Foodservice Profile – Vietnam

Macroeconomic profile and consumer foodservice trends

In 2022, Vietnam's total population was 98.2 million people, representing a CAGR of 0.8% (2017-2022). Vietnam's total population is expected to slightly slow down between 2023 and 2028 with a CAGR of 0.6% from 98.9 million people in 2023 to reach approximately 101.7 million by 2028.

The country's GDP was around US$408.9 billion, equivalent to $1.287 trillion (international dollar) when measured in purchasing power parity (PPP) terms with a real GDP decline to 5.180% in 2022 from 5.329% in 2021 - forecast to recover again in 2024 to reach 5.900%. The inflation rate reached 3.216% in 2022, increasing from 1.835% in 2021.

In 2022, total consumer per capita expenditure (PCE) on personal goods & services in the Vietnam domestic market reached US$2,104.0. Vietnamese consumers spent a total PCE of 30.0% (US$632.2) on food, followed by 1.1% (US$22.6) on non-alcoholic beverages, 1.0% (US$21.1) on alcoholic drinks, and 67.9% on other remaining expenditures such as clothing, housing, health, transportation etc., in 2022. A total of US$232.0 per capita was spent on foodservice expenditures over the year, which is expected to grow in sales from a historical CAGR of 0.1% (2017 to 2022) to a forecast CAGR of 9.6% between 2023 and 2028.

The Vietnamese foodservice market

In 2022, Vietnam's consumer foodservice food and beverage sales totalled US$22.8 billion using year-over-year (y-o-y) exchange rates. Between 2017 and 2022, foodservice sales increased slowly by a CAGR of 0.2%, while experiencing a total decline of 9.0% since its peaked sales in 2019 (US$25.0 billion). During this time (2019-2022), foodservice sales of drinks registered the largest decline at a CAGR of −14.4% mostly likely due to losses during lockdown periods with foodservice sales of food at a decline of 4.3%. Both food and drink foodservice categories are expected to pick-up and return to experience moderate growth over the forecast period by a CAGR of 6.4% (2022 to 2027) to reach a foodservice sales value of US$31.1 billion by 2027.

As society reopened in Vietnam after two years of restrictions and limitations, this stimulated sales across all foodservice channels including travel, tourism and on-the-go sales. A fourth COVID-19 wave hit Vietnam in 2021 said to have been worse than that of 2020, however, starting from October 2021 when restrictions were loosened again, this resulted in higher recovery in 2022 as consumers were keen to dine out again. Nevertheless, the foodservice industry has become a challenging environment to thrive in with global inflation placing pressure on food prices as the costs of crop production and raw ingredients have increased, along with hikes in transportation and other logistical costs. Overall, foodservice operators are focusing their efforts on enhancing offers with aggressive marketing campaigns and expansion into popular areas (resuming longer-term pre-pandemic plans) to reattract consumers back to their premises.^{Footnote 1}

In Vietnam, standalone foodservice outlets accounted for 90.8% of sales (US$20.7 billion) in 2022, followed by 4.0% in retail (US$911.2 million), 2.2% in travel (US$501.2 million), 2.0% in lodging (US$455.6 million), and 1.0% in leisure locations (US$227.8 million). Leisure outlets registered the highest growth between 2017 and 2022 at a CAGR of 2.6%, while lodging and retail locations reported declines of 5.4% and 2.5%, respectively over this period. Over the forecast period (2022 to 2027), all foodservice channels are expected to report higher CAGRs with leisure (31.6%), travel (22.8%), lodging (19.0%), and retail (22.8%) recovering the most over standalone outlets remaining stable as during COVID-19 at 4.4%.

In 2022, with increasing food prices there is an increased consumer price-sensitivity in Vietnam where foodservice channels that offer lower prices such as food stalls/kiosks and limited-service restaurants (LSRs) are more appealing to lower-to mid-income consumers. Meanwhile, often the younger generation seeking new experiences within foodservice offerings or higher-income urban consumers are more willing to pay higher prices within more expensive full-service restaurants (FSRs) and bars/cafés.^{Footnote 1}

Vietnam's largest foodservice channel in terms of sales were from within FSRs at a total registered value of US$15.7 billion (68.9%) in 2022. Within the FSR channel over last year, Asian cuisine - which is strongly influenced by Japanese and Korean culture - maintained its popularity in FSRs in Vietnam accounting for 97.3% of sales in the category, compared to market size in European and pizza FSRs (1.8%), North American FSRs (0.4%), and other FSRs (0.5%) in 2022. Pizza FSRs was the best performing category in 2022, with its foodservice value sales increasing by 31% in current terms to US$134.7 million from US$103.2 million in 2021. Foodservice value sales in the FSR channel are set to increase at a CAGR of 9.6% over the forecast period (2022 to 2027) to reach US$24.8 billion in 2027.

Once society reopened, FSRs have began to recover further in 2022 from a loss of sales of 12.0% compared to 2019 at the category's peak value (US$17.3 billion). While LSRs lend themselves well to takeaway services, the appeal of FSRs is in their dine-in qualities, in which Vietnamese consumers have been keen to re-embrace dining, missing the opportunity to re-establish social occasions with friends and families. That said, in light of the trend for home delivery and associated apps, several small independent FSRs did switch to delivery options via third party apps, and packed their meals (the same as on their restaurants' menu) as they would if they were serving them under normal circumstances. Large, chained players like Golden Gate Trade & Services JSC's brands and Pizza 4P's, also started selling ready-to-cook and frozen items in supermarket chains, in which never had to shut down during lockdown periods. Additionally, to stand out from their other channel competitors, FSR operators are investing in new outlets, whereby outlet numbers have risen by 5% to 114,813 in the same year in 2022, expected to increase at a CAGR of 4% to reach 136,397 over the same period in 2023.^{Footnote 2}

In Vietnam, sales in cafés and bars/pubs were the 2nd largest channel at a sales value of US$3.6 billion in 2022. Cafés registered the highest sales at US$1.7 billion (47.4%), followed by specialist coffee and tea shops at US$1.2 billion (32.4%), bars and pubs at US$619.3 million (17.3%), and juice/smoothie bars at US$104.3 million (2.9%) over the year. Bars/pubs was the best performing category in 2022, with its foodservice value sales increasing by 55% in current terms from US$399.5 million in 2021. Foodservice value sales in the cafés/bars channels are set to increase by a CAGR of 14.3% over the forecast period (2022 to 2027) to reach US$7.0 billion in 2027.

Bars/pubs returned to strong growth in 2022 from a total loss of sales of 40.4% compared to the category's peak value (US$1.0 billion) in 2019 - with independent foodservice operators benefiting the most for their social establishments that have uniqueness and individual appeal. During the long lockdown in 2021, independent players in the cafés and bars/pubs appeared to gain an advantage overall over chained players due to independent players often being less rigid and structured and more flexible and adaptable to the fast-changing environments and government regulations. Another advantage was that many independent players are also family-owned and operate from their own houses in Vietnam, which reduces rental costs. Chained outlets are usually similar to each other and can become boring and lose their attractiveness, where currently, branded bars/clubs typically see a smaller number (~2-3) of outlets in Vietnam. Many new independent players entered the market with new styles of décor, menus or other features to attract customers with cafés and coffee shops being ideal places to socialize with friends in a comfortable setting. Outlet numbers of cafés/bars in Vietnam rose by 8% to 35,011 in 2022, expected to increase at a CAGR of 5% to 43,869 over the same period in 2023.^{Footnote 3}

Street stalls/kiosks registered the 3rd largest channel sales reaching its peak value of US$2.8 billion in Vietnam in 2022, which was the least negatively impacted foodservice category (usually as the cheapest option), experiencing a total growth increase of 26.2% over 2019 (US$2.2 billion). Independent foodservice street stalls/kiosks performed the best with foodservice value sales rising by 45% in current terms in the category from US$1.9 billion in 2021. Foodservice value sales in the category is set to increase by a CAGR of 10.6% over the forecast period (2022 to 2027) to reach US$4.6 billion in 2027. Albeit, consumers who frequent such outlets are typically of the lower-income bracket and are likely to be more price-sensitive, as such, as food prices increases, cash-strapped consumers will likely cut their spending in foodservice overall.^{Footnote 4}

The number of street stalls/kiosks in Vietnam is growing robustly in 2022, growing by 22% to 172,628 in the same year, which is expected to rise at a CAGR of 7% to 241,998 over the same period in 2023. Furthermore, regulations on travel have also loosened, resulting in the restimulation of tourist trade and on-the-go consumption. Many street stalls/kiosk operators linked up with third party delivery apps and stocked up on packaging supplies to better prepare for delivery and takeaway services during the pandemic. Additionally, street stalls/kiosks are familiar to Vietnamese consumers and offer a certain sentimental attraction (memories of a taste from the past) that offer unique food tastes at affordable options. Thus, many café/bars and FSRs foodservice players in Vietnam like Highlands Coffee, Pizza 4P's and Phuc Long adapted their sales strategies by moving from their current establishment into street stall/kiosks, in order to continue to offer safe takeaway services during lockdown periods.^{Footnote 4}

Limited-service restaurants (LSRs) was the smallest foodservice category in Vietnam at sales of US$721.4 million in 2022. Over the year, Asian LSRs registered the highest sales in the category at US$234.3 million (32.5%), followed by LSRs serving ice cream (22%), chicken (20.4%), burgers (13.5%), baked goods (6.6%), convenience store products (2.9%), and pizzas (2.1%). Chicken LSRs was the best performing category in 2022, with its foodservice value sales increasing by 42% in current terms from US$103.9 million in 2021. Although a smaller category within the consumer foodservice industry, convenience stores LSRs were the least impacted category in 2021, since they were being considered a grocery store and was the only channel able to still sell their foods and snacks during lockdowns.^{Footnote 5} Foodservice value sales in the LSR channels are set to increase by a CAGR of 10.5% over the forecast period (2022 to 2027) to reach US$1.2 billion in 2027.

Especially for LSRs who mainly target price-sensitive families and students, home delivery became the go-to option, even after the lockdowns were lifted with many consumers still reluctant to dine-in to avoid exposure to other people. As such, LSRs offered constant promotions through third party delivery apps, such as Grab and Baemin, which helped drive overall sales in the category by often making it cheaper to order home than buying in the outlets. These applications are developing very fast in Vietnam, where food service operators are offering promotions and loyalty/discount programmes, while also investing in branding campaigns to attract new consumers. Much like the other foodservice channel competitors, LSRs are growing their number of outlets in major urban locations, while also offering wider ranges of services and new food options. Outlet numbers of LSRs in Vietnam grew by 7% to 10,046 in the same year in 2022, expected to increase at a CAGR of 4% to 12,080 over the same period in 2023. Challenges still do exist for foodservice channels and with many consumers expected to be more careful with their budgeting, many are likely to switch away from non-essential spending - especially for underdeveloped food services such as ice cream LSRs, which is likely to continue to decline from its historical CAGR of −6.8% (2017-2022).^{Footnote 5}

Foodservice sales: chained franchises versus independent operators

In 2022, independent operators (95%) were the largest foodservice providers over chained franchises (5%) in Vietnam with value sales of US$21.6 billion and US$1.2 billion, respectively. Independent foodservice operators are said to have been more flexible and agile in adapting to the changes forced upon the foodservice industry during the pandemic. Many independent players are family-owned and operate from their own houses, reducing rental costs and providing the opportunity to adapt to food price increases and better manage their operating margins in 2022. The category also have an advantage in terms of differentiation and uniqueness in settings that is harder to duplicate in chain outlets.^{Footnote 1}

Despite ongoing economic pressures that will impact food prices and higher operating costs, sales within independent operators are forecast to recover at a rate of 10.3%, while chained franchises are expected to grow by a higher CAGR of 14.8% in value (2022 to 2027). The number of both independent and chain foodservice outlets are growing well with players in these spaces strongly looking past the pandemic and are investing, enhancing, and expanding on their outlets to meet the high demand from consumers.

In 2022, independent operators in Vietnam of FSRs was the largest foodservice segment at sales of US$15.4 billion, followed by sales in independent cafés/bars (US$3.1 billion), street stalls/kiosks (US$2.7 billion), and LSRs (US$416.9 million). The independent foodservice categories that adjusted well during the pandemic and that showed positive period growth (2017-2022) were independent street stalls/kiosks at a CAGR of 6.0%, along with independent Asian FSRs (0.5%) and FSRs serving pizzas (4.0%) at an overall CAGR of 0.4% in the FSR category due to independent North American (−9.2%) and European FSRs (−5.7%) not faring as well over the review period. All other independent operator foodservice outlet channels over the historic period experienced positive growth at the exception of independent bars/pubs at a CAGR of −7.1% and ice cream LSRs (−5.4%) who registered negative growths (2017-2022). Albeit, all independent foodservice operators are forecast to recover with positive, moderate to high growths in sales between 2022 and 2027.

Vietnam's chained franchises of cafés/bars registered the largest sales at a total of US$511.8 million, followed by sales in chained LSRs (US$304.5 million), FSRs (US$287.9 million), and street stalls/kiosks (US$46.0 million) in 2022. Between 2017 and 2022, all chained foodservice segments, registered low to moderate growth at the exception of chained ice cream LSRs, once again at a CAGR of (−20.2%), chained Asian FSRs (−2.4%), and pizza LSRs (−0.1%). Chained ice cream LSRs are expected to continue to experience negative growth at a CAGR of −12.2%, while all other chained segments are expected to recover to moderate to high growth over the forecast period (2022 to 2027).

Foodservice: Eat-in versus delivery and to-go services

In Vietnam, eat-in services registered the highest sales at US$17.1 billion, accounting for a market share of 75.1% of total foodservice sales in 2022 - especially for eat-in services in FSRs at sales of US$12.2 billion (71.4%), eat-in services in cafés/bars at US$2.9 billion (16.7%), and eat-in street stalls/kiosks at US$1.6 billion (9.1%) in the channel segment.

Take-away services in Vietnam registered the 2nd largest sales at US$3.2 billion, accounting for a market share of 13.8% of total foodservice sales in 2022 - especially take-away services in FSRs at sales of US$1.9 billion (60.7%), and take-away services in street stalls/kiosks at US$874.9 million (27.8%) in the channel segment.

Home delivery services in Vietnam registered the 3rd largest sales at US$2.5 billion, accounting for a market share of 11.0% of total foodservice sales in 2022 - especially home delivery services in FSRs at sales of US$1.6 billion (62.6%), home delivery services in cafés/bars at US$436.6 million (17.4%), and home delivery services in street stalls/kiosks at US$344.1 million (13.7%) in the channel segment. Registered in 2021, drive-through services in LSRs brought in sales of US$0.4 million. Although some eat-in and takeaway services experienced negative growth during the historic period (2017-2022), all channels by various service types are expected to recover over the forecast period (2022 to 2027) with home delivery sales returning to regular growth - which historically spiked in sales despite the pandemic (especially in street stalls/kiosks and cafés/bars channels).

In 2022, total foodservice sector home delivery services at sales of US$2.5 billion (total growth: +67.9%) in Vietnam have managed to exceed pre-pandemic sales compared to sales of US$1.5 billion in 2019 - with sales, however, dropping by 13.4% from US$2.9 billion in 2021. Meanwhile, total sector takeaway services (−3.5%) are getting closer to recovering to pre-COVID value sales with eat-in dining services having further to go towards recovery (−15.6%) with sales of US$17.1 billion in 2022 from peak sales of US$20.3 billion in 2019. Total drive-through services have remained stable over the review period at smaller sales of US$0.4 million (available in LSRs only) between 2017 and 2021.

Foodservice sales: Offline retail versus online

In Vietnam, offline retail (in-person) foodservice sales totaled US$21.5 billion (94.3%) versus online sales of US$1.3 billion (5.7%) in 2022. E-commerce total sales accounted for 4.5% share from within Vietnamese FSRs, followed by cafés/bars (0.6%), street stalls/kiosks (0.4%), and LSRs (0.3%) over the year. Since the beginning of the pandemic, growth in online sales occurred in all categories except for in FSRs (−5.4%), registering positive CAGRs respectively in cafés/bars (287.9%), street stalls/kiosks (213.2%), and LSRs (27.2%) between 2019 and 2022. Conversely, offline retail foodservice sales declined over this same period in all categories except for street stalls/kiosks (+22.9%), registering losses respectively in cafés/bars of 13.9%, FSRs (13.2%), and LSRs (11.2%). Overall online foodservice sales grew at a historical CAGR of 25.4% (2017-2022) at a share of 5.7% in 2022, and is forecast to grow at a CAGR of 11.9% (2022 to 2027) to reach US$2.3 billion (7.4%) in 2027.

Competitive landscape in Vietnam

The consumer foodservice sector in Vietnam is characterized by a highly fragmented competitive landscape dominated by independent outlets, with chained players holding only 2-3 similar outlets throughout Vietnam. Established operators that were able to offer delivery options were more likely to survive during the COVID-19 crisis and were more easily able to bounce back to normal sales by 2022.

Asian cuisine, influenced strongly by Japanese and Korean culture, maintains its popularity in FSRs in Vietnam. This has caused intensive investments from large Japanese and Korean companies not only in food but fashion, music and the films industry, stimulating sales in food FSRs. Vietnamese consumers also proudly support local FSRs serving their own culture's traditional cuisine, thus Asian FSRs have the highest chance of success in the country. Chicken LSRs continue to attract attention in Vietnam both by children and adults, with the biggest names being KFC and Jollibee Vietnam Ltd. Companies. International names seeing growth in LSRs include KFC, alongside McDonald's (Good Day Hospitality JSC), and Domino's Pizza (Imex Pan Pacific Group Inc.). These trusted companies with a professional image are known by consumers as offering a high standard of service and food quality - bringing new formats, trends, and styles of services, that help the overall category to develop further in the country.^{Footnote 1}

Specialty coffee and tea shops are enhancing their food and atmospheric offerings that is helping to grow the category by better meeting many consumers needs, as it offers both drinks and foods, along with high-quality coffee and teas, and regular innovations with intriguing and trendy beverages. Companies that saw new expansion investments in 2022, included Phuc Long (Phuc Long Coffee & Tea Co. Ltd.), Katinat Saigon Kafe (Katinat Saigon Kafe Jsc), and ChukChuk. These establishments are becoming suitable for various occasions, from hanging out with friends, to remote working, studying, and setting up business appointments. The boom in chained street stall/kiosks is expected to continue and brands such as Phuc Long or Masan Group Corp. (the GBO of Phuc Long) and Chuk Chuk are strategically investing and expanding in the channel. Mason has entered a cooperation arrangement with Phuc Long recently, to sell coffee and bubble tea at more than 2,200 Winmart+ stores nationwide. ChukChuk focuses on ice cream, bubble tea, coffee, and other beverages, aiming to expand its outlets to 300-400 in Vietnam, with a focus on outlets in malls.^{Footnote 1}

To lower operation fees and standardize brands which attracts attention, franchising is another developing trend. Franchising also, helps operators not have to start from scratch. Branded chains of street stalls/kiosks for example, is a strategy to ensure that consumers develop a belief that the food and service standards are of better quality over unbranded chains.^{Footnote 1}

In 2022, Vietnam's top foodservice company was Jollibee Foods Corporation (café/bar) with value sales of US$149.9 million for its Highlands Coffee or Jollibee brand, representing a 0.7% share of the foodservice market. The chained Yum! Brands incorporation (brands: KFC, Pizza Hut) was the second largest FSR and LSR foodservice company with value sales of US$102.2 million (share: 0.4%); followed by independent Golden Gate Trade & Services JSC at US$93.2 million (brands: GoGi House, Kichi Kichi, share: 0.4%), The Lotte Group (LSR) at US$78.6 million (brand: Lotteria, share: 0.3%), and the Mason Group Corporation (FSR) at US$46.3 million (brand: Phuc Long, share: 0.2%) in 2022. These top five companies only accounted for 2.0% of the total foodservice market in Vietnam. The largest street stall/kiosk operator in Vietnam was the Charoen Pokphand Group (brand: 5 Star Chicken) at sales of US$25.3 million (share: 0.9% in the category) in 2022.

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Resources

• Euromonitor International, 2023
• Euromonitor International | February 2023. Country Report: Cafés/Bars in Vietnam
• Euromonitor International | February 2023. Country Report: Consumer Foodservice in Vietnam
• Euromonitor International | February 2023. Country Report: Full-Service Restaurants in Vietnam
• Euromonitor International | February 2023. Country Report: Limited-Service Restaurants in Vietnam
• Euromonitor International | February 2023. Country Report: Street Stalls/Kiosks in Vietnam

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