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Vietnam’s fast food market: not an opportunity for foreign investors

Vietnam’s fast food market: not an opportunity for foreign investors

Thursday 09, 12 2021
If KFC, Pizza Hut or McDonald's are called fast food, the stalls of bread, sticky rice, and other food vendors present throughout the streets of Vietnam may be named "flash” food. However, this is just one among dozens of reasons why fast food has not experienced good growth in Vietnam like it does in many other countries in the world.

Overview of Vietnam’s fast food market

The global fast food industry is worth up to 651 billion USD, and has gained success from the US, Europe to Asia. However, in the Vietnamese market, which seems to be very potential, this industry has not flourished as expected.

According to Statista, McDonald's was the most valuable fast food brand in the world in 2018 with more than 126 billion USD, far ahead of Starbucks with 44.5 billion USD. Followed by Subway ($18.8 billion), KFC ($15.1 billion), Domino's Pizza ($7.4 billion), Pizza Hut ($7.3 billion) and Burger King ($6.6 billion).

Mc donal

Of these brands, only KFC in the fried chicken segment and Pizza Hut in the pizza segment are successful in Vietnam. In contrast, McDonald's or Burger King have long struggled in this fierce competition.

Despite being a global leader in the field, even in Asian countries like China or Japan with thousands of stores, so far in Vietnam, McDonald's has opened only 20 stores and Burger King 13 stores, far behind its initial ambitions.

KFC and Lotteria, which hold most of the market share, have showed signs of slowing down. In 2018, KFC Vietnam recorded a revenue of nearly 1,480 billion VND, an increase of only 7.5% compared to 2017. A year earlier, the revenue growth rate reached more than 18.3%. Lotteria Vietnam also faced a similar situation when its revenue in 2018 increased by just over 2%, compared to 17% a year earlier.

KFC and Lotteria

Meanwhile, the food service industry in Vietnam has expanded enormously compared to 10 years ago. Currently, there are about 540,000 stores, about 430,000 of which are street vendors, 80,000 are eat-in restaurants, but only about 7,000 are fast food restaurants. This shows how modest the fast food industry is.

Moreover, it is caculated that Vietnamese people spend a large proportion of their earnings on food every day, 78% of which goes directly to street food vendors and only 1% flows into fast food restaurants.

Why are the world's famous fast food chains growing slowly in Vietnam?

First of all, street food stalls in Vietnam have quite fully met all aspects of eating: not only delicious, nutritious, cheap but also served very quickly. The service provided by street restaurants can be 1.5 to 2 times faster than that in fast food restaurants.

Although McDonald's possesses technology that can speed up service, it is nothing compared to waiters and waitresses in Vietnamese “flash” food restaurants. The service speed of fast food restaurants is measured in minutes, while that of street eateries in Vietnam can be measured in seconds.

In addition, it can be observed that the majority of customers of fast food restaurants in Vietnam are young people who often come to celebrate birthdays, holidays, or anniversaries, etc. This has profoundly influenced and changed the concept of fast food.

The habit of having conversation while eating of Vietnamese people might also be a contributor to the slow growth of fast food. The vast majority of Westerners avoid talking while eating, so their fast food restaurants serve separate portions which are completely independent of each other. In contrast, Vietnamese people prefer a more intimate atmosphere to chat throughout the meal. Therefore, most fast food restaunrants have failed to fullfill this demand.

The habit

The inadequacy in prices is also a valid reason why Vietnamese people do not like fast food restaurants. A piece of fried chicken or hamburger of KFC or McDonald's is about 40,000 VND or more, much higher than street food such as vermicelli, pho, or banh mi.

With the above-mentioned reasons, it is not exagerating to say that there are not many opportunities for new foreign investors in Vietnam’s fast food industry.

Source: statista, doanhnhan.vn

Compiled by VietnamCredit

 

 

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