VietNamNet Bridge - F&B investors
enter Vietnamese market via side door
VietNamNet Bridge –
Vietnam will have to open its food & beverage (F&B) market beginning in
January 2015 under its WTO (World Trade Organization) commitments.
However, dozens of F&B brands have been present in Vietnam for years, some
entering through the “front door”, and others through the “side door”.
The opening of the first
Starbucks shop in Vietnam earlier last year, for example, was a surprise to
many lawyers.
Under its WTO
commitments, Vietnam does not have to fully open its F&B market to foreign
investors until eight years after WTO accession. Vietnam officially joined the
WTO in January 2007.
Prior to that eight-year
deadline, foreign investors are permitted to operate F&B chains only as
part of their hotel construction and upgrading projects, i.e., they cannot open
shops separate from hotels. The development of such F&B chains would be
allowed only from January 1, 2015.
HCM City’s state
management agency in charge of managing foreign direct-invested projects said
that it had not granted any investment certificates to any foreign legal
entities to develop the café chain bearing the Starbucks brand in HCM City.
However, 10 Starbucks
cafés have opened in HCM City and Hanoi. How have Starbucks and other F&B
chains been able to enter the Vietnamese market?
Local newspapers
reported that the well-known American brand entered Vietnam through its
franchise partner, Hong Kong’s Maxim Group.
Maxim is a partner of
Starbucks Coffee International, Inc, now operating Starbucks outlets in Hong
Kong and Macau. It runs Starbucks shops in Vietnam under an agreement between
one of its subsidiaries, Coffee Concepts (Vietnam) and Starbucks.
Under the agreement, the
subsidiary has the right to use the Starbucks brand in Vietnam and extend the
Maxim-Starbucks partnership to areas outside Hong Kong and Macau.
And the legal entity
managing the Starbucks chains in Vietnam is Y Tuong Viet F&B Company, a
100-percent Vietnamese-owned company under a franchise contract with Starbucks
and Coffee Concepts (Vietnam).
Analysts noted that
franchise contracts with Vietnamese partners was the favored method used by
F&B owners to open many shops in Vietnam. In addition, they can also
establish underground links with Vietnamese institutions and individuals to do
business.
Pre-WTO brands
While many foreign
brands have entered Vietnam through the “side door”, others have come through
the front door as 100 percent foreign-invested enterprises. These include
Lotteria, KFC and Jollibee.
An official of the HCM
City Planning and Investment Department explained that these brands arrived in
Vietnam many years ago, when Vietnam was not a WTO member and did not have to
impose restrictions on the companies.
Lotteria Vietnam, which
runs the Korean-owned food chain, for example, has just opened its 200th shop
in Vietnam. There is no limit on the number of shops it can open.
US-based KFC, whose
first shop in Vietnam appeared in 1997, has opened 180 shops in 20 provinces
and cities in the country over the last 17 years.
TBKTSG