Thought Bubble is a regular feature on the Mintel blog highlighting multiple viewpoints on one topic from Mintel’s team of expert analysts around the globe.

Recently, McDonald’s entered a new Southeast Asia country for the first time in nearly two decades, adding a new restaurant in Vietnam’s largest city, Ho Chi Minh. A stated, yet aggressive goal of expanding the chain to 100 additional locations within the next 10 years poses quite a challenge, as McDonad’s enters the market much later than many of it’s competitors, including Domino’s, Subway, Carl’s Jr and Dunkin’ Donuts.

According to International Monetary Fund estimates, Vietnam has averaged economic growth of 6.6% this century, quadrupling it’s per-capita income to $1,896 last year from $402 in 2000.  Will this, along with the cache that McDonald’s brand carries, be enough to overcome a late entry into the market and heavy competition?  Mintel has invited two of its analysts from different sectors to weigh in with their thoughts.

img_bethany_wall

Jane Barnett, Senior Trend and Innovation Consultant:

“On its very first day on February 8th of this year, McDonald’s served over 22,500 customers in Vietnam. Quickly after this initial big bang, the second McDonald’s was introduced to reach the demand of Saigonese people.

As of July 2013, Vietnam reported a population of 92 million people, 43 per cent of which are below 25 years old. Besides, a rapid increase of the middle-class group who consider Western brands inspiring and premium. This provides a solid support for McDonald’s growth plan in Vietnam. According to rumor, this American giant is looking at 100 outlets in Vietnam in the near future.

Many experts, however, still question about their opportunity in Vietnam for being a latecomer after major rivals, and its 24-hour drive-through is not highly unique, since local food outlets usually open very early in the morning and close quite late at night.

It took KFC almost 10 years to obtain the current leading position in the fast food industry in Vietnam. How fast and how huge the success of McDonald’s in this country will depend on many factors, especially their marketing commitment such as in-store activations, customer loyalty programs and PR, as well as their price competitiveness.”

img_bethany_wallBethany Wall, Foodservice Analyst:

“McDonald’s recently entered the Vietnam market, a decade after other fast food competitors. The mega brand has vast experience entering foreign markets, a great deal of capital to finance its expansion, an efficient distribution system in place, and scales of economy on its side. However, some speculate McDonald’s may be too late to gain a foothold due to stiff competition from Asian chains Lotteria and Jolibee along with the strong presence by KFC and recent entrants Subway and Burger King.

McDonald’s has earned a positive worldwide reputation through its strong presence and is likely already recognized by the majority of Vietnamese consumers. McDonald’s also effectively adapts its menu to local tastes while featuring signature items. This strategy helps the brand bridge the gap between traditional foods of the country and American cuisine, gaining trust in new markets and eliminating the veto vote in dining parties from members looking for something more familiar.

It is my opinion that the market for fast food will likely expand to accommodate the burger giant. Vietnam has an increasing GDP per capita, signaling a growing disposable income in conjunction with a large population of young consumers—the primary users of quick service restaurants in the United States. Like American Millennials, these young consumers have grown up with fast food meals and are more likely to be familiar with the brand, creating excitement rather than hesitance for its arrival.”

To read more on Mintel’s Quick Service Restaurants US report, click here.

Jane Barnett joined Mintel in 2007 and is currently a Senior Trend and Innovation Consultant for the South Asia region, heading up the Customised Intelligence team.  In 2009, Jane developed a greater focus on the Food and Drink industry as a Trends and Innovation Consultant, gaining valuable experience delivering tailored research and analysis and discussing new product development at a client level, as well as at tradeshows and conferences across Europe.

Bethany Wall’s work as Foodservice Analyst is primarily focused on developing monthly foodservice-specific reports by utilizing custom consumer studies, market research, and menu information. Her most recent topics include Technology in Restaurants and LSR: Ethnic Concepts.

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