26 February 2009 Media 21

Radio stations provide the

most localised content
GRadio in China, page 24
ANALYSIS 5
Analyst comment
Outlets of popular fast-food chains,
such as KFC, Lotteria, Jollibee and
BBQ Chicken, are located largely
within Ho Chi Minh City and,
increasingly, Hanoi. They target the
younger population but also workers
who desire an international culinary
experience.
Fast-food restaurants in Vietnam are
positioned as a place for the consumer
to appear stylish and relaxed in an air-
conditioned setting. A weekend visit to
a fast-food outlet such as KFC is also
seen as a good family bonding activity.
The localisation of menus at
affordable prices is also aiding
penetration. Examples of adaptation
to the Vietnamese market are KFCs
sup ga a chicken soup and chicken
rice. Some consumers look to these
internationally renowned food chains
for assurance and safety due to their
ISO and HACCP certifications amid
continued concern about food
standards and hygiene.
With entry to the World Trade
Organisation in 2007, Vietnam is
under pressure to ease restrictions on
retailers and food-service operators
and allow them to set up shop without
the necessity of a joint venture with a
local partner.
McDonalds, while keeping an eye on
the growth potential of the Vietnamese
market, seems content for now to
focus on its expansion in the two
titans India and China. With the
current economic slowdown,
McDonalds is unlikely to seek a
Vietnamese presence until after 2010.
When McDonalds does arrive in
Vietnam, competition will increase
several notches and push fast-food
into second-tier cities such as Hai
Phong, Da Nang and Bien Hoa.
testify to the importance of supply
chain. During the bird flu crisis, it
was forced to switch to fish. But
with the global fast-food industry
training its sights on the market,
Vietnam may soon be home to a far
more modern fast food sector.
Fastfood category spending (US$)
Source: TNS
0
200,000
100,000
300,000
400,000
600,000
500,000
Television
Press
2006 2007 2008
KFC adspend in Vietnam
Source: TNS
0
20
40
60
100
80
2006 2007 2008
7%
93%
14%
98%
2%
Television
Press
T
he worlds fast-food giants
are descending upon Viet-
nam following the countrys
ascension to the World Trade
Organisation two years ago.
International missions in Ho Chi
Minh City (HCMC) and Hanoi are
hosting matchmaking fairs in the
hope of wedding foreign franchis-
ers to local franchisees. These fast-
food marriages may well bring an
influx of new accounts to Viet-
nams ad agencies.
Vietnam is the most attractive
retail destination on Earth, says
Vikas Mehta, MD of Lowe World-
wide in HCMC. Global retail
players, including quick-service
restaurants, are planning entry
strategies. There will be explosive
year-on-year growth.
Two agencies Bates141 and
BBDO are already working
with the sectors pioneers. BBDO
recently won KFC, which arrived
in 1997 and quietly spread across
HCMC before entering the more
conservative capital Hanoi in May
2006. Bates141, meanwhile, works
with Jollibee, which has been in the
country since 1996 and pursuing a
similar strategy.
KFC, which parted ways with
Ogilvy when selecting BBDO, is a
big spender, completely dominat-
ing Vietnams fast-food advertis-
ing. In anticipation of post-WTO
competition, KFC expanded from
17 stores in 2006 to its current 55,
supporting them with Vietnams
first fast-food ad campaign.
The blitz kicked off in 2006 with
KFC airing TVCs a fast-food
first on HCMCs HTV7 and
HTV9 and Hanois VTV1, VTV3
and HN1. Last year,TV accounted
for 98 per cent of KFCs total media
outlay of US$514,000, which like-
wise represented a 98 per cent
share of all Vietnams fast-food ad-
vertising of $526,000. Low as this
sum is compared to regional ad-
With the countrys entry into the WTO, global fast-food franchises are scrambling for a piece of the pie. By Glenn Smith
Vietnam braces itself for a fast-food explosion
SECTOR INSIGHT
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Yvonne Kok
Research
manager,
Euromonitor
Singapore
KFC...been in Vietnam since 1997 Pizza Hut...targeting top locations
spend levels, it marks a 17.5-fold
jump from 2006. The absolute
spends are negligible compared to
mobile service, infant nutrition,
haircare or other top 20 cate-
gories, says Lowes Mehta. But
we are optimistic.
Global franchises soon to open
include Burger King, Popeyes,
Round Table Pizza, Melting Pot,
Carls Jr from the US, and Bread
Talk, Cavana and Koufu from Sin-
gapore, to list a few appearing in
HCMCs business press.
Aside from KFC and Jollibee,
they will battle Lotteria and Pizza
Hut, both already in-country and
targeting the best real estate at
HCMC and Hanois malls.
Euromonitor counted 6,579 fast-
food outlets, with sales of VND5.5
trillion last year. The vast majority
are local operations.But these are a
small fraction of the 528,812 food-
service outlets the majority
being owner-operated food stalls
that generated VND411 trillion.
Vietnamese entrepreneurs have
experimented with franchising.
Two local success stories Trung
Nguyen Coffee and Pho 24 have
matured enough to venture off-
shore. At home, Trung Nguyen
boasts more than 1,000 outlets.Pho
24, founded by Australian-educat-
ed Ly Quy Trung, has 65 locations
and adheres to the franchise for-
mula based on four pillars sys-
tem, brand name, product and
trade secret. But emulating this
model is difficult in Vietnam, a
country with a per capita income of
$832. Potential franchisees lack
start-up funds, and homegrown
franchises often license their busi-
ness piecemeal as a result.
Despite their deep pockets, glob-
al franchises will encounter prob-
lems. The whole notion of fast
food already exists in Vietnam,and
it is readily available on the street,
says Alison Dexter, research direc-
tor at TNS Vietnam.
McDonalds absence in Vietnam
is conspicuous. The country is the
worlds 12th most populous, and
McDonalds usually moves in step
with rivals KFC and Pizza Hut.Yet
Liam Jeory, regional VP of corpo-
rate relations at McDonalds, in-
sists: We have no plans currently
to set up in Vietnam.
One challenge is the low level of
development of supply-chain in-
frastructure, and the lack of locally
produced ingredients. KFC can
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