How Vietnam’s Restaurant Scene Is Evolving In Q2 2017 | Vietcetera
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Oct 03, 2017
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How Vietnam’s Restaurant Scene Is Evolving In Q2 2017

the number of out-of-home dining visits in Vietnam’s three largest cities grew by 0.7% in the second quarter over the same period last year.

How Vietnam’s Restaurant Scene Is Evolving In Q2 2017

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New data from Decision Lab’s Foodservice Monitor shows that the number of out-of-home dining visits in Vietnam’s three largest cities grew by 0.7% in the second quarter over the same period last year.

This is encouraging for restaurants after a slow start to the year, but this growth did not benefit every segment equally. In fact, the lower end of the market posted the strongest growth, namely street food, convenience stores and canteens, the data shows.

Higher-end segments, and especially full-service restaurants, continue to struggle. Average spending dropped significantly in the second quarter, falling 15% over the same time period in 2016. Why might this be?

Convenience Wins Out

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Source: vir.com.vn

Vietnam’s cities are fast-paced, and many don’t have time in their busy day for a sit-down meal at a full-service restaurant. Street food, the most traditional type of dining in Vietnam, remains extremely popular thanks to its affordability and convenience – oftentimes commuters don’t even need to get off their bike while ordering street food.

The spread of convenience stores throughout major cities, and especially Saigon, has also lured many budget-minded diners, particularly students and young adults. Outlets within this segment are packed during lunch and before or after school or office hours, as chains like 7-11 and Family Mart strive to provide full meals instead of just snacks. Many of these dishes directly compete with street food offerings.

Vietnam also doesn’t have a tradition of extended sit-down meals like those which take place at full-service restaurants. Street food and open-storefront meals are quick since many outlets have high customer turnover. Nhau, or drinking and snacking sessions, take longer, but those generally occur at simple quan places on the street.

High Restaurant Costs Deter Many

While street food options and convenience stores remain relatively cheap, especially outside the urban cores of major cities, full-service restaurant prices only seem to be going up. It is difficult to find a full meal at a western restaurant in Saigon’s District 1 for less than VND200,000, a small fortune for many even in an increasingly wealthy city.

Compared to down-market segments where meals generally cost under VND50,000, it shouldn’t come as a surprise that consumers are turning towards more affordable outlets. Given the high overhead costs required to operate a brick-and-mortar restaurant, it is understandable that meal costs are higher at full-service restaurants, but this makes it difficult for anyone on a tight budget to choose this segment.

Sit-down Restaurants No Longer New and Exciting

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When international-standard chains and restaurants became common in Vietnam throughout the 2000s, many new members of the middle class saw visiting them as a status symbol. Even chains like KFC, considered low-budget in the United States, came to be seen as high-end since they offered air-conditioning and comfortable seats.

Now, many members of Vietnam’s young urban generations have grown up with such options around them all the time, so they no longer carry the same appeal. Eating at KFC doesn’t have the same significance it once did when you can buy the latest iPhone instead.

This may also turn some consumers back towards down-market segments like street food and convenience stores since they no longer feel the need to show off by patronizing a full-service restaurant.

Looking Ahead to Q3

It is unlikely these trends will change in a significant way in the next quarter. Convenience stores continue to open throughout major cities, with Saigon a focal point as 7-11 has ambitious expansion plans. Little stands in the way of this segment becoming even more popular than it already is and continuing to take business away from full-service restaurants, and even street food.

Street food will remain a common choice as well, though it will be interesting to see if the sidewalk-clearing campaigns in Hanoi and Saigon, which have only been intermittently enforced, will impact this segment. Saigon has opened a dedicated ‘street food street’ in District 1 intended for vendors affected by the campaign, and it is yet unclear if such a system will be popular given the traditional convenience of street food being available nearly everywhere.

The data notes that full-service restaurants have begun launching promotions and discounts in order to lure more customers, but it remains to be seen how effective this will be given the stiff downmarket competition. Even a substantial discount at a relatively expensive restaurant would not be enough to put the cost below street food or convenience store prices.

Nonetheless, new upscale restaurants are opening regularly in Vietnam’s major cities, meaning competition will remain fierce in every sector.