When fast food is localized

Date AddedAugust 22, 2009 10:50:43 PM

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VietNamNet Bridge - It has never been so easy to spot a fast-food store in HCMC like now, from KFC to Lotteria or Jollibee, at numerous corners in the city. These stores are increasingly frequented by young people, especially children who will insist on having easy-going meals treated by their fond parents. To better cater to these customers, many stores have managed to localize ingredients as a way to attract more patrons.
However, while international brands have been so quick to penetrate the market to close in on the changing tastes of the young, local companies for the most part have been too slow to act on fast food. And so, they are left out in the race.
Fast-food stores are now making their march into every commercial venues, from groceries, cell phone stores and coffee shops located at junctions or roundabouts in some main districts to big supermarkets or entertainment parks or luxury trade facilities.
Foreign players in full gear
Having spent more than 10 years since setting its foothold in Vietnam, the global food chain Jollibee under the Philippine-based Jollibee Foods Corporation (JFC) has prepared itself well enough for expansion, and the scheme is being carried out right in 2009.
Dennis Flore, JFC's Jollibee vice president for international operations, sees the time now as a good opportunity to expand operations, having set up ten stores in the country so far. Flore says that JFC will open more Jollibee fast food shop's in many big cities in Vietnam, with four planned for this year, having come to better understanding of Vietnam's culture.
"When choosing a mainstream market like Vietnam, Jollibee analyzes the culture of the local consumers, zeroing in on their specific eating habits," he says.
Flore remarks that both the Filipinos and Vietnamese people are family-oriented and enjoy family meals as bonding moments. "We are optimistic with the positive response of the market where Jollibee has already established its presence, and we will continue to move forward with expanding our international store network which we envision would make a major contribution to our revenue," Flore confides.
Similarly, KFC, a brand of Yum! Brands Inc., has been known in Vietnam for over 10 years, and this food store chain can be seen one of the strongest foreign players now given its widespread network. There are currently 68 KFC fast-food restaurants nationwide regularly offering new dishes suitable for the taste of Vietnamese customers. HCMC is home to the largest number of KFC outlets with more than 40 units, followed by Hanoi, Vung Tau, Dong Nai, Haiphong and Can Tho.
Yum! has four restaurant brands, KFC, Long John Silver's, Pizza Hut and Taco Bell.
All foreign-owned or foreign-franchised fast-food stores in Vietnam now see Vietnamese people as their target customers.
Says Truong Ham Liem, marketing manager of Vietnam Lotteria Co., a subsidiary of Korea's Lotte Group operating the Lotteria fast food chain in Vietnam, "We mainly target local teenagers, but it is a fact that in past years our main customers were young people and white-collar workers." Liem says the fast-food business is thriving in Vietnam regardless of the global economic crisis, adding rice now is an important ingredient in the menu to attract locals.
"Lotteria focuses on developing products and services continuously to serve customers, especially fast-food rice" Liem said.
Some foreign fast food companies said that previously, Vietnamese rice was not sold at fast food restaurants. However, rice has been added to their menus because 90% of the customers are Vietnamese and rice is the dish which can bring the highest turnover. Other dishes have also been 'localized' to suit local tastes.
Flore of Jollibee says that the mast popular choice at Jollibee's is rice with chicken, which brings 60% of Jollibee's total turnover.
According to foreign players, Vietnam is an emerging market for fast-food development compared with other markets in Asia.
These players also have plans to enter deeper into the local market in order to further tap the great potential of the market but also to prepare for the harsher competition ahead when other, international fast-food brands like McDonald's or Burger King enter the country. However, they say Vietnam has great potential, so there is room for other brands.
Lotteria will open more stores this year, increasing their number to 80, in new markets including Hue, Quang Nam and Ha Dong. "Compared with other markets, Lotteria in Vietnam has seen the fastest development," Liem says. "We are also asking the Government to have franchises in the country."
KFC is not out of the race with plans to double its Vietnam chain to 100 units next year. And it also targets to widen the network to not only commercial buildings but also residential areas.
These international brands are optimistic with the positive response of the markets where they have already established themselves and they will continue to expand their store networks by working closely with local operators of commercial facilities.
Saigon Co-op, owner of Co.opMart Supermarket chain, and other distributors say that whenever they open new stores in HCMC and other cities, foreign fast food owners will immediately follow their step by leasing space for their fast food stores.
Locals act slowly
Though the fast food market looks like a delicious cake, Vietnamese enterprises are still without their piece. According to an estimate from the Ministry of Trade and Industry, in 2009, total revenue of the fast food sector in Vietnam will reach some VND500 billion, up 35% to 40% over last year, despite the economic difficulties. That will be a market big enough for more players.
In fact, Vietnam once had some fast food brand names, but they faded away because the investors could not understand the taste of customers.
Experts say that it is difficult to build up and develop brand names in the field of food processing, as investors must invest big money on labor, materials and other expenses.
Local enterprises also agree that the difficulties in finding suitable premises and workers do not allow them to make heavy start-up investments. Therefore, it is not easy to develop a brand name quickly that is strong enough to compete with international brand names.
Kinh Do Group seems to be one of the few domestic companies with the potential to develop a successful fast food chain.
Kinh Do Saigon Bakery Corp., owner of Kinh Do Bakery food store chain, under Kinh Do Group, recently opened its first bakery & cafe outlet where customers can sit and relax in an air-conditioned space with Wifi and television, available. The K-Do Bakery& Cafe outlet follows the fast-food model and is also targeting the young.
Nguyen Duy Dang, franchise and marketing manager of Kinh Do Saigon Bakery Corp., says the company also sells sandwiches, pizza, hamburgers and drinks and will open three more such outlets in downtown HCMC this year.
Duc Phat Bakery outlets have saved a corner to serve pizzas, hamburgers, rice and drinks. A Duc Phat Bakery store manager in District 1 says that since adding the products and services, more white-collar workers have been coming in.
In HCMC, many private companies in recent years have tried to enter the fast-food sector, such as Oroll or Ta Bread, but they have all lacked capital, facilities and experience.
Despite local companies' effort, foreign players simply sweep aside any potential threat from them in the competition.
Liem from lotteria says that Kinh Do and Duc Phat are still bakery shops despite their efforts to enter the fast food market, so the fast food operators have not seen them as competitors.
Representatives from other fast food companies comment that the move of private enterprises into the fast food market in Vietnam is good for the country, but that they need more time and a professional development plan, if a real competition can take place in the future.
VietNamNet/SGT