MARKET ACCESS SECRETARIAT Global Analysis Report Foodservice Profile Vietnam July 2014 EXECUTIVE SUMMARY CONTENTS Vietnam has been in transition from a centrally-planned to a market- based economy since the late 1980s. This process has accelerated over the last decade since Vietnam achieved World Trade Organization (WTO) membership in January 2007. Over the last few years, a combination of strong economic and tourism growth, rising disposable income, a growing middle class, and increasing exposure to western lifestyles has fueled the rapid growth of the foodservice sector in Vietnam. Executive Summary ....................... 1 Sector Overview ............................. 2 Subsectors ..................................... 4 Locations ........................................ 6 Top Companies .............................. 7 Today, Vietnam is considered a middle-income country within the Asian region. With 90 million people, Vietnam’s population ranks as th the 13 -largest in the world. Vietnam’s dynamic, young, and educated population is enjoying a GDP per capita of US$3,750 and growing. It is also one of the driving forces behind the foodservice sector. Euromonitor also forecast’s is Vietnam to be among the world's top ten tourist destinations by 2018. The tourism sector has contributed US$6.3 billion to the economy in 2012 and it is forecasted that the sector will contribute a record of US$6.7 billion in 2013. Total international arrivals were expected to reach 7.6 million visitors that same year, representing a 10.6% growth over 2012 as reported by the department of Tourism Vietnam. In Vietnam, eating out is common practice, especially in large cities, such as Ho Chi Minh City or Hanoi and it is considered a regular part of social life. Vietnamese consumers have access to a wide variety of street food vendors and restaurants at affordable prices. People love gathering at cafés or restaurants to have breakfast, lunch or dinner, a trend reminiscent of Vietnam’s colonial past, according to a BBC “Vietnam economic country profile”. Conclusion ...................................... 8 Resources ...................................... 8 SECTOR OVERVIEW Vietnam’s foodservice sector was valued at US$33.3 billion in 2012. Between 2008 and 2012, the foodservice sector recorded a compound annual growth rate (CAGR) of 11.8% and is expected to continue a healthy growth with a CAGR of 13.3% from 2013 to 2017, reaching total sales of US$59.8 billion, according to Euromonitor. Vietnam, with the smallest urban population in Asia (about 30 percent of the total population), has started seeing significant rural to urban migration as the economy becomes more industrialized and urbanized. Consumers are also adopting western eating trends. Urban Vietnamese consumers have busier lives; consequently, they are dining-out more than before, and have greater demand for home delivery services. Foodservice outlets are used for entertainment and socializing. The forecasted growth also supports this trend. Thanks to increasing disposable incomes, rising living standards and the increasing trend towards travel, especially in big cities, Vietnamese tourism is projected to enjoy strong growth during the 2013-2017 forecast period. In addition, the Vietnamese government is putting great efforts into promotional campaigns in order to promote Vietnam as a tourist destination all over the world. Historic Market Value and Growth of Vietnamese Foodservice by Category, US$ millions Category Total Consumer Foodservice Full-Service Restaurants Street Stalls/Kiosks Cafés/Bars Fast Food Pizza Consumer Foodservice** 100% Home Delivery/Takeaway 2008 2009 2010 2011 2012 21,313.0 11,259.5 8,389.7 1,410.0 253.8 26.7 - 22,899.6 11,985.1 9,060.9 1,565.4 288.1 30.8 - 24,679.0 13,027.3 9,604.5 1,719.2 326.9 39.0 1.1 30,980.4 17,091.2 11,338.4 2,132.8 414.5 55.9 3.6 33,295.7 18,477.6 11,961.9 2,373.3 477.4 62.7 5.4 CAGR 2008-12 11.8% 13.2% 9.3% 13.9% 17.1% 23.8% - Forecasted Market Value and Growth of Vietnamese Foodservice by Category, US$ millions Category Total Consumer Foodservice Full-Service Restaurants Street Stalls/Kiosks Cafés/Bars Fast Food Pizza Consumer Foodservice** 100% Home Delivery/Takeaway Source for both: Euromonitor, 2014. 2013 36,330.3 20,521.0 12,634.1 2,620.7 546.7 73.6 7.8 2014 2015 2016 2017 40,755.4 23,488.3 13,647.8 2,964.1 643.8 88.9 11.4 46,131.4 27,134.3 14,841.7 3,376.2 762.8 108.5 16.5 52,397.8 31,455.0 16,158.3 3,857.7 903.4 132.6 23.4 59,771.0 36,609.9 17,634.9 4,424.5 1,068.9 162.8 32.7 CAGR 2013-17 13.3% 15.6% 8.7% 14.0% 18.2% 22.0% 43.1% CAGR: compound annual growth rate. **Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza consumer foodservice is not counted as its own sector within the consumer foodservice total. Page | 2 In the Vietnamese market, independent operators represent almost the entirety of value sales for the foodservice industry, accounting for US$33.1 billion in over 500,000 outlets for 2012. Over the forecasted period of 2013 to 2017, independent operators will see a CAGR of 13.1% and outlets are expected to grow to over 575,000. Chained operators are expected to continue gaining an impressive market share with a CAGR of 28.3% over the forecast period, to reach sales of US$740 million in 2017. Historic Market Value and Growth of Vietnam Foodservice by Type, US$ millions, Fixed 2012 Exchange Rates Category Consumer Foodservice by Type Independent Chained Source: Euromonitor International, 2014. 2008 2009 2010 2011 21,313.0 21,235.2 77.8 22,899.6 22,801.5 98.0 24,679.0 24,554.1 124.9 30,980.4 30,795.9 184.5 CAGR 2008-12 33,295.7 11.8% 33,079.9 11.7% 215.8 29.1% 2012 CAGR: compound annual growth rate. Forecast Market Value and Growth of Vietnam Foodservice by Type, US$ millions, Fixed 2012 Exchange Rates Category Consumer Foodservice by Type Independent Chained Source: Euromonitor International, 2014. 2013 2014 2015 2016 36,330.3 36,057.2 273.2 40,755.4 40,402.9 352.5 46,131.4 45,677.0 454.4 52,397.8 51,816.2 581.6 CAGR 2013-17 59,771.0 13.3% 59,030.9 13.1% 740.0 28.3% 2017 CAGR: compound annual growth rate. Historic Number of Vietnam Foodservice Outlets Category Consumer Foodservice by Type Independent Chained 2008 529,175 528,756 419 2009 536,709 536,214 495 2010 543,483 542,906 577 2011 550,027 549,181 846 2012 553,941 553,015 926 2016 572,203 570,370 1,833 2017 577,521 575,416 2,105 Source: Euromonitor International, 2014. Forecast Number Vietnam Foodservice Outlets Category Consumer Foodservice by Type Independent Chained 2013 558,331 557,204 1,127 2014 562,856 561,512 1,344 2015 567,356 565,777 1,579 Source: Euromonitor International, 2014. Page | 3 Outlets and Transactions of Vietnam Foodservice by Subsector, 2012 Subsector Street Stalls/Kiosks Full-Service Restaurants Cafés/Bars Fast Food Pizza Consumer Foodservice** 100% Home Delivery/Takeaway Outlets 438,697 84,227 23,322 7,684 212 11 Total Sales Transactions (US$ million) (thousands) 18,477.6 11,961.9 2,373.3 477.4 62.7 5.4 8,420,731 5,601,617 917,289 368,499 9,891 479 Average Sales per Sales per Transaction Outlet (US$) (US$) 42,119.3 2.2 142,019.8 2.1 101,762.3 2.6 62,129.1 1.3 295,754.7 6.3 490,909.1 11.3 Source: Euromonitor, 2014. **Pizza consumer foodservice data is compiled from three different subsectors (fast food, full-service restaurants, and 100% home delivery/takeaway) for the purposes of comparison, but remains reflected within the figures for these subsectors, and thus the consumer foodservice total. As such, pizza consumer foodservice is not counted as its own sector within the consumer foodservice total. The Vietnamese foodservice landscape comprised of over 438,697 street stalls/kiosks that recorded over 8.4 billion transactions in 2012. The average transaction cost of around US$2.2. On the other hand, home delivery restaurants had the highest average sales per outlet nearing the US$491.000 and higher average sales per transaction of US$11.3 SUBSECTORS The following subsector analysis is based on information from Euromonitor International, Please see resource section for complete listing of documents consulted. Full-Service Restaurants Local full-service restaurants played an important role in leading the overall category in Vietnam. In fact, with rising disposable incomes and higher living standards, especially in big cities such as Ho Chi Minh City, many local full-service restaurants put in large efforts to improve quality, service and food safety standards, while at the same time, increasing their numbers of outlets. Independent operators remained dominant in full-service restaurants in Vietnam, accounting for almost 100% of value sales. Similar to cafés/bars, independent full-service restaurants are present on most street corners across the country, especially in big cities such as Ho Chi Minh City or Hanoi. These independent operators have broad knowledge/expertise regarding Vietnamese tastes and preferences; this enables them to attract customers with their authentic dishes. They offer a very wide range of dishes at different price points. With less leisure time, Vietnamese consumers, especially single ones, are increasingly choosing to eat out rather than cook at home. In Vietnam, full-service restaurants are a highly diverse channel that encompasses numerous different styles and cuisines from various countries. Product offerings vary considerably, ranging from small independent restaurants with only one special dish, to large, high-end restaurants offering a vast array of dishes. Euromonitor data shows that full-service restaurants in Vietnam saw current value sales grow at a CAGR of 13.2% from 2008 to 2012. This was mainly a result of the rising unit prices in most restaurants, alongside the rising number of outlets. Page | 4 Street Stalls/Kiosks The majority of Vietnamese people eat breakfast outside the home. Street food vendors are very popular and have long been an integral part of people lives, and can be found everywhere. As such, street stalls/kiosks remained by far the most prominent consumer foodservice channel in Vietnam in terms of outlet numbers. Through such outlets, consumers can easily find a wide range of dishes or drinks at a much lower price compared to other foodservice channels. Furthermore, historically, street stalls/kiosks were considered to be a highlight in Vietnamese culinary culture. However, as the awareness of health, hygiene and food safety increased among urbanite consumers, the sector may experience a slowdown. New regulations put forward by the government will hamper the growth of street stalls/kiosks, aimed to control their numbers, as well as their food safety standards. Street stalls/kiosks saw value sales of US$12.0 billion in 2012 and a CAGR of 9.3% from 2008 to 2012. The CAGR for the forecasted period of 2013 to 2017 is expected to be 8.7% while sales are expected to reach US$17.6 billion. Cafés/Bars Cafés/bars remained one of the most popular foodservice venue types in Vietnam for social gatherings and meetings, reflecting Vietnamese tradition. This sector saw value sales of US$2.4 billion in 2012 and a CAGR of 13.9% from 2008 to 2012. The CAGR for the forecasted period of 2013 to 2017 is expected to be 14.0% while sales are expected to reach US$4.4 billion. The high value growth in this category is the result of increases in spending per transaction, as well as higher living standards and the increasing westernisation trend in Vietnamese culture, especially among younger consumers residing in major cities. Independent cafés/bars dominated in the Vietnamese cafés/bars category in terms of number of outlets and transactions, as well as value sales, according to Euromonitor. Independent cafés/bars are present on most streets across the country, with many being within walking distance of residential areas. In addition, the independent cafés/bars category includes a diverse range of services, ambience styles and menus, factors that help them cater to the needs of both younger and older customers, as well as a broad spectrum of income levels. In contrast, chained cafés/bars such as Highlands Coffee (Viet Thai International JSC), Bud’s Café (North American Food Corp) or Angel-in-us Coffee (Vietnam Lotteria Co Ltd) tend to target middle- to high-income consumers, especially the young, by offering premium services at higher prices. Fast Food In Vietnam, fast food outlets are mainly operated by international chains, although recent years have seen the emergence of domestic brands. Fast food outlets have shown strong growth in recent years, increasing from 477 outlets in 2012 to more than 1000 by 2017 according to Euromonitor forecast. They are proving popular among young people for their convenience and comfortable settings. Fast food recorded a healthy CAGR of 17.1% from 2008 to 2012. The strong performance of the category was the result of intensive efforts of fast food operators, especially chained international players, to stimulate demand, according to Euromonitor. In 2012, many international players expanded their outlet networks in Vietnam. For example, in 2011, Subway had only one outlet, but towards the end of 2012, it had three, all in Ho Chi Minh City. Local independent fast food continued to dominate the Vietnamese fast food category in terms of number of outlets. Nevertheless, chained fast food posted a much faster growth rate in terms of number of outlets in 2013, with a 27% rise, compared to mere 1% increase for independents. Euromonitor explains this was the result of increasing consumer awareness of chained fast food, where operators focus on offering a pleasant environment, higher-quality services and better food safety standards. Page | 5 100% Home Delivery/Takeaway Due to the increasingly busy lifestyles of working Vietnamese people, overall, the take-away and home delivery category continued to be popular in 2012, to reach a value share of 11% and 6% respectively of the total sales of the food service category. The number of 100% home delivery/take away outlets remained very low compared to other consumer foodservice categories, Euromonitor notes in its report about the sector. Home delivery/takeaway and pizza foodservice, so common in Western countries, remains at its infancy stage of development, having only appeared in Vietnam in 2010 with the arrival of Domino’s Pizza (Imex Pan Pacific Group Inc) and the launch of Pizza Hut Express (Pizza Hut Vietnam Ltd) shortly after. Pizza home delivery recorded current value growth of 12% in 2012. This sector saw a combined value sales of US$68.2 million in 2012. The CAGR for the forecasted period of 2013 to 2017 the pizza food service alone is expected to be 22.0% while sales are expected to reach US$163 million. LOCATIONS Over the half million of Vietnam foodservice outlets are standalone, and based on 2012 Euromonitor data, together account for 91% or 521,277 of outlets with value sales of US$33.3 billion. Standalone outlets offer proximity and convenience to consumers. However, this category is facing challenges in the form of affordability and availability of good new standalone locations; consequently the standalone category is seeing limited growth (CAGR of 11.3% 2008-2012), in comparison, to consumer foodservice through retail locations (CAGR 21.8% 2008-2012), which is perceived as a good substitute for foodservice operators. With stable rent prices and stable consumer traffic generated by commercial buildings, retail foodservice has the upper-hand according to Euromonitor analysis. As a result, consumer foodservice through retail outlets is forecasted to record the fastest overall growth by 2017 at CAGR of 18.7%. However, growing from a low base, it remained a relatively small category, accounting for only a 3% share of overall consumer foodservice units in Vietnam in 2012. Historic Market Value and Growth of Vietnamese Foodservice by Location In million US$ Current Prices - Fixed 2012 Exchange Rates Location Total Consumer Foodservice Standalone Lodging Retail Travel Source: Euromonitor international, 2014. 2008 2009 2010 2011 2012 21,313.0 22,899.6 24,679.0 30,980.4 33,295.7 19,807.8 21,219.2 22,739.0 28,440.8 30,408.4 640.6 703.1 782.0 1,040.1 1,153.1 408.9 481.9 573.8 768.3 900.1 455.8 495.3 584.2 731.1 834.1 CAGR 2008/12 11.8% 11.3% 15.8% 21.8% 16.3% CAGR: compound annual growth rate. Page | 6 Forecast Market Value and Growth of Vietnamese Foodservice by Location In million US$ Current Prices - Fixed 2012 Exchange Rates Location Total Consumer Foodservice Standalone Lodging Retail Travel Source: Euromonitor international, 2014. 2013 2014 2015 2016 2017 36,330.3 33,053.4 1,305.1 1,044.9 927.0 40,755.4 36,989.8 1,517.4 1,236.5 1,011.7 46,131.4 41,776.5 1,779.4 1,459.0 1,116.5 52,397.8 47,335.7 2,093.2 1,736.3 1,232.6 59,771.0 53,867.3 2,457.8 2,074.6 1,371.2 CAGR 2013-17 13.3% 13.0% 17.1% 18.7% 10.3% CAGR: compound annual growth rate. Within the standalone foodservice category, a number of formats are present, including cafés/bars, fullservice restaurant, fast food and street stalls/kiosks. However, there has been a trend among many foodservice operators, especially the mid- to high-end segment, to locate their outlets in the retail location in order to not only capture their target customers, but also boost their brand image. The remaining foodservice locations, such as travel and lodging outlets, are predicted to see healthy value growth by 2017, as the Vietnamese Government is putting more effort into developing the country’s travel and tourism industry. In line with the growth of tourism, the numbers of high-end full-service restaurants are also expected to increase in terms of outlets and value sales. The table below shows that sales per transaction are the lowest at standalone outlets, followed by lodging outlets in 2012, averaging US$2.12 and US$2.47 respectively. In contrast, foodservice through retail outlets seems to perform the best, in terms of average sales per transaction (US$3.52). Outlets and Transactions of Vietnamese Foodservice by Location, 2012 Subsector Total Sales in US$ million Consumer Foodservice Standalone Lodging Retail Travel 33,295.7 30,408.4 1,153.1 900.1 834.1 Outlets 553,941 521,278 16,596 9,654 6,414 Transactions (thousands) Average Sales per Outlet (US$) 15,308,617.9 14,342,439.8 467,427.6 255,484.2 243,266.3 60,106.92 58,334.37 69,480.60 93,235.96 130,051.76 Average Sales per Transaction (US$) 2.17 2.12 2.47 3.52 3.43 Source: Euromonitor international, 2014. TOP COMPANIES Euromonitor highlights that international brands maintained their leadership in the Vietnamese foodservice industry. Leading global brands such as KFC, Lotteria and Pizza Hut, continued to expand their outlet numbers in the country especially in Ho Chi Minh City and Hanoi. International players in all sectors of the foodservice industry are forecasted to continue seeing fast growth in terms of both outlets and retail value sales. New foreign brands are also expected to follow suit and enter the Vietnamese market next year. A key example is the American fast food chain McDonald’s; through 100% franchising, it plans to open up to 100 restaurants across the country, with the first set to launch in Ho Chi Minh City in 2014. Page | 7 Top 10 Companies and their Market Share in % in Vietnamese Consumer Foodservice Brand Global Brand Owner KFC Lotteria Pizza Hut Highlands Coffee Pho 24 Trung Nguyen Jollibee Banh Mi Que Thuan Kieu Hoa Huong Duong Yum! Brands Inc Lotte Group Yum! Brands Inc Viet Thai International Joint Stock Co Nam An Group Trung Nguyen Corp Jollibee Foods Corp Tam Viet Thao Food Co Ltd Com Tam Thuan Kieu Co Ltd Hoa Huong Duong Co Ltd 2009 2010 33.5 10.7 5.5 8.3 14 1.7 2.2 32.7 10.9 6.2 8.3 11.9 2.2 2.8 - 4.2 3.7 3.5 3.1 2011 32.2 12.5 7.1 6.2 11.5 2.8 2.5 2.4 2.8 1.6 2012 35.8 12.9 7 6.4 4 3.7 3.6 2.1 2.1 1.6 Source: Euromonitor international, 2014. CONCLUSION At present, Western style fast food outlets are restricted to the fast food concept such as Kentucky Fried Chicken (KFC), but as the Vietnamese economy grows, market restrictions should be lifted, and it is therefore more likely other large multinational will enter Vietnam. Companies such as McDonalds, Burger King and Starbucks are known for their extensive experience in entering and building businesses in developing countries, either by direct ownership, partnerships or franchising. This will likely introduce more Western foods to the Vietnamese foodservice scene. Vietnam, like many other Asian countries, has a strong culture for eating out and for consuming food in a family-friendly setting. At the present time, the vast majority of the restaurant sector is based on Vietnamese cuisine and ingredients are sourced locally, but as the economy grows the opportunity for imported goods is also growing. In addition, the return of European and North American Vietnamese expatriates is creating a new demand for European and North American types of foodservice outlets. Finally, Vietnam is also a growing tourist destination both from travelers within Asia, but also increasingly from the West. This has encouraged the development of a large number of four and five star accommodations with varied Western menus available for travellers. This sector is expected to continue to grow and provide significant openings for imported fresh, frozen and grocery items including wine. RESOURCES Euromonitor International (2013). - Cafés/Bars in Vietnam - Consumer Foodservice by Location in Vietnam - Consumer Foodservice in Vietnam - Fast Food in Vietnam - Full-Service Restaurants in Vietnam - Street Stalls/Kiosks in Vietnam - 100% Home Delivery/Takeaway in Vietnam BBC Economic section: Vietnam country profile Country profile - Planet Retail (2014) Vietnam Tourism Word Tourism Organization (UNWTO) Page | 8 Foodservice Profile: Vietnam © Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2014). Photo Credits All photographs reproduced in this publication are used by permission of the rights holders. All images, unless otherwise noted, are copyright Her Majesty the Queen in Right of Canada. 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