There are three key challenges for international F&B brands in Vietnam but the market also offers opportunities for new entrants.
Mr. Ralf Matthaes, Managing Director of Infocus Consultants
Vietnamese consumers do not have the same tastes or preferences in terms of fast food offerings so international franchisers need to adapt and adopt their menus to meet the Vietnamese palate. This not only helps sales in terms of trial but should also send a message to consumers that the outlets care about the needs of Vietnamese consumers and create pull and don’t solely rely on marketing push.
I think that KFC has done a great job in terms of adapting their menu to Vietnamese tastes. Vietnamese people are heavy consumers of fish, pork, and, above all, chicken, so KFC in one way has an advantage over, say, hamburger outlets, because they sell a Vietnamese staple. They also adapted their menu to include Vietnamese spices and products. Most other fast food franchises have not been in market long enough to have truly had a serious impact in terms of an adopt / adapt strategy, so it’s a little hard to say who else has been very successful.
There are three key challenges to international food and beverage (F&B) brands in Vietnam. The first is pricing. Vietnamese fast food such as “pho” and “bun me” are very reasonably priced and hence within reach of almost all Vietnamese, regardless of income. Many international F&B outlets need to pay substantial franchising fees, high rents, and import duties, making their products much more expensive and limiting their offerings to the wealthier classes and or are only for special occasions.
The second challenge is speed of service. Although called fast food, typical waiting times at international fast food outlets is longer than at their Vietnamese counterparts, largely due to inexperienced staff. Finally, menu items and taste are often not in line with Vietnamese preferences, thus not creating the draw that they should. While timing and taste preference can easily be overcome, pricing will and can be solved by driving sales volumes.
The most essential element to success is four-fold. Product adaptation: ensure you research your product offering and consumer feedback and adopt and adapt to Vietnamese tastes. Location: ensure that you select locations that have high visibility but do not kill your potential profits due to high rental costs. Brand consistency: ensure that you enforce and implement the same brand offer, look, feel and taste across all locations. Too often franchisees cut corners and hence destroy the equity of the brand due to inconsistent delivery of products or services. Price: ensure price points meet the affordability of a larger target audience to assure success.
There are a lot of opportunities in Vietnam, especially among younger consumers and families. By understanding consumer wants, needs, desires and pocket books, franchising in the mid to long term can be very lucrative in the country.