Why McDonald’s Flopped In Vietnam
Summary
TLDRDespite global success, McDonald's and Burger King struggle in Vietnam, where local food culture and street vendors dominate the market. With only 17 McDonald's and 13 Burger King locations, the chains face challenges like high competition, underestimation of local tastes, and cultural serving preferences. Fast-food chains account for a mere 1.3% of Vietnam's food outlets, with traffic to them dropping 31% from 2016 to 2018, while street vendors' visits surged 70%. Adapting menus to local tastes, as KFC and Pizza Hut have done, may offer a path forward.
Takeaways
- 🌐 Fast-food chains like Burger King and McDonald's are global with thousands of locations, but struggle in Vietnam.
- 🇻🇳 McDonald's and Burger King have a significantly smaller presence in Vietnam compared to other Asian markets, with only 17 and 13 stores respectively.
- 🎉 Initial hype around McDonald's launch in Vietnam in 2014 has since diminished, with growth not meeting expectations.
- 📉 Both chains had ambitious expansion plans for Vietnam, which have not been realized, with McDonald's planning 100 stores and Burger King 60, but falling far short.
- 🍔 Fast food in the US is popular for its convenience, but in Vietnam, local street food like pho and bahn mi is just as quick and cheaper.
- 🏢 Vietnamese consumers spend a large portion of their food budget at local vendors, with only 1% going to fast-food chains.
- 🇺🇸 The underestimation of local food culture and competition by international fast-food chains is a significant factor in their struggle.
- 🍗 KFC adapted its menu to local tastes in Vietnam, which has contributed to its success with 130 stores, unlike McDonald's and Burger King.
- 💰 High prices at McDonald's and Burger King make local street food a more attractive option for the average Vietnamese consumer.
- 👨👩👧👦 Vietnamese dining culture often involves family-style sharing, which doesn't align well with individual fast-food meals like burgers.
- 📊 Despite efforts to adapt menus, McDonald's and Burger King face a challenging future in Vietnam as fast-food popularity declines and street food visits surge.
Q & A
How many locations does Burger King have worldwide?
-Burger King has more than 16,000 locations in over 100 nations.
What is the number of McDonald's locations globally?
-McDonald's has over 36,000 locations worldwide.
Why did McDonald's and Burger King face challenges in the Vietnamese market?
-They faced challenges due to stiff competition from local vendors, cultural preferences for sharing meals, and high prices compared to local options.
How many stores did McDonald's plan to open in Vietnam within 10 years after its launch in 2014?
-McDonald's planned to open a hundred stores in Vietnam within 10 years.
What was Burger King's investment in Vietnam in 2012, and what was the goal for the number of restaurants by 2016?
-Burger King invested 40 million dollars in Vietnam in 2012 with the goal of opening 60 restaurants by 2016.
What percentage of Vietnamese consumers' food spending goes to local vendors, street stalls, and kiosks?
-78% of Vietnamese consumers' food spending goes to local vendors, street stalls, and kiosks.
How does the number of local food vendors and kiosks compare to fast-food chains in Vietnam?
-There are over 430,000 local vendors and food kiosks compared to just over 7,000 outlets for fast-food chains.
What was the impact of the severed diplomatic ties between the US and Vietnam on fast-food chains?
-The severed diplomatic ties between the US and Vietnam after the war in 1973 delayed the entry of American fast-food chains into the Vietnamese market until the countries reestablished trade relations in 1995.
How did KFC adapt its menu to better fit local tastes in Vietnam?
-KFC introduced the KFC chicken rice and the KFC shrimp burger to cater to Vietnamese customers' preferences.
What is the market share of McDonald's and Burger King combined in the total share of foreign fast-food chains in Vietnam?
-McDonald's and Burger King make up 2.8% of the total share of foreign fast-food chains in Vietnam.
How have McDonald's and Burger King attempted to adapt to the Vietnamese market?
-They have made efforts to adapt their menus to reflect cultural influences of Vietnamese cuisines, such as offering grilled pork rice with egg and fish rice combo.
Outlines
🍔 Fast Food Struggles in Vietnam
Despite their global dominance, fast-food giants McDonald's and Burger King are facing significant challenges in the Vietnamese market. The script highlights the initial excitement when McDonald's entered Vietnam in 2014, but notes that the hype has since faded, with only 17 stores by 2018. Burger King, which entered in 2011, has only managed to open 13 stores. The script contrasts this with the success these chains have found in other Asian markets like China and Japan. The main issues appear to be the strong competition from local street food vendors, which offer quick, affordable, and culturally relevant alternatives. Additionally, the script points out that Vietnamese consumers spend a significant portion of their food budget on local vendors, allocating only 1% to fast-food chains. The historical context of severed diplomatic ties between the US and Vietnam, which were only restored in 1995, is also mentioned as a contributing factor to the slow adoption of American fast-food chains.
📉 Declining Fast Food Popularity in Vietnam
This paragraph delves into the declining popularity of fast food in Vietnam, with a significant drop in traffic to fast-food chains by 31% from 2016 to 2018. In contrast, visits to street food vendors surged by 70% during the same period. The script acknowledges that not all foreign fast-food chains have struggled; KFC and Pizza Hut have managed to capture a larger share of the market, with KFC at 11.4% and Pizza Hut at 21.3%. McDonald's and Burger King are attempting to adapt by introducing menu items that reflect Vietnamese cuisine, such as grilled pork rice with egg and fish rice combo. However, experts suggest that more extensive efforts are needed to compete with the abundance of local food options. The script concludes with a pessimistic outlook for McDonald's and Burger King in the Vietnamese market, as the overall trend for fast food is on the decline.
Mindmap
Keywords
💡Fast-food chains
💡Vietnam
💡Market saturation
💡Cultural adaptation
💡Local vendors
💡Pricing strategy
💡Diplomatic ties
💡Consumer behavior
💡Family-style serving
💡Market share
💡Menu revamp
Highlights
Fast-food giants like Burger King and McDonald's have struggled to find success in Vietnam, despite their global dominance.
Burger King has over 16,000 locations globally, while McDonald's boasts over 36,000.
McDonald's and Burger King's expansion into Vietnam has been slow, with only 17 and 13 stores respectively as of 2018.
McDonald's and Burger King have seen significant growth in other Asian markets like China and Japan.
Vietnamese consumers spend a large portion of their income on food, with 78% going to local vendors and only 1% to fast-food chains.
Vietnam's food service sector is dominated by local vendors and food kiosks, with fast-food chains significantly outnumbered.
The severed diplomatic ties between the US and Vietnam post-1973 may have impacted the acceptance of American fast-food chains.
KFC was one of the first American brands in Vietnam and adapted its menu to local tastes, leading to growth to 130 stores.
High prices of fast food compared to local street food vendors make it less attractive for Vietnamese consumers.
Vietnamese dining culture values family-style serving, which contrasts with the individual portions typical of fast food.
Traffic to fast-food chains in Vietnam dropped by 31% from 2016 to 2018, while street food vendors saw a 70% increase.
KFC and Pizza Hut have been more successful in Vietnam, capturing a larger share of the foreign fast-food market.
McDonald's and Burger King have attempted to adapt their menus to Vietnamese tastes with limited success.
The decline in popularity of fast food in Vietnam suggests a challenging future for McDonald's and Burger King.
Vietnamese consumers prefer the convenience and affordability of street food over fast-food chains.
McDonald's initial hype in Vietnam has significantly subsided, reflecting the challenges of capturing the Vietnamese market.
Transcripts
Fast-food restaurants dominate markets all over the world
Burger King has more than 16,000 locations in over 100 nations
And McDonald's has over 36,000
There's one in a decommissioned airplane in New Zealand
And there's even one in Vatican City
Fast food is a more than half a trillion a year business
But there is one place where these chains can't seem to take off
And that place is Vietnam
Here's why McDonald's and Burger King are failing to find a mass following in Vietnam
There was a lot of hype with McDonald's first opened its doors in Vietnam in 2014
The launch drew crowds of locals who waited hours to get their hands on a Big Mac
But fast-forward to today and the hype has slowed way down
McDonald's which launched in Vietnam in 2014 has only 17 stores there
And Burger King which entered the market in 2011 has only 13 as of 2018
Failure to capture the attention of the Vietnamese market was odd given that
these burger chains had previously been met with success when expanding into Asian countries
McDonald's has seen tremendous growth in countries like China and Japan
Where it has thousands of storefronts in both countries
And Burger King has grown its franchise in Japan from 12 restaurants in 2008 to 98 last year
McDonald's has ranked second out of all foreign fast food in mainland China behind KFC
And Burger King is ranked fourth
But Vietnam was a different story
When McDonald's finally entered the Vietnamese market in 2014
it planned to open a hundred stores in Vietnam within 10 years
But so far today it's only launched 17
The same thing happened at Burger King
The company invested 40 million dollars in Vietnam in 2012
with the goal of opening 60 restaurants by 2016 according to Vietnam Business Review
And as of 2018 they're just 13 Burger Kings in Vietnam
Both McDonald's and Burger King did not respond to CNBC's questions about
why they face such trouble breaking into the Vietnamese market
Fast-food in the States is popular because you can get it now
Vietnamese food is the same thing, if you go to street vendors
you can get your bowl of pho or your bahn mi also maybe even faster than McDonald's
So that kind of defeats the the value proposition of fast-food in Vietnam
But part of the problem seems to be that fast food giant's underestimated their local rivals
Vietnamese diners are spoiled for choice in top-tier cities like Hanoi or Ho Chi Minh City
which has made it tough for international fast food chains to compete
For the Vietnamese we have our banh mi sandwiches and those sandwiches are sold on the streets
at rock-bottom prices compared to McDonald's and Burger King
According to the European Commission, Vietnamese consumers dedicate a sizable portion
of their income to food
and of that money spent on food, 78% of that cash
went to local vendors street stalls and kiosks
Just 1% went towards fast-food restaurants in Vietnam
Vietnam's food service sector has over 540,000 outlets
Over 430,000 outlets are local vendors and food kiosks
There's nearly 80,000 full service Vietnamese restaurants and almost 22,000 bars and cafes
But as for fast-food chains, they account for just over 7,000 outlets in Vietnam
Fast-food chains are so outnumbered in Vietnam partly because of
the severed diplomatic ties between the US and Vietnam
After the United States withdrew forces from Vietnam following the war in 1973
all diplomatic relations were severed between the two countries in 1975
It wasn't until 1995 that the United States and Vietnam mended fences and opened the door for trade
If you know anything about like the history of Vietnam like the last 30 to 40 years
There was a lot of growth, but only really in the last 20
A lot of storefronts are literally just people's homes
They'll live upstairs and they'll just convert the downstairs into any sort of street vending option
In 1997 KFC was one of the first American brands to open up shop in Vietnam
But it was entering an already crowded food market
It took seven years for KFC to open just 10 restaurants
So KFC changed course and updated its menu to better fit local tastes
The brand introduced the KFC chicken rice and the KFC shrimp burger for Vietnamese customers
And today the company has a 130 KFC stores in 21 Vietnamese cities
But the hefty price tag for KFC meals seem to be worth it for customers
The comparatively high prices weren't unique to KFC
McDonald's and Burger Kings prices are also considered be at a premium compared to local vendors
Local vendors can feed twice as many people as a single meal does
at Burger King and McDonald's, at half the cost
Average people would say, about 2-3 dollars for their lunch
That's about it, you know
And 2-3 dollars is quite a lot
Average people tend to go out in groups, then once in a while they would
probably use McDonald's and then all the other days its Vietnamese food on the street
But these high prices are only part of the problem for McDonald's and Burger King
The way food is served in Vietnam has a lot to do with it
When Americans go to a restaurant they normally find something
on the menu that they like and order for themselves
In Vietnam, it's more of a family-style serving experience
Burgers have a tough sell in Vietnam because they're not really a food you want to share
And it doesn't look like things will be getting better fast food chains any time soon
More Vietnamese customers are retreating from fast food chains each year
Traffic to fast food chains dropped 31% from 2016 to 2018
While visits to street food vendors were up 70% during that two year span
But not all fast food chains have failed to appeal to locals
Just take KFC and PizzaHut
McDonald's and Burger King make up 2.8% of the total share of foreign fast food chains in Vietnam
But KFC makes up 11.4% and Pizza Hut makes up 21.3%
McDonald's and Burger King aren't giving up just yet
The companies have made efforts to adapt their menus to reflect the cultural influences of Vietnamese cuisines
like the grilled pork rice with egg from McDonald's and the fish rice combo from Burger King
Experts say that's gonna take a lot more than revamping a menu to compete with
so many local foods crowding the market space
With the popularity of fast-food in Vietnam on the decline
McDonald's and Burger King have a hard future ahead when it comes to satisfying the Vietnamese tastes
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