Challenges of Doing Business in Vietnam – Foreign Food and Beverage Industry

Linh Pham

April 14, 2020


Challenges of Doing Business in Vietnam – Foreign Food and Beverage Industry

Linh Pham

April 14, 2020

Food and beverages industry in Vietnam

Vietnam is an ideal place in Southeast Asia to expand food and beverage business thanks to stable politics, favourable economic conditions, young population and an increasing middle class. As a result, Vietnam has become the target of many food and beverage giants as a dynamic market in Southeast Asia. 

In recent years, F&B (food and beverage service) industry in Vietnam has become familiar, in fact, McDonald’s, Starbucks, KFC, Burger King, Pizza Hut, Loteria, and many others in the market of food and beverage tycoons in the world, all are present in big cities of Vietnam. Yet Vietnam still poses challenges for the food and beverage industry tycoons wanting to invest in the country.

Why Vietnam become the target of many food and beverage industry investors?

The vortex of growth

Vietnam is one of the countries with the young population, who tend to eat out, and has become a big potential market for the food and beverage industry. This not only attracts domestic investors but also foreign giants.

The food and beverage industry in Vietnam is experiencing a high growth rate with the presence of many domestic and foreign businesses. According to Euromonitor Market Research Company, the food and beverage market in Vietnam reached an average growth rate of 18% per year in the period of 2014 – 2019.

High development opportunities

Of all industries, the food and beverage industry have the opportunity to grow most rapidly because this is a basic human need. Especially in Vietnam market, there are many opportunities for businesses and food flavouring companies to grow thanks to the young population structure. Moreover, Vietnam’s market is still not saturated, so there are still many opportunities for businesses to develop their products.

What are the challenges that foreign food and beverage industry have encountered doing business in Vietnam?

However, not every well-known food and beverage brands in the world can thrive in Vietnamese market, nor the noisy and series of check-in in the early stages can keep the businesses heat. There are certain barriers that confuse the food and beverage industry tycoons when investing in Vietnam which is mentioned as follow:

The shortage of human resources

shortage of HR in F&B

Food and beverage industry in Vietnam is facing the problem of lack of human resources. The current speed of restaurant opening in Vietnam is very high, making the industry’s human resources become scarce. Previously, when food and beverage businesses recruited, businesses often required many standards, checking a lot of information. However, according to some businesses, now they only need to recruit a sufficient number of employees.

Besides, human resources in Vietnam are abundant but there are limitations in culture, manners and skills that require employers to have appropriate recruitment, training, exploitation and utilization solutions. In addition, businesses must also comply with the provisions on labor relations, social insurance, health insurance, trade unions,etc.

Brand development issues

brand development issue

The problem of developing food and beverage brand is also very difficult to solve. A brand with more value can raise more capital, but in order to do so, it needs to expand the number of stores quickly and the form of choice is usually a franchise. However, the challenge of franchising can be clearly seen, to be consistent with the quality of the food and services provided. In Vietnam, it is common to see different experiences of going to the same brand but different locations.

The difference in culinary culture

Products that are suitable for the tastes and tastes of the people are still the core factors, which are the most important factors that make the success of a food and beverage brand developing in the chain. Therefore, the issue of taste is a top concern. The world’s leading food and beverage brands bring to Vietnam eye-catching, novel products typical of Western cuisine. 

However, the majority of Vietnamese people have not really welcomed this new culinary trend, because Asian culinary culture is deeply ingrained in their mind. Meanwhile, food and beverage businesses that do not achieve wide coverage would be easy to lose.

In spite of the presence of the giant McDonald’s, the burger is still not a favorite and daily dish of Vietnamese people. So when the purchasing power is not big enough, the market is too small, it is natural for brands with core products such as Burger King or McDonald’s to meet.

The race to keep up with consumer’s trend

The market of food and catering services has few barriers to entry but the elimination rate is very fast, so it is still a challenge for businesses that want to conquer. Vietnamese people are ready to experience new food services but they may get bored soon. To maintain their revenue, businesses must always be flexible in developing products and services.

In addition, there are other risks facing the food and beverage industry such as:

  • Rental rates in prime locations in Ho Chi Minh City and Hanoi are quite high.
  • Rental period is not long.
  • Staff rarely consider serving in a restaurant a serious profession.
  • The cost of transporting some food ingredients from the parent company to Vietnam is very high, resulting in the price of some international fast food chains in Vietnam too high compared to the needs of users.

In fact, the market shows that not every famous food and beverage brand in the world can survive the food and beverage “storm” in Vietnam. There have been many brands “leaving” from Vietnam market such as Tenren milk tea (Taiwan), Gloria Jean’s Coffees (Australia). It is important for the food and beverage industry investors to understand customers and the environment doing business in Vietnam.

In short, food and beverage is a potential industry but also involves many risks. Especially encroaching on the Vietnamese market – an emerging market, long enough access time and clear, effective strategies are required. The above article is expected to provide investors with some useful notes for the F&B development plans in Vietnam. And at Viettonkin, we are ready to give investors thorough consultancy to achieve success in the food and beverage market in Vietnam.

You can also check our tips for helping food and beverage company to stay afloat during crisis.

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