Fast-food chains ignore Vietnamese suppliers, cite quality reasons

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The first foreign fast-food brand came to Vietnam in 1995 and there has been a steady influx since, but one thing has remained constant -- Vietnamese suppliers to these chains have been conspicuously absent.

US brand Dunkin' Donuts is the latest entrant, opening an outlet in Ho Chi Minh City this month and with plans to open 50 by 2018.

Popeyes Chicken, which first came to HCMC in 2010, returned last January after quitting in 2012 due to losses.

Tuoi Tre newspaper quoted insiders as saying that foreign chains, which grow at 20 percent annually, mostly import their requirements since local providers have not met requisite standards.

Nguyen Hai, general director of the HCMC-based Vietnam Food and Beverage Company, the sole franchisee for many of the foreign brands, said at the launch of Dunkin' Donuts last Friday that 80 percent of ingredients would be imported.

"It is necessary to increase local ingredients, but the providers are required to meet very high standards."

Few Vietnamese firms have allegedly managed to do so.

A spokesperson for KFC, the US chain that arrived in 1996, said the company has sent personnel to train Vietnamese farmers in quality standards and managed to increase the use of local ingredients to 30 percent.

Le Hoai Nam, marketing director of KFC, said it is not easy to increase it any further though they want to.

Nam said besides quality requirements, local supplies also need to be consistent, with items like potato chips and chicken pieces requiring to be of the same shape and size.

"We have faced many barriers in looking for and establishing a supply chain that meets standards."

South Korea's Lotteria imports all its potatoes and sauces despite being aware that using local ingredients would save cost, its marketing director, Truong Ham Liem, said.

Lotteria leads the industry with 146 outlets, followed by KFC with 134 and Jollibee with 30.

Burger King, which opened its first restaurant in Ho Chi Minh City October last year, uses only foreign ingredients except for buns.

Huynh Tuan, director of a local food company, told Tuoi Tre he has tried to sell to foreign chains but failed like many other Vietnamese suppliers.

ABC Bakery chain is a rare local success, being the exclusive bun suppliers to KFC, Lotteria, and Burger King.

Kao Sieu Luc, director of ABC, said sales to the fast-food sector has shot up from 2 percent of its revenues a decade ago to 25 percent now.

The bakery delivers nearly 40,000 buns to the chains every month.

It has also been chosen to supply to McDonald's, the world's largest restaurant chain, which will open its first outlet in Ho Chi Minh City early next year following on the heels of traditional rival Burger King.

"They are all buns but each chain has its own formula and we have to keep it secret," Luc said.

"So we are forced to run different production lines for different chains."

Le Ha My Tram, who represents McDonald's in Vietnam, said the chain welcomes local suppliers, but it depends on the latter's ability to meet requirements.

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