When Starbucks opened its first outlet in Vietnam in early 2013, many said the US chain would have a hard job convincing locals to switch from stronger coffee at the simple cafes that line almost every city street and the more sophisticated outlets run by local chains Trung Nguyen and Highlands Coffee.
Customers at a Starbucks cafe in downtown Ho Chi Minh City on April 21, 2015. Photo: Thao Vi
Today the world’s largest coffee chain has eight stores in Ho Chi Minh City and four in Hanoi. While the company does not disclose its revenues or growth rate, its cafes are crowded every evening.
Many young people say the light-flavored coffee is never an issue as they go to Starbucks mainly for the cool and trendy experience. Moreover, they can drink chocolate, juice, or tea instead of caffè mocha or frappuccino, they point out.
The US coffee giant has an offering for Vietnamese only. Last month it launched dolce misto, which was created to “bring Vietnamese customers a unique and delicious drink whose flavor is familiar to them,” Patricia Marques, General Manager of Starbucks Vietnam, said.
Though dolce misto is made from arabica, it is stronger and sweeter than Starbucks’s other drinks thanks to a different brewing method and sweetened milk, Marques told Thanh Nien News. The others are made from espresso and unsweetened milk, she said.
Most coffee grown in Vietnam and brewed is robusta, which has a slightly bitter taste that is offset by sweetened condensed milk.
Marques described the introduction of dolce misto as “a highlight” in Starbucks’s business in Vietnam, adding it has become a favorite for many customers.
People eat at a McDonald's restaurant in Ho Chi Minh City on March 9, 2015. Photo credit: Reuters
McDonald’s, on the other hand, offered McPork burger, which it said to reflect Vietnamese preferences, along with the iconic Big Mac beef burger when it opened in the pork-loving country in early 2014.
Last Sunday the company behind the golden arches opened its fifth restaurant in Vietnam, all of them in HCMC.
It seems that fast food rival KFC, which arrived in HCMC in 1997, also understands Vietnam well.
Since 2010 KFC has offered rice, Vietnam’s iconic food, served with roasted chicken and vegetables for lunch.
These days the image of founder Colonel Sanders is ubiquitous in Vietnamese cities since the chain has 135 outlets around the country.
West meets East
In fact, western food and beverage chains have been customizing their menus in eastern markets for years.
In India, Hindus don't eat beef and Muslims don't eat pork, while a significant portion of the population is vegetarian. Thus, McDonald's has not had beef or pork on its menu since entering the country in 1996. Instead it sells chicken and vegetarian variants.
McDonald's tweaked 70 percent of its menu for the Indian market, according to Euromonitor.
In China, KFC has been opening for breakfast since 2002 and offers favorite Chinese morning treats like fried bread stick, spring rolls, soybean milk, and porridge.
Starbucks, meanwhile, has capitalized on China’s tea-drinking culture by including popular local teas like Oolong and Mudan on the menu.
Not all foreign things are superior
Experts say sticking to the classic menu might be enough for US chains to do well in Vietnam, but localization helps them appeal to new customers.
“Localized products will draw attention and make customers step into the store,” Robert Tran, CEO of Robenny Corp., a business strategy advisory firm in charge of US and Asia Pacific markets, told Thanh Nien News.
“When customers are already in, there are many chances to sell other products.
“Starbucks, McDonald’s, KFC have to train their staffs well in cross-selling skills.”
Local products might not contribute profits, but could help other products sell for huge profits, he said.
Sean Ngo, CEO of VF Franchise Consulting, who is based in Ho Chi Minh City and has offices in Thailand and Singapore, suggested another reason: “Not localizing would drive home the message that all things foreign are superior and shows a lack of knowledge and respect for the local culture.
“It is not an accident that brands that have localized well are also performing better than those that do not.”
Ngo said while international brands are increasingly more open to localization of their menu to cater to local markets, the challenge for them is to not over localize since that may make the brand appear local rather than a highly successful international one.
He sees more and more franchises entering Vietnam from the USA and Australia as well as brands from within Asia.
McDonald’s 2014 entry preceded a rush to set up shop in Vietnam by fast-food and cafe chains like Burger King, Subway, Pizza Hut, Coffee Bean & Tea Leaf, Australia’s Gloria Jean’s Coffee and the Philippines’ favorite chain Jollibee.
They eye a share of a market where 65 percent of the 90 million population is below 35.
“We [also] see more locally grown franchise systems continue to take root and to contribute to the evolving franchising industry in the next decade,” Ngo said.
“Vietnamese food and culture are well liked internationally, and the potential to grow overseas is possible but only if adequate preparation and investments are made to ensure success.”