Fast food chains are expanding rapidly in Vietnam following the country's entry into the WTO in 2007. KFC has been the most aggressive advertiser, increasing its ad spending nearly 18-fold from 2006 to take 98% of the fast food ad market share. With global chains like Burger King and Popeye's entering Vietnam, competition is set to intensify as they battle existing players like KFC, Jollibee, Lotteria, and Pizza Hut for prime locations in major cities. However, the fast food sector still faces challenges establishing franchises in Vietnam due to low incomes and an underdeveloped supply chain.
Fast food chains are expanding rapidly in Vietnam following the country's entry into the WTO in 2007. KFC has been the most aggressive advertiser, increasing its ad spending nearly 18-fold from 2006 to take 98% of the fast food ad market share. With global chains like Burger King and Popeye's entering Vietnam, competition is set to intensify as they battle existing players like KFC, Jollibee, Lotteria, and Pizza Hut for prime locations in major cities. However, the fast food sector still faces challenges establishing franchises in Vietnam due to low incomes and an underdeveloped supply chain.
Fast food chains are expanding rapidly in Vietnam following the country's entry into the WTO in 2007. KFC has been the most aggressive advertiser, increasing its ad spending nearly 18-fold from 2006 to take 98% of the fast food ad market share. With global chains like Burger King and Popeye's entering Vietnam, competition is set to intensify as they battle existing players like KFC, Jollibee, Lotteria, and Pizza Hut for prime locations in major cities. However, the fast food sector still faces challenges establishing franchises in Vietnam due to low incomes and an underdeveloped supply chain.
most localised content GRadio in China, page 24 ANALYSIS 5 Analyst comment Outlets of popular fast-food chains, such as KFC, Lotteria, Jollibee and BBQ Chicken, are located largely within Ho Chi Minh City and, increasingly, Hanoi. They target the younger population but also workers who desire an international culinary experience. Fast-food restaurants in Vietnam are positioned as a place for the consumer to appear stylish and relaxed in an air- conditioned setting. A weekend visit to a fast-food outlet such as KFC is also seen as a good family bonding activity. The localisation of menus at affordable prices is also aiding penetration. Examples of adaptation to the Vietnamese market are KFCs sup ga a chicken soup and chicken rice. Some consumers look to these internationally renowned food chains for assurance and safety due to their ISO and HACCP certifications amid continued concern about food standards and hygiene. With entry to the World Trade Organisation in 2007, Vietnam is under pressure to ease restrictions on retailers and food-service operators and allow them to set up shop without the necessity of a joint venture with a local partner. McDonalds, while keeping an eye on the growth potential of the Vietnamese market, seems content for now to focus on its expansion in the two titans India and China. With the current economic slowdown, McDonalds is unlikely to seek a Vietnamese presence until after 2010. When McDonalds does arrive in Vietnam, competition will increase several notches and push fast-food into second-tier cities such as Hai Phong, Da Nang and Bien Hoa. testify to the importance of supply chain. During the bird flu crisis, it was forced to switch to fish. But with the global fast-food industry training its sights on the market, Vietnam may soon be home to a far more modern fast food sector. Fastfood category spending (US$) Source: TNS 0 200,000 100,000 300,000 400,000 600,000 500,000 Television Press 2006 2007 2008 KFC adspend in Vietnam Source: TNS 0 20 40 60 100 80 2006 2007 2008 7% 93% 14% 98% 2% Television Press T he worlds fast-food giants are descending upon Viet- nam following the countrys ascension to the World Trade Organisation two years ago. International missions in Ho Chi Minh City (HCMC) and Hanoi are hosting matchmaking fairs in the hope of wedding foreign franchis- ers to local franchisees. These fast- food marriages may well bring an influx of new accounts to Viet- nams ad agencies. Vietnam is the most attractive retail destination on Earth, says Vikas Mehta, MD of Lowe World- wide in HCMC. Global retail players, including quick-service restaurants, are planning entry strategies. There will be explosive year-on-year growth. Two agencies Bates141 and BBDO are already working with the sectors pioneers. BBDO recently won KFC, which arrived in 1997 and quietly spread across HCMC before entering the more conservative capital Hanoi in May 2006. Bates141, meanwhile, works with Jollibee, which has been in the country since 1996 and pursuing a similar strategy. KFC, which parted ways with Ogilvy when selecting BBDO, is a big spender, completely dominat- ing Vietnams fast-food advertis- ing. In anticipation of post-WTO competition, KFC expanded from 17 stores in 2006 to its current 55, supporting them with Vietnams first fast-food ad campaign. The blitz kicked off in 2006 with KFC airing TVCs a fast-food first on HCMCs HTV7 and HTV9 and Hanois VTV1, VTV3 and HN1. Last year,TV accounted for 98 per cent of KFCs total media outlay of US$514,000, which like- wise represented a 98 per cent share of all Vietnams fast-food ad- vertising of $526,000. Low as this sum is compared to regional ad- With the countrys entry into the WTO, global fast-food franchises are scrambling for a piece of the pie. By Glenn Smith Vietnam braces itself for a fast-food explosion SECTOR INSIGHT I| |\ ||It t|M||I| t|st| |s I| |sI|t| ||tIs\ | I| s|| MediaWorks sold out in 2005, 2006, 2007 and 2008 Contact Evelina Lye +65 6579 0539 or email evelina.lye@haymarketasia.com III1 jr|| I1 [ Is ta||s| s||, Is||s1 Yvonne Kok Research manager, Euromonitor Singapore KFC...been in Vietnam since 1997 Pizza Hut...targeting top locations spend levels, it marks a 17.5-fold jump from 2006. The absolute spends are negligible compared to mobile service, infant nutrition, haircare or other top 20 cate- gories, says Lowes Mehta. But we are optimistic. Global franchises soon to open include Burger King, Popeyes, Round Table Pizza, Melting Pot, Carls Jr from the US, and Bread Talk, Cavana and Koufu from Sin- gapore, to list a few appearing in HCMCs business press. Aside from KFC and Jollibee, they will battle Lotteria and Pizza Hut, both already in-country and targeting the best real estate at HCMC and Hanois malls. Euromonitor counted 6,579 fast- food outlets, with sales of VND5.5 trillion last year. The vast majority are local operations.But these are a small fraction of the 528,812 food- service outlets the majority being owner-operated food stalls that generated VND411 trillion. Vietnamese entrepreneurs have experimented with franchising. Two local success stories Trung Nguyen Coffee and Pho 24 have matured enough to venture off- shore. At home, Trung Nguyen boasts more than 1,000 outlets.Pho 24, founded by Australian-educat- ed Ly Quy Trung, has 65 locations and adheres to the franchise for- mula based on four pillars sys- tem, brand name, product and trade secret. But emulating this model is difficult in Vietnam, a country with a per capita income of $832. Potential franchisees lack start-up funds, and homegrown franchises often license their busi- ness piecemeal as a result. Despite their deep pockets, glob- al franchises will encounter prob- lems. The whole notion of fast food already exists in Vietnam,and it is readily available on the street, says Alison Dexter, research direc- tor at TNS Vietnam. McDonalds absence in Vietnam is conspicuous. The country is the worlds 12th most populous, and McDonalds usually moves in step with rivals KFC and Pizza Hut.Yet Liam Jeory, regional VP of corpo- rate relations at McDonalds, in- sists: We have no plans currently to set up in Vietnam. One challenge is the low level of development of supply-chain in- frastructure, and the lack of locally produced ingredients. KFC can Got a view? Email feedback@media.asia