Not lovin’ it: the fast food failure

14:00 | 02/11/2018
Fast food giants such as McDonald’s and Burger King have dominated the sector globally for decades, but unique cuisine culture and uncommon spending behaviours means Vietnam is one of the few countries they are struggling to crack. Van Anh reports.
not lovin it the fast food failure
The time it takes to order Vietnamese street food is faster than heading into Burger King, negating their entire premise

A staple in many countries across the world thanks to the appeal of being quick and effortless to take away, foreign fast food brands are failing to grab a foothold in the Vietnamese market.

At the launch of its first restaurant in Vietnam in 2014, McDonald’s expected to reach 100 stores within a decade. However, after four years it only has 16 stores across the country. In a similar vein, Burger King has opened only 11 stores over seven years of operations, despite an initial target of 60 stores across Vietnam by 2017.

According to market researcher Kantar WorldPanel, western fast food does not suit the palates of the majority of Asian people. However this does not seem to apply to China and Japan. Fast food joints are booming there as they do elsewhere globally - Burger King boasts 700 stores in China as of 2016 and 98 outlets in Japan currently; McDonald’s has thus far opened 2,500 stores in China and 2,975 Japanese branches. Thailand, another nearby nation, is witnessing fast food expansion at a fair rate. So what makes Vietnam so unique, despite the many traits it shares with other Asian countries?

Local street food reigns supreme

Local brand expert Hoang Tung said that the appetite for foreign fast food products has never been received well, despite initially entering the market long ago. “Vietnamese people basically prefer banh mi (Vietnamese sandwiches) to hamburgers partly due to the reasonable price. This is consequently the main reason behind fast food chains showing signs of weak growth,” Tung added.

The sector in the US is popular directly because of the appeal of being quick and easy to take away. However, Vietnamese people can already easily find the same thing at street vendors, purchasing a bowl of pho noodles or a banh mi among other items. Incidentally, the time it takes to order and receive Vietnamese-style street dishes is even faster than at a branch of McDonald’s or Burger King, which negates their entire premise and leaves them with little value in Vietnam.

Locals and tourists alike commonly wait 5-7 minutes at a street store, while the time to get a hamburger or chicken wings generally falls around the 10-15 minute mark.

Additionally, the local motorbike culture also impacts hugely on the popularity of street food. Motorbike riders can easily pull over to the sidewalk to buy a banh mi or a pack of xoi (steam sticky rice) from street vendors, pay and receive the item, and ride off without ever leaving their vehicle of choice. Purchasing a burger from a fast food chain will usually involve finding parking space and potential fees. Thus, fast food branches will also lose the speed contest with local vendors.

Furthermore, the standard price of a banh mi, xoi or pho is also one of the reasons behind the slowing of fast food store expansion in Vietnam. While the average price for one hamburger comes to VND50,000-70,000 ($2.1-3), the average price of banh mi or xoi is less than VND20,000 ($0.87).

According to the Vietnam General Office of Statistics’ latest survey on local people’s living standards in 2016, which is performed every two years, the local average spending on food was VND969,000 ($42) per month, equalling 13-19 hamburgers. In terms of being efficient with money, local street food is still the best option for people living and travelling in Vietnam.

General director of Pathfinder Consultant Tran Anh Tuan said that in other countries, fast foods are basic and pleasant dishes, but in Vietnam they are seen as middle- and high-end dishes, leading to their prices sitting high against local average income.

Bucking the trend compared to neighbouring nations

Vietnam is not the only country famous for street food. China, Thailand, and Japan are well-known for local dishes, but they still entertain room for fast food development. The market research company Statista shown that the total sales of fast food restaurants in China will reach $180 billion by 2018. And the National Centre for Biotechnology Information reported that the annual average growth rate in China is 13 per cent.

At a report by the Agriculture and Agri-Food Canada’s about Thailand, fast food outlets have seen the most growth in number, are expected to continue expansion. In the 2012-2017 period, the total sales of outlets in Thailand increased from $2.5 billion to $4 billion, respectively.

It’s clear that the difference in cuisine culture between Vietnam and similar countries has once again been raised. Specifically, the definition of street food elsewhere is just that – quick bites on the street which cannot replace main dishes.

However, street food in Vietnam is routinely used as a replacement for traditional main dishes for local people. Eating banh mi or xoi for breakfast is quite popular in Vietnam.

29-year-old Minh Khoa, from Hanoi’s Hai Ba Trung district, said, “In addition to banh mi and pho, Vietnamese also have access to banh cuon (rolled rice pancake), banh bao (dumpling), banh gio (meat pie) and more, which are both cheap and nourishing.”

24-year-old Thanh Thien, from Ho Chi Minh City, said, “I eat banh mi or xoi for breakfast every day because my job is busy, so those are the best options for my meals.”

Differences in spending behaviours also impact on the business of fast food brands in the local market. With 90 per cent of daily spending carried out by cash only, traditional food kiosks and street vendors are a great convenience for Vietnamese people. As fact, Vietnamese people spend the majority of their income on food, including 78 per cent on street food and just one per cent on fast food.

Along with street food holding the upper hand in the local food and beverage market, Vietnamese cuisine culture and spending behaviours may retain obstacles on the likes of McDonald’s and Burger King in Vietnam in the future.

To increase the presence of their products in the market, fast food brands may need to locate more appropriate strategies to target on the real demands of local consumers, such as the combination of diversified dishes and food safety, which are still seen as a big issue at street vendors and food kiosks.

Based on MasterCMS Ultimate Edition Ver 2.8 2018