Why McDonald’s Flopped In Vietnam

Summary

Despite 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

00:00

🍔 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.

05:03

📉 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.

Keywords

💡Fast-food chains

Fast-food chains refer to large-scale, branded restaurants that serve quick, ready-to-eat food. In the context of the video, they are significant because they dominate the global market but face challenges in Vietnam. The script mentions Burger King and McDonald's, which are struggling to capture the Vietnamese market despite their worldwide success.

💡Vietnam

Vietnam is the focus of the video as it presents a unique case where major fast-food chains have not been able to establish a strong presence. The country's distinct food culture, economic factors, and historical context are highlighted as reasons for this phenomenon.

💡Market saturation

Market saturation refers to a state where a product or service is so widely available that it has reached the maximum possible level of sales. The video discusses how Vietnam's food service sector is dominated by local vendors, which makes it difficult for fast-food chains to compete.

💡Cultural adaptation

Cultural adaptation in the video refers to the strategy of modifying products or services to align with the local culture's preferences and tastes. It is mentioned as a potential solution for McDonald's and Burger King to improve their appeal in Vietnam, with examples like KFC's introduction of chicken rice and shrimp burger.

💡Local vendors

Local vendors are small-scale food sellers that offer traditional Vietnamese dishes at street stalls and kiosks. The script emphasizes their prevalence and popularity in Vietnam, which poses a significant challenge to fast-food chains due to their affordability and cultural relevance.

💡Pricing strategy

Pricing strategy is the method by which a company sets the price of a product or service. The video points out that fast-food chains like McDonald's and Burger King are priced at a premium compared to local vendors, making them less attractive to the average Vietnamese consumer.

💡Diplomatic ties

Diplomatic ties refer to the formal relationships between countries. The video mentions the severed diplomatic ties between the US and Vietnam post-1973, which might have influenced the late entry and slow growth of American fast-food chains in the Vietnamese market.

💡Consumer behavior

Consumer behavior is the study of individuals' actions and patterns in making purchases. The script discusses how Vietnamese consumers prefer to spend a significant portion of their food budget on local vendors rather than fast-food chains, reflecting their cultural preferences and economic choices.

💡Family-style serving

Family-style serving is a dining approach where food is shared among family members or friends. The video suggests that this cultural preference in Vietnam makes it difficult for individual-serving fast-food items like burgers to gain popularity.

💡Market share

Market share is the portion of the total market for a particular product or service that is controlled by an individual company. The video compares the low market share of McDonald's and Burger King in Vietnam to the higher shares of KFC and Pizza Hut, indicating the varying success of different fast-food chains in adapting to the local market.

💡Menu revamp

Menu revamp refers to the process of redesigning or updating a restaurant's menu to attract more customers. The video mentions that McDonald's and Burger King have attempted to adapt their menus to Vietnamese tastes, such as offering grilled pork rice and fish rice combo, as part of their strategy to compete in the market.

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