VietNamNet Bridge – The sweets market proves to be very lucrative in the eyes of investors, which explains why more than 100 bakery brands have been existing there. However, there are many spikes and thorns on the market.
Retail premises – biggest challenge
Kao Sieu Luc, the owner of a bakery brand, affirmed that the retail premises rent would be a big item of expenditure for all bakery brands, simply because advantageous position is considered the most important factor in distribution. On average, a bakery has to spend from tens to hundreds of millions of dong a month on premises
However, even if they have money to pay, it would still be very difficult to have stable premises.
In general, billions of dong are spent to advertise a bakery address, according to Nguyen Xuan Qua, Director of Bao Ngoc Akito Sweets Company. Meanwhile, the huge sum of money would be in vain if the bakery has to leave the retail premises when the landlords refuse to extend the land leasing contracts.
Ly Quy Trung, the owner of Breadtalk chain, reportedly spent six billion dong on the bakery shop on Cao Thang Street in HCM City, saying that it would take at least two years to recover the investment capital. This means that the producers need to lease retail premises for two years at least to be able to make profit.
Difference – the key to success
Givral, which is believed to be one of the brands available on the Vietnamese market very early, in 1950s, has been succeeding with the strategy focusing on making nutritious products.
Especially, in 2011, the brand launched into the market a new product, called the “trump card” of the manufacturer in the competition with other rivals. One of the materials used to make the product is Salba nut, very rich in vitamin and essential minerals which are lacking in the Vietnamese meals.
In 2010, Nam Young Huyn, General Director of CJ Vietnam, which manages Tour les Jours brand, stated that the company would set up 200 shops throughout the country by 2012. However, it has had 19 shops only to date, while hoping to increase the number of shops to 30 by the end of the year.
After a period operation, Tour les Jours realized that bread is the most favorite product by Vietnamese consumers. Therefore, the producer has decided to make more bread, with bread output now accounting for 55 percent of total products, while the figure is less than 30 percent in South Korea.
There are quite a lot of ways bakeries have been following to scramble for customers. Lovebread attracts customers because it takes full advantage of the space in supermarkets to sell cakes and introducing the production process at the same time. Meanwhile, Thu Huong Bakery gives coupons to clients and commits to deliver goods.
Domestic bakeries on the upper hand
Vietnam is believed to be a potential processed food market, because it has all the four necessary factors allowing to create differentiated business models, attractive and easily to develop through the mode of franchising.
According to the Phu Hung Securities Company, about 100 bakery brands have existed in the market, while domestic ones now hold 75-80 percent of the market share.
Kinh Do Bakery is now the leader in the market with 36 shops located in Hanoi and HCM City.
However, Nguyen Xuan Truong, Deputy General Director of Golden Gate, said foreign brands, with powerful financial capability, technology and experiences, are always big rivals.
“Our greatest advantage is understanding the taste of Vietnamese consumers. Therefore, we need to do everything we can now to get ready to new circumstances, when foreign bakery chains flock to Vietnam,” he said.
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