Living with the pandemic, F&B brands need to constantly innovate, adjust their supply chains and their values ​​to find ways to please the "gods".

In 2019, scandal of Mon Hue signaled great difficulties faced by F&B (Foods & Beverages) chain market. Chain branding, especially F&B chains, has never been easy. Even an instant of uncertainty could have meant disaster to investors.

In early 2020, Mon Hue were gradually forgotten. But due to Covid-19, investor rarely launch large F&B chains. Only by the end of 2020 and early 2021, the F&B chain market began to warm up with the encroachment and expansion of the market of Ha Long Bubble Yogurt, Phuc Long, Phuc Loc Tho broken rice ...

Investors and people in the F&B industry hadn’t have a chance to be happy when bad news alerted. Golden Gate's financial statements (the leading enterprise in the F&B chain in Vietnam, owning a chain of 400 restaurants with brands Vuvuzela, Manwah, Gogi House ...) showed that 80% of profit decreased in 2020. Net revenue in 2020 was at VND 4,559 billion, down 5% over the same period. After –tax profit was only 65 billion VND, down nearly 5 times compared to 2019 and did not reach half of the plan.

 

This story is not impersonal one

The biggest difficulty of Golden Gate in Covid-19 is that their brands are mainly distributed in the mid-end and high-end segment, suitable for serving at restaurants rather than at home. Therefore, when entering the periods ofsocial distancing, their products are not suitable for online sales in whichtheirfacilities have not been prepared enough also.

Revenue declined rapidly, Golden Gate as well as many other businesses have encountered cash flow failure, which makes it difficult to access to the source of credits. Maintaining operation and paying debts face many great risks.

It did not stop then, a series of news broke out that Lotteria Vietnam was facing the danger of closing down, following the Indonesian branches. Although Lotteria later denied this information, their business losses in many years also caused public concern.

Finally, RedSun - the second largest F&B chain in Viet market (only after Golden Gate), was accused by supplier of not paying their debts on time. The reason was also because of ... Covid-19.

Similarities can be seen through the stories of Red Sun, Golden Gate, Lotteria. Despite the large scale of the chain, the profit is negligible, even at a disastrous loss.

 

Opportunities for F&B industry in Vietnam

Firstly, young population and improved per capita income. With 70% of the population under 35 years of age and growing incomes, innovative solutions to meet consumer demand for high quality, convenient food and beverages with a unique model are always welcome in emerging markets like Vietnam.

Secondly, increased demand for organic foods. In recent years, global consumer awareness has been increasing about organic, naturally preserved, and natural foods. According to Vietnam Report (2019), green and clean products will be the leading trend in Vietnam for many years to come.

Thirdly, impact of Free Trade Agreements. Vietnam has now signed 16 free trade agreements with other countries. This achievement has made Vietnam one of the most open economies in the world, along with new waves of international trade and investment.

Fourthly, consumer confidence is high. In 2019, Vietnam ranked 3rd in the Consumer Confidence Index of the World with 129 percentage points, showing high job opportunities, improved personal finances and consumers' willingness to spend.

Fifthly, big data and artificial intelligence. Technology has been applied early and popularly in the field of F&B allowing customers to pay quickly and enjoy convenient services. Businesses can track the source, personalize customer experience from the collected data.

 

Challenges to be faced

First of all, the infrastructure for the operating system in the F&B sector requires a great investment if businesses want to be methodical and professional. This increases operating and management costs, not suitable for businesses that do not own large and long-term capital.

In addition, the competitiveness is increased when foreign brands enter the Vietnamese market. The advantage of the predecessor in terms of brand name, experience, and capital is a huge challenge for domestic F&B brands.

Besides, consumers are changing their preferences, gradually shifting to healthier foods. According to Nielsen Vietnam, consumers are increasingly aware of the health benefits of everyday foods. For many people, the Covid-19 pandemic serves as a wake-up call for people to realize the importance of a healthy immune system and adopt a green lifestyle from healthy food products.

Ultimately, the increase in buying and delivering food online has led to the emergence of many alternative products in the F&B industry. In an unprecedented crisis like Covid 19, the food and grocery delivery segment has achieved tremendous growth.

Cho Tot has partnered with Unilever Food Solutions to launch its food portfolio online and achieved an average traffic growth of 40% with a 26% increase in orders. Similarly, other e-commerce operators such as Tiki, Lazada and Shopee also jumped in by introducing their grocery delivery service during the Covid-19 outbreak.

Transition to stay ahead

Owning a strong brand is the decisive factor to retain and nurture customer loyalty.

It's no secret that customers convert and spend more time and money on brands they are loyal to. These customers are the ones who share with their coworkers and families about those brands, driving referral traffic and word-of- mouth marketing. However, for many F&B brands, the strategy of retaining and customer loyalty is still a new concept.

Many brands are paying attention to technical development, building an online D2C system (Direct-to-Consumers). Investing in e-commerce platforms, marketing automation tools, billing and content management are high-cost works that require a team of tech-savvy personnel to do seamless integration of systems and construction of data flows.

To minimize the time, F&B businesses can outsource experienced units. They can advise and help F&B brands build appropriate technology solutions to quickly reach the market.

This workaround is also applied to improving online marketing performance - Converting leads to revenue. Normally, when brands do their own online marketing, it is difficult for them to achieve high results if they are unskilled. In order to develop e-commerce or E Marketing, it is necessary to have a team of personnel possessing specific expertise in e-commerce such as CTAs, data sources, products, automatic campaigns and drive relevant user experience; fulfil the highest consumer trend.

Ultimately, it is of utmost importance to develop a new customer experience in order to form and retain customer relationships. The key to this problem revolves around the perception: Shopping is to experience!

If foods can be converted to online transactions and this type of transaction becomes more and more popular, then how about local shops and traditional restaurants? "wherewould they be"? Business types of food and beverage, in addition to meeting basic essential food and drink needs, have become a type of entertainment service and require a high level of experience.

However, most Vietnamese businesses are currently overlooked and have not made a clear "appearance" of their new, unique and truly experienced services. More and more competition, and no different food quality, what reason to make your brand stand out? The answer is to find the difference of the product (Unique Selling Point - USP).

 

Conclusion

Due to the COVID-19 impacts, business model or product innovation has been largely suspended for many brands including the F&B industry. To continue growth, brands now need creativity, continually adjust their supply chains and their values ​​to match the new desires of the "gods". Partnering with third parties with expertise in technology and digital transformation is a good choice.

Is it time for F&B brands to seriously think about having a CTO (Chief Technology Officer ) position in the organizational model to move towards a new development cycle filled withopportunities?