McDonald’s Opens in Vietnam, Bringing Big Mac to Fans of Banh Mi

McDonald’s Opens in Vietnam, Bringing Big Mac to Fans of Banh Mi

By MIKE IVESFEB. 7, 2014

HANOI, Vietnam — When Nguyen Hoang Anh and Nguyen Thi My Hao started dating, the 23-year-olds agreed to disagree about food: Mr. Anh adores Western-style fast food, but Ms. Hao mainly eats pho, a popular noodle soup, and other northern Vietnamese foods she has loved since childhood.

“He dragged me here,” Ms. Hao, a secretary at a Hanoi university, said recently at a new Burger King restaurant here.

But though she does not eat fast food almost every day like her boyfriend, Ms. Hao said she was not entirely opposed to it once in a while.

“Sometimes I want to try something different,” she said, before taking a bite of her Whopper hamburger.

Attitudes like hers — and appetites like her boyfriend’s — have made Vietnam attractive for American fast-food brands, which view the country as one of Asia’s last consumer markets with significant untapped potential, according to industry analysts.

The latest entrant is McDonald’s, the fast-food giant, which has restaurants in more than 100 countries and will open its first Vietnam location on Saturday in downtown Ho Chi Minh City.

Vietnam has a surging middle class, and most of its 90 million citizens were born after the Vietnam War ended, in 1975. Many young Vietnamese are insatiably curious about foreign cuisine and culture, like kebabs and K-pop, and the McDonald’s opening has been widely discussed on Vietnamese websites in recent weeks.

KFC opened in Vietnam in 1997, two years after the country normalized relations with the United States. But not until 2010 did American brands begin to enter Vietnam’s market in earnest. They still trail Asian brands by a large margin. American-style Asian fast-food chains, like Lotteria from South Korea and Jollibee from the Philippines, have slowly introduced restaurants in a few major cities. Two Vietnamese coffee chains — Highlands Coffee and Trung Nguyen — have also made a splash in a market dominated by mom-and-pop cafes.

It was inevitable, consultants said, that more American brands would enter the country once the economics looked more appealing. Vietnam’s per capita income rose to $1,550 in 2012 from $1,000 in 2008, according to World Bank estimates, and inflation has stabilized.

“It’s got a big population, the government is making it easier to enter,” said Ralf Matthaes, managing director for Vietnam and the Mekong region at TNS Global, a British market-research consulting firm, “and Vietnamese are now having that basic income level where there is not just sustainability but genuine opportunity for growth and profits.”

McDonald’s waited a long time to open in Vietnam, given its global brand recognition and likely appeal to young Vietnamese consumers. When it did, it tagged Henry Nguyen, the son-in-law of Prime Minister Nguyen Tan Dung, as its local franchisee.

Bill Hayton, a former foreign correspondent in Vietnam and the author of “Vietnam: Rising Dragon,” a 2010 book that explored links between money and power in the one-party state, said: “Laws and regulations are often rather vaguely written, giving officials plenty of opportunity to delay or assist an investor’s plans, but Mr. Nguyen has been able to negotiate these difficulties with ease. Having the second-most-powerful man in the country as father-in-law is like having a golden ticket and get-out-jail-free card all rolled into one.”

A representative for McDonald’s declined requests for a meeting or telephone interview with Mr. Nguyen, a Vietnamese-American business tycoon who moved to the United States as a child and returned with degrees from Harvard and Northwestern University to run the Vietnam office of IDG Ventures, a network of venture capital funds based in San Francisco.

In a statement, Liam Jeory, a McDonald’s vice president for corporate relations, wrote: “The contract with Henry Nguyen as developmental licensee is the result of a rigorous selection process that began years ago. Nguyen brings a strong passion for the brand that he developed while working as a part-time crew member for McDonald’s as a young student in the United States.”

Food industry experts say McDonald’s and other American fast-food brands typically market themselves in Asia as a lifestyle choice for the middle class, rather than as an inexpensive option for the poor, and that their Vietnam strategy is no exception.

Meals at a Burger King on Lo Duc Street in Hanoi were selling the other day for 65,000 dong ($3) — twice what Nguyen Thi Hang Nga charges for a bowl of pho in her restaurant across the street, where patrons sit on blue plastic stools.

“That food may be tasty, but it’s expensive for normal Vietnamese,” Ms. Nga said of the American company’s offerings.

A 2012 report by the market forecaster Euromonitor International predicted that Vietnam’s food service industry would grow to $670 million in 2015, from $383 million in 2010, according to Lucia Vancura of Promar Consulting, a firm in Tokyo that advises on food and agriculture. However, she said, the exact parameters of “fast food” were not clearly defined in the forecast.

Virginia Ferguson, a spokeswoman in Kentucky for Yum Brands, the parent company of KFC and Pizza Hut, said KFC grew quickly after its 1997 opening because it was the first of its kind in Vietnam. KFC now has 134 Vietnam locations, and Pizza Hut, which opened a decade later, has 34.

Baskin-Robbins and Dunkin’ Donuts, which opened in Vietnam in 2012 and 2013, now have a combined 18 locations. The two brands plan together to open 60 to 80 locations each year in Southeast Asia.

The coffee giant Starbucks, which opened its first three stores in Vietnam last year, all in Ho Chi Minh City, said the company planned to open in Hanoi in 2014. “For us, the Vietnam market is a huge opportunity, and we’re taking a long-term view on how we build our business there the right way,” said John Culver, the company’s president for China and Asia-Pacific.

Industry experts say that although Vietnam’s fast-food market is far from saturated, multinationals trying to expand their operations face logistical challenges.

One is finding affordable and central sites in the smallish downtown areas of Hanoi and Ho Chi Minh City, where competition is fierce and monthly rents in prime locations can reach as much as $19 a square foot, according to Richard Leech, executive director at the Vietnam office of CBRE, a real estate consulting firm based in Los Angeles. He said fast-food companies in Ho Chi Minh City typically sought to pay about $6 a square foot.

Another obstacle is establishing an efficient food distribution and refrigeration network that extends into second-tier cities.

Some international companies have found they need to adapt their food to local tastes. The South Korean bakery chain Paris Baguette offers multiple variations on the banh mi, a Vietnamese sandwich that typically includes sliced pork and sprigs of cilantro. KFC serves rice and seafood alongside its fried chicken, and both Starbucks and Dunkin’ Donuts brew beverages to appeal to the Vietnamese penchant for extra-sweet coffee.

Nguyen Hoang Anh, the 23-year-old who loves fast food, said before lunch on a recent weekday that he welcomed American brands to Vietnam, partly because he had never liked Vietnamese food very much. He said eating hamburgers and fried chicken reminded him of living in Australia, where he earned a degree three years ago in design and visual communications.

“It’s not as complex — it doesn’t have many mixed flavors, like Vietnamese food,” Mr. Anh said.

Nguyen Thi My Hao, his girlfriend, shook her head and said Mr. Anh’s fast-food habit was a disappointment to his mother.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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