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Fast-Food Chains Struggling in Vietnam

Aug 13, 2024

Fast-Food Chains in Vietnam: Challenges and Perspectives

Overview

  • Fast-food restaurants like Burger King and McDonald's are globally dominant.
    • Burger King: 16,000 locations in over 100 countries.
    • McDonald's: Over 36,000 locations.
  • Fast food industry is over half a trillion dollar business annually.
  • Unique case: Difficulty in penetrating the Vietnamese market.

Initial Hype and Current Situation

  • McDonald’s opened in Vietnam in 2014 with significant initial interest.
    • Now only 17 stores.
  • Burger King opened in 2011.
    • By 2018, only 13 stores.
  • Contrast with other Asian countries:
    • Success in China and Japan.
    • McDonald’s: Thousands of outlets in China and Japan.
    • Burger King: 98 outlets in Japan by last year.
  • Planned expansion not met.
    • McDonald’s: Planned 100 stores; only 17 opened.
    • Burger King: Planned 60 stores by 2016; only 13 opened by 2018.

Reasons for Challenges

Competition with Local Food

  • Vietnamese food readily available from street vendors, often faster and cheaper.
    • Street vendors offer cheaper alternatives like banh mi sandwiches.
  • Vietnamese food service ecosystem:
    • Over 540,000 outlets.
    • Majority are local vendors and kiosks.
    • 78% of food expenditure on local vendors.

Cultural and Economic Factors

  • History of severed US-Vietnam diplomatic relations affected market entry.
    • Diplomatic ties resumed only in 1995.
  • Changes in the food service environment:
    • Many storefronts double as homes and food vendors.

Price Sensitivity

  • Fast-food is costly compared to local options.
    • KFC, McDonald's, and Burger King seen as premium.
    • Local vendors offer more affordable meals.

Eating Habits

  • Vietnamese dining often involves shared, family-style meals.
    • Burgers are not conducive to this style.

Successful Competitors

  • KFC and Pizza Hut have adapted better.
    • KFC: 130 stores in 21 cities.
    • Menu adaptations include KFC chicken rice and shrimp burger.
    • KFC and Pizza Hut have a larger share of the market.

Efforts to Adapt

  • McDonald’s and Burger King introducing localized menu items.
    • Ex: Grilled pork rice with egg at McDonald’s.
    • Fish rice combo at Burger King.
  • Challenges remain due to market saturation with local foods.

Conclusion

  • Fast food chains face a difficult road ahead in Vietnam.
    • Decline in fast-food popularity.
    • Need for deeper cultural integration and competitive pricing strategies.

Full transcript