McDonald’s in Vietnam: Why hasn’t it been successful?
McDonald's is one of the world most recognizable brands. So how come McDonald's and fast-food chains have struggled to be successful in Vietnam?
Updated April 16, 2019
With locations in over 100 countries, McDonald’s is a brand recognized all over the world. The fast-food chain caters to local tastes, globally. However, with Mcdonald’s in Vietnam, there are just 17 outlets across the whole country. It’s a similar story for Burger King which only has 13. Compare this to America for example, which has over 14,000 McDonald’s across the country.
As a general rule, McDonald’s tries to adapt to cultural differences by modifying their menu for each corner of the world. This is a strategy that has been mostly successful – but this just doesn’t seem to be working for Mcdonald’s in Vietnam.
This lack of growth since the fast food giant opened its first store in 2014 is odd considering Vietnam loves its food. The country has an estimated total 540,000 food and beverage outlets, including 430,000 street vendors across the country.
With so few Mcdonald’s in Vietnam, one of the only places to pick up a Big Mac is at the outlet by Hoan Kiem lake, in the capital of Hanoi.
Some of the only places you can find a tasty Big Mac is at the McDonald’s by Hoan Kiem lake in the capital of Hanoi. Plus, there is a handful of outlets in the major tourist hotspots around Ho Chi Minh City.
The same goes for Burger King. There are barely any established fast food chains that are popular anywhere in the world. The locations that do exist only seem to cater to the growing number of tourists to the country.
This failure to capture the market is especially strange since these international brands have seen success when expanding into other Asian countries like China and Japan.
So why have these brands flopped? On the surface, Vietnam seems like a perfect choice. It has a booming food and beverage industry valued at $22.3 billion USD in 2016. Which is only expected to grow. On top of that, relatively low-income levels increase the demand for cheap food options.
The problem is – for Mcdonald’s in Vietnam, there is just too much competition. Fast-food is definitely an oversaturated market in the country. McDonald’s usual strategy of adapting its menu to the local culture just doesn’t work if street food is available everywhere.
In fast-paced Vietnam why would someone wait a minute for a McDonald’s when you can have a meal in seconds from a street food vendor, or a bowl of Pho as soon as you step outside.
Food kiosks are visible on every corner in every major city and offer a variety of different foods. This makes international chains proportionately limited menu a tough sell to locals. Usually, street food meals are available at extremely low prices and prepared so fast that you don’t even have to get off your bike.
Affordability and convenience is the name of the game for the Vietnamese. Unfortunately, for these big brands their unique selling point, fast food, just isn’t there. McDonald’s simply can’t compete in the hustle and bustle of the city.
Delivery is also a big factor. The food delivery economy is something that remains steady year round. Many kitchens offer affordable delivery and with so many delivery bikes in the city getting food to your doorstep in quick and affordable. You can read more about the big business of bike delivery in Vietnam here.
Not all international brands have fallen on a hard time however. Fast food brands like KFC and the Korean Lotteria have seen steady growth due to the massive popularity of fried chicken in Vietnam. Pizza Hut has also seen astronomical success and makes up 21.3% of the fast food market.
While the sandwich shop Subway might thrive in most corners of the world, the Vietnamese have their own alternative, the Banh Mi. A holdover from French colonialization this traditional sandwich is served with a selection of meats and salads, served at a fraction of the price, and is available on every street in the country.
On top of that small convenience stores lure in budget-minded diners. These local grocery stores usually have lunch areas which become crowded at midday office hours or after school. It is not uncommon to see two or three Family Marts or 7-11 stores all on one stretch of road.
With the first McDonald’s opening in Ho Chi Minh in 2014, many members of the new middle class saw visiting them as a sign of status. When international chains started opening across the 2000s, they were a lot more popular. However, the novelty has long since worn off with young urban generations.
Eating out is a massive part of the culture; according to the European Commission, Vietnamese consumers spend 78% of there cash income on local vendors. However, large international chains that would typically be considered low-budget in the West are considered high-end in Vietnam, with their offering of comfortable seating and air-conditioning.
While food is an integrated part of Vietnamese culture, views differ between young and older people.
The biggest fast-food consumer is Generation Z (those born after 1995) who despite earning less than $98.7 USD per month, as a group spends $520 million USD on eating out every month. For young people eating out is a social event to be enjoyed sitting on a low plastic chair in the street with a group of friends for several hours.
The older Vietnamese generation cherishes eating time as something for the family. It is especially important that foods can be shared. A burger or happy meal isn’t something that is designed for sharing with a group.
Fast Food restaurants have only been in Vietnam for a relatively short amount of time, and that’s understandable given that open trade between Vietnam and the US only opened up since 1995. When these international brands arrived, they were met with a saturated market and massive competition.
Fast food brands are now working towards adapting their menus even more by offering rice and chicken combos to match cultural cuisine better.
At the end of the day, the main reason these big brands exist at all is for the tourists to get a taste of home. Tourism is a massive sector in Vietnams economy, when traveling in the country tourists want to experience delicious Asian and western dishes. However, it is not uncommon for anyone a long way from home to demand cultural comforts in the form of a Big Mac.
By Tyler Wood