CBRE VIETNAM
Golden Arches –
Golden Opportunities?
www.cbrevietnam.com
January 2014
Number of F&B Stores by Brands in 2013, Vietnam
Open year 1997
30
2004
135
155
2007 2008
31
2011
2012 2013
16
20
4
Jolibee
KFC
Lotteria
2014
3
The Coffee Bean
P
Pizza
Hut & Tea Leaf Subway
2
McDonald’s
c o ads
Burger
King Starbucks
(*) Number of current stores
Source: CBRE
McDonald's – the
restaurant in HCMC
giant
opens
its
first
The two debut restaurants of McDonald's in HCMC
marked Vietnam as the eleventh Southeast Asia country
to welcome the golden arches. Though entering the
market later than any of its rivals like KFC, Lotteria or
Burger King, the giant brings to the market two as yet
unseen services; the first drive-thru eatery and the first
fast food chain that serves 24/7.
/ In consideration of the
potential growth of South East Asia, McDonald’s is
planning to open 750 new restaurants in the next two
years.
McDonald's sees a big opportunity in Vietnam’s strong
demographics. The emergence of Western culture and
rising average income generates increasing spending for
foreign brands,
brands which young consumers view F&B foreign
brands as fashionable. According to Euromonitor, fast
food market in Vietnam valued over US$543.6 million
which annual growth rate is expected to increase from
13.9% in 2012 to 15% in 2014. Busy lifestyle with
growing economy is boosting demand for fast food. KFC
and Lotteria are leading players in the country in terms of
both sales and number of operating stores.
Although ranked as the largest fast food brand
worldwide (ranked seventh in the list of 100 best global
brands by Interbrand), entry of the fast food giant is late
to Vietnam market, where KFC, Lotteria, Pizza Hut,
Subway, Burger King and Starbucks already established
a solid presence. However, the early penetration of these
competitors can be also viewed as an advantage to
M D
McDonald’s
ld’ when
h considering
id i their
h i impacts
i
on educating
d
i
and gradually changing consumers behaviours.
Best Global Brands, 2013
BRANDS
VALUE (US$ MILLION)
RANK
McDonald's
42.0
7
KFC
6.2
66
Starbucks
4.4
91
Source: Interbrand
There are, however, challenges for McDonald‘s: (1)
Affordable price points: it is critical to determine the price
point that is competitive to cheaper alternative offers in
road-side vendors. Bringing “Dollar Menu” to Vietnam
including items from US$1-2 is expected to favour
McDonald’s. (2) Coverage: KFC and Lotteria’s coverage
in Vietnam is approximately 600,000 persons/store
persons/store*
while Burger King is targeting to reach 160,000
persons/store**. Therefore, the hindrance for McDonald's
is not only adaption, catering to local tastes, but also
expansion.
Although F&B represents basic needs, consumers are
now more demanding and concerning about health and
wellness quality and convenience.
wellness,
convenience To maintain a
sustainable growth, F&B operators are notably required
to guarantee a good supply chain to ensure a highest
quality food and great value. McDonald’s showed its
commit to focus on energy conservation, sustainable
packaging and waste management for years, which are
its differentiation to success so far.
Store coverage = Vietnam’s
Vietnam s population / number of stores across the
country.
** Source: Tri Thuc Tre (ttvn.vn)
© 2014, CBRE Vietnam Co., Ltd.
Starbucks open day, February 1, 2013
Expenditure for F&B (including FMCG, fresh food, eating
and drinking out) accounts an essential part of
Vietnamese wallet share, at up to a third of urban
household expenditure. F&B is by nature a non-cyclical
sector, not negatively affected by unfavorable economic
conditions as it is considered a necessity.
OPPORTUNITIES FOR RETAILERS,
CHALLENGES TO DEVELOPERS.
According to the newly published survey of Nielsen in six
cities, Vietnam consumer confidence has showed an
improvement from the end of last year (from 87 points
to 97 points). Along with market confidence, the pick-up
i transactions
in
t
ti
i expected
is
t d to
t occur gradually.
d ll In
I the
th
outlook for next year, the recovery is expected to gather
pace only in the second half as macroeconomic
conditions improve while rental rate will take longer to
recover.
Vietnam is experiencing a “modernity process”, which
changes consumers habit from shopping at street
vendor or market to more convenient and fashionable
air-conditioned shopping environment. Not only in F&B
sector, other sectors also welcomed many international
retailer names such as Crocs, Topshop, Banana
Republic, Payless, Christian Dior etc. Modern retail
channels are anticipating strong and diversified
development in coming years.
However, it is noted that vacancy rate was reported an
increasing trend in the last two quarters with negative
net absorption, reflecting tenants’ dissatisfaction with the
rentals charged at major shopping centres and the
amount of foot traffic which they were able to generate.
Retailers are moving out of shopping centre to look for
cheaper alternations. High street leasing still dominates
the market due to lower cost and its ready availability.
The recovery of the economy will be followed by the
pick-up of the retail market, but in the meantime
landlords must remain responsive to the needs of
retailers.
Vietnam Retail View
The event of Starbucks opening first store in February
and successfully attracting a long queue of customers
are a positive sign to retailers. Followed Starbucks and
McDonald’s, it is believed that many F&B retailers will
f rther set eyes
further
e es on Vietnam market.
market
Source: giaoduc.net.vn
Household share of wallet, 2012
2.7%
2
7%
3.5%
FMCG & Fresh food
Ed ti
Education
Savings
Eating/Drinking out
Transportation
Utilities
Housing
Communications
Travel/Holiday
Healthcare
Investment
Entertainment
Others
2.6% 5.4%
4.2%
27.9%
4.3%
5.4%
6.4%
10.8%
6.7%
10 2%
9.8% 10.2%
(*) Declared income: VND10.5 million
Source: Kantar Worldpanel , 4 urban cities: HCMC, Hanoi, Da Nang, Can Tho
CBRE Retail Leasing Enquiry, 2013
F&B
Supermarket & convenience store
Fashion
20.4%
1.7%
3.0%
6.8%
48.7%
Cosmetics & Accessories
Lifestyle
y
9.2%
10.1%
Home décor
Others
Source: CBRE
CONTACTS
For more information about this Market View, please contact:
Dung Duong
g
Associate Dirrector
Research and
d Consulting Services
CBRE Vietnam
m
Unit 1201, Melinh
M
Point Tower,
2 Ngo Duc Ke
K Street, District 1
t: +84 913 381
3 118
e: dung.duon
ng@cbre.com
© 2014, CBRE Vietnam Co., Ltd.
January 2014
Thanh Pham
Research & Financial Analyst
Research and Consulting Services
CBRE Vietnam
Unit 1201, Melinh Point Tower,
2N
Ngo D
Duc Ke
K St
Street,
t Di
District
ti t1
t: +84 908 861 600
e: thanh.pham@cbre.com