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