Mr. Do Thanh Nam, CEO of Win-Win Strategy Consulting, spoke with VET about the nature of and prospects for the food and beverage sector in Vietnam.
How do you view Vietnam’s food and beverages (F&B) market?
There is much activities in F&B in Vietnam, with the presence of brands such as Banh Xeo, Mon Hue, Kichi Kichi, Tokyo Deli, Sushi Bar, Tour Les Jours, Paris Baguette, BreadTalk, Le Tokyo Baum, Starbucks, McDonald’s, Gloria Jean’s Coffee, The Coffee Bean & Tea Leaf, Passio, Urban Station, and Dunkin’ Donuts. Foreign brands dominate the premium segment.
Vietnam has a large population with an ancient culture and cuisine, marked by three regions and 54 ethnic minority groups. Foreign investors also bring their culture and cuisine to the country, and these factors taken together result in diverse cuisine and increase the demand for food and culture.
Vietnamese enterprises often succeed with one or two restaurants but they find difficulties in standardizing product and service quality, and in their management model, control, and marketing strategies, while also lacking the funds to operate on a large scale. This is why many Vietnamese enterprises cooperate with foreign investors to improve their weaknesses and penetrate into the market.
Gross profit per unit of product and the return on investment are relatively higher than in other sectors, which attracts foreign investors. They also consider other factors when deciding to invest, however, including the willingness of owners to cooperate with investors, business efficiency, the capacity to expand, management models, and information transparency.
What are the popular segments for foreign investors?
Two trends can be seen in the market today. The premium segment has high risk and high return, and foreign investors are geared towards this segment with luxury products, such as spirits, wine and dark beer, which need large capital. Brands such as Starbuck and Gloria Jean’s Coffee aim to serve customers earning high incomes and their investment costs for securing a good location are very high. Meanwhile, Vietnamese investors with proper staff training, strong networks, and good locations also target this segment. The remaining domestic investors often pursue the middle segment, aimed at the mass market. The F&B market in Vietnam has great potential to grow and there are many different criteria in determining market segments. This shows that there are a lot of niche markets.
Vietnamese often prefer brands based on recommendations handed down over generations. What limitations do modern restaurant chains face in building new brands in Vietnam and what strategies do they adopt?
Such brands are popular because they have a special flavor and have a number of loyal customers. This is a special advantage, because the tastes of previous generations in a family become familiar and affect the habits and tastes of subsequent generations. Traditional brands, however, do not invest sufficiently in food safety, management, and control, and risks may appear at anytime. They are also often dependent upon a few individuals and chefs, without any quality standardization, so expansion is problematic.
Vietnam’s young population more easily accepts new trends. The mixing of cultures between regions and countries and the development of tourism also contribute to younger people trying a range of new food items. In recent times many Japanese and South Korean restaurants have successfully opened in Vietnam. The success of a restaurant does not only depend on its food, however, with other factors such a space, services and convenience being important. Investors can leverage this to build strong brands in Vietnam.
What are your expectations for Vietnam’s F&B market over the next three years?
Vietnam is one of the most well-developed economies in Asia, with 90 million inhabitants, mostly young, a rapid level of urbanization, and rising incomes, while it is moving towards integration and many people now travel. This has created higher consumption in the country so the F&B market has significant potential.
Many new investors arrive, and foreign partners with a range of strengths will become more involved. Competition will be fiercer as tariffs fall or are eliminated on imported raw materials. Investors must be fully prepared, however, in factors such as meeting the tastes of its selected segment, the quality of its products and services, its management and control models, and its investment and location.