr, the vast majority of fast-food chains have yet to enter Vietnam. Notably, in markets like China, the Philippines, and South Korea, the number of franchises is in the thousands, yet Vietnam has only approximately 110 foreign franchises registered according to the Ministry of Industry and Trade as of October 2014.
For both Ho Chi Minh City and Hanoi, the amount of modern retail space is very limited compared to other countries in the region. Privately owned properties often present major challenges for international retailers as transactions are not transparent and property management is unprofessional, added Ngo.
Source Vietnam Investment Review.