California Fitness injects $25 million to expand presence in Vietnam

May 28, 2023 | 09:00
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California Fitness announced a substantial investment of $25 million on May 26 to expand its operations in Vietnam, a move that underscores its commitment to capturing a larger market share in the region.
California Fitness injects $25 million to expand presence in Vietnam

The fitness giant, established in 2007, is set to expand its operations, upgrade its facilities, revamp its appearance, and enhance its services across selected clubs.

Moreover, it intends to secure extended lease agreements for four premium fitness centres strategically located in highly sought-after areas over the next 15 years.

Of particular significance is California Fitness's imminent presence at Hung Vuong Plaza, a prominent commercial complex recently reclaimed by KIDO from Parkson that is scheduled to unveil a new shopping mall concept, Van Hanh Mall, in August.

In addition, the lease contracts for Pico Plaza in Ho Chi Minh City, as well as Hanoi Capital Building and Hanoi Sky City Tower, have been successfully renewed by California Fitness, consolidating the brand's foothold in these key cities.

With a distinguished legacy spanning 16 years, California Fitness & Yoga stands as a trailblazer in the fitness industry and was the first chain of its kind in Vietnam.

Presently, the chain operates an impressive network of 37 state-of-the-art fitness studios, catering to a vast membership base exceeding 500,000 individuals who engage in over 11 million training sessions annually.

However, amidst the meteoric expansion experienced by California Fitness, particularly in Hanoi and Ho Chi Minh City, the company has confronted a host of challenges that have gradually eroded its standing in the eyes of consumers.

Sales tactics characterised by undue solicitation, untransparent pricing structures, and substantial disparities in service quality have contributed to a decline in consumer confidence over the past five years.

In candid acknowledgment of these obstacles, CEO of California Fitness Dane Fort articulated his stance in a statement released towards the end of last year.

He said, "It is crucial to recognise that our rapid growth has presented certain difficulties. Consequently, in recent years, we have refrained from opening new fitness clubs and instead directed our investments towards enhancing the member experience and upgrading existing facilities."

As part of this strategic vision, California Fitness plans to infuse $2 million into its current clubs, introducing state-of-the-art equipment, innovative services, fresh uniforms, and upgraded lighting systems.

To recapture lost market share and counter the rise of emerging competitors like City Gym, Elite Fitness, and S Life Gym, California Fitness has launched a comprehensive restructuring campaign, encompassing its fitness studio network and employee training programmes.

The company has undertaken a substantial equipment upgrade, incorporating leading brands such as Technogym, Matrix, and True Fitness. A careful analysis reveals that acquiring new members costs ten times more than retaining existing ones, underscoring the importance of nurturing customer loyalty.

Moreover, in the wake of the pandemic, there has been a notable shift in public attitudes towards fitness and overall wellbeing. With individuals placing greater emphasis on their physical health, the fitness industry in Vietnam has witnessed a remarkable surge in demand. In response, fitness chains, including California Fitness, are gearing up for a fiercely competitive market environment.

Vietnam's expanding middle-class population, expected to reach 45 million in the next five years, provides a compelling business opportunity. Approximately 15 million individuals are projected to transition from the working class to the middle class, with a significant portion considering fitness club memberships and prioritising personalised fitness regimes to invest in their wellbeing.

"Consequently, California Fitness must inaugurate an additional 150 fitness clubs to cater to this new wave of potential members. Our primary challenge lies in aligning our expansion pace with the rapid population growth," emphasised Fort.

He further noted that before the pandemic, most individuals merely expressed an interest in fitness without actively engaging in training. However, the post-pandemic landscape has witnessed a transformative shift, with fitness becoming a paramount priority for many.

Despite occasional periods of stagnation and the emergence of formidable competitors, Fort asserted California Fitness's preeminent market position, with a market share exceeding 70 per cent and annual revenues amounting to hundreds of billions of VND.

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By Celine Luu

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