Fast food giants flock to Vietnam, frightening domestic businesses

VietNamNet Bridge – The public attention these days has been concentrated on the opening of the first Starbucks shop in HCM City and the fellow-countryman, Dunkin’s Donuts. Will there be a new wave of foreign fast food giants flocking to Vietnam?

When opening the first Starbucks shop in Vietnam in early February, Starbucks stated that it would have hundreds of Starbucks shops throughout the country in the future, according to Bloomberg.

Meanwhile, the Wall Street Journal has reported that Dunkin’s Brands Group, the owner of Dunkin’s Donuts brand, has signed an agreement on a franchising deal to Vietnam Food & Beverage Company to develop a Dunkin’s Donut chain in Vietnam. It is expected that the first shop bearing the brand would be opened in HCM City.

It’s obvious that both Starbucks and Dunkin’s Donut are the giants in their field. The former has 18,200 shops throughout the world, while the latter has 10,000 shops in 32 countries and territories, including 1,450 shops in South East Asia.

Baskin-Robbins, an ice cream brand also belonging to Dunkin’s Brands, has been present in Vietnam since January 2012 already, which has had 13 shops here.

Dunkin’s announced its plan to march towards the Vietnamese market just a couple of weeks after the information about Starbucks flooded local newspapers.

The US AP newswire has commented that the US food chains have been trying to push up their growth by increasing their presence in Asia. Starbucks said China may exceed Canada to become its second biggest market, just to the US, in some more years.

Thoi bao Kinh te Vietnam quoted its sources as saying that in 2012, Starbucks’ share price increased by 17 percent, while Dunkin’s Brands increased by 33 percent.

In fact the landing of the foreign giants in Vietnam has been anticipated. Vietnam now has 8 million people classified as “urban middle-class consumers.” The figure is expected to increase to 44 million by 2020 and to 95 million by 2030.

The middle class consumers, as defined by Nielsen, are the households with the daily spending of $10-100 per capita per day. The rapid increase of the group of consumers would lead to the consumption boom in the future, which means that Vietnam is a fertile land for foreign food brands. McDonald’s has also revealed its plan to come to Vietnam.

The appearance of the foreign giants in Vietnam has raised a worry that they would, sooner or later, collapse the Vietnamese food chains, which are clearly inferior to foreign in both experience and finance capability.

Pham Viet Anh, President of Left Brain Connectors, in an article on VnExpress, wrote that in principle, the US Starbucks would not confront directly with Vietnamese Trung Nguyen, because they are in completely different areas. Starbucks targets urban youth with modern lifestyle and office workers, while Trung Nguyen targets “real coffee drinkers.”

However, the common thing that both Starbucks and Trung Nguyen would need is the retail premises. Since retail premises always play a very important role in doing business, they would have to compete fiercely to scramble for advantageous positions. In the completion, the rivals with weaker financial capability would be the losers.

The so called “Vietnamese coffee culture” may change more or less in the future with the appearance of big foreign brands like Starbucks, Gloria Jeans or Coffee Bean. Especially, the biggest changes would occur with the youth, who have got familiar to the western style. They go to café not to enjoy cups of coffee, but to enjoy the new way of relaxing and meeting friends.

However, Anh does not think that there is no room in the market for domestic brands. Foreign giants have their advantages, but they cannot cover all the market segments. Meanwhile, there always exist different groups of clients and different classes of consumers who have different demand and lifestyles.

Compiled by C. V