F&B players remain upbeat about market

After a decade of doing business in Vietnam, instead of organising a grand anniversary celebration, American fast food giant McDonald’s bid farewell to its most prominent store in the Ben Thanh area of Ho Chi Minh City last week.

McDonald’s closure in Ben Thanh leaves it with only 35 stores

“Although we do not want to say goodbye, we will end our 10-year journey full of emotions on September 19,” a McDonald’s fan page announced.

McDonald’s Ben Thanh was one of the first stores of the brand in the country, and among its busiest stores, with a seating capacity of around 260. After the closure of this branch, McDonald’s will have only 35 stores nationwide, including 17 in Ho Chi Minh City and the remaining stores located in Hanoi, Danang, Binh Duong, Khanh Hoa, and Haiphong.

McDonald’s once had ambitions to own a wide network of stores nationwide, similar to how they operate in many other countries. When it entered Vietnam in 2014, McDonald’s owned over 100 stores in Singapore and about 400 stores in the Philippines.

According to market research by iPOS, 2024 has been a challenging year for the F&B industry, with approximately 30,000 stores closing in the first six months.

Before McDonald’s, many major brands in the F&B sector such as Starbucks and The Coffee House also announced the closure of branches located in prime locations. Starbucks announced the closure of the Starbucks Reserve store on Han

Thuyen Street in District 1 at the end of August due to the high increase in rental costs. The Coffee House chain also confirmed the closure of all stores in Can Tho and Danang by the end of the third quarter to optimise costs and ensure business efficiency.

However, the economic challenges do not diminish the attractiveness and confidence of businesses in the recovery of the sector. A report on the culinary business market in Vietnam in the first half of 2024 published by iPOS.vn in August found that up to 61 per cent of businesses are trying to maintain their current business scale, and over one-third of businesses plan to open new locations.

Amy Truong, CEO and founder of the ToCoToCo milk tea chain, confirmed that declining purchasing power and increasing competition among milk tea brands did not appear to affect ToCoToCo. On average, each day, ToCoToCo still records revenue of VND3 billion ($120,000), equivalent to 100,000 drinks sold.

“Despite the not-so-positive changes in the market, since the beginning of this year, ToCoToCo has maintained an impressive growth pace by continuously opening new stores,” Truong said.

ToCoToCo is currently the largest franchise milk tea chain in Vietnam, with approximately 1,000 stores in 56 locations nationwide.

According to Do Duy Thanh, a senior F&B operations consultant in Vietnam, the market is being redistributed to align with business trends and the needs of customers. “The assessment that the market in Vietnam is declining is incorrect. Instead, the market share is being redistributed more appropriately,” he said.

For the beverage business model, market share is shifting according to two major trends. Brands with strong capital will continue to open experiential store chains, while smaller brands will focus on developing the kiosk model.

Meanwhile, the Michelin-starred culinary model is expanding fast. Certified Michelin brands are seizing the opportunity to increase their average revenue by as much as 300 per cent with a focus on enhancing the dining experience for guests, meticulous taste, and culinary techniques.

“Social media also plays a significant role in the development of the F&B industry,” Thanh added. “Many F&B business models are heavily promoted on social media, with many establishments having all of their customer base coming from TikTok or Instagram.”

The increasing demand for digital technology, sustainable experiences, and personalisation from consumers is driving F&B businesses to adapt and change in line with the trends.

In the second quarter of this year, a dozen F&B brands from New Zealand, including Anchor, Bostock, Fresh Co, Freshmax, Kiwi Crunch, Rockit, T&G, and Zespri, came to Vietnam seeking opportunities.

“We will focus on stores and supermarket chains, and continue to utilise existing digital resources such as numerous streamers and content creators to easily convey our story to consumers throughout the country through social platforms like TikTok, Facebook,” said Scott James, consul general and trade commissioner for New Zealand in Vietnam.

The F&B industry in Vietnam is experiencing remarkable development with an impressive annual growth rate of 10-12 per cent, ranking third in Southeast Asia, according to global exhibition organiser, Informa Markets. Kirin Capital’s F&B industry outlook report forecasts that the F&B sector in Vietnam will increase by nearly 11 per cent by the end of this year compared to 2023, reaching around $26.2 billion.

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McDonald's Ben Thanh store closes after 10 years McDonald's will close its Ben Thanh outlet in Ho Chi Minh City on September 19, marking an end to a decade of operations in District 1.