If one wants to fall behind in business, a good strategy is to only pay attention to what one actually needs to know. It sounds like a reasonable time-allocation strategy but, inevitably, it is what you didn’t know you needed to know that sneaks up behind you and bites you.
So we have been paying attention to Vietnam and, particularly to the efforts of Dairy Farm International to set up an operation there. We’ve mentioned Dairy Farm International before, including this piece on a small footprint store it opened in Taiwan and this letter from one of Dairy Farm’s executives in Malaysia on the subject of counterfeiting produce brands.
Well, back in the Summer of 2006, we received word that Dairy Farm International’s Singapore-based subsidiary, Giant South Asia Pte. Ltd., has received a difficult-to-obtain license to enter the market in Vietnam. The announcement was somewhat cryptic but basically it seemed that Dairy Farm would take over all the Citimart stores in Vietnam. In the fall of 2007, we learned that the stores were reopening under the Wellcome banner.
In light of both the potential of the market — about 87 million people rapidly becoming more affluent — and the connection between the US and Vietnam — 2.1 million Americans served in the military there, and almost 60,000 Americans died in that war — it seemed as if there would be pointed interest in what is going on in our industry in Vietnam today.
We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Benjamin Eng, Chief Executive Officer, Giant South Asia, (Vietnam) Ltd., local arm of Dairy Farm.
Editor’s Note: Giant South Asia, a new company that is part of Dairy Farm International, which operates more than 2,600 shops and supermarkets in Asia, is looking to capitalize on Vietnam’s emerging market and spark competition. Its foray into Vietnam began in August 2006, with the takeover and conversion of a Citimart store in Ho Chi Minh City. A second store was opened in Can Tho in September. The next two stores are located in Kien Giang and Minh Chau (Ho Chi Minh City). The Group aims to build brand equity and presence and will be seeking new sites in both Hanoi and Ho Chi Minh City. All stores will be traded under the Wellcome banner, with a focus on fresh foods. Wellcome is Taiwan’s largest supermarket chain, with some 180 stores. Strategic growth of the Wellcome brand now extends to Vietnam.
Q: What is your retail strategy in Vietnam? Could you elaborate on how retailing has evolved?
A: Vietnam is not as backward as some have perceived. There are big German Metro Cash and Carry self-service wholesale outlets and French hypermarkets, and other formats in modern channels that offer perishables, most local but some imported.
Consumers are traveling. Retailing is a competitive environment now with modern supermarkets. The range may be limited, but the retail landscape is shaping up and modernizing very rapidly.
Q: Who runs the hypermarkets you mention? Carrefour?
A: Carrefour is not here. The Casino Group from France has a big presence.
What we are trying to do is develop and promote local produce and perishables and encourage and set higher standards in quality and discipline in maintaining safety and health standards. I don’t want to be rude to locals, but sometimes there are issues with proper storage and handling. Hypermarkets are striving to do right. But local markets have a lot to learn with quality of product, which can only be maintained with proper handling.
Q: What needs to be done?
A: Investments in refrigeration are critical. But if it is not installed and utilized properly, it is useless. Therefore we are monitoring closer, and we’re training people to do the right thing in maintaining proper temperatures. We bring in a few senior people to train local employees in our associate stores in the region.
Q: You mention the importance of handling and refrigeration. What is the situation as far as people having refrigerators and freezers in the home?
A: It’s quite common. Many households can afford refrigerators in their home.
Q: Regarding transport, do people walk to the store? Can they only buy what they can carry?
A: The majority, 80 percent go on motorbikes or what you might refer to as motorcycles in the U.S. This is a very common and popular mode of transportation. Everyone working can afford motorbikes. People put baskets on the motorbikes and are able to transport purchases back home.
Motorbikes are very important for passengers of goods and those making deliveries. Young people zoom around with them. Now it’s more advanced. Normal households that go shopping use baskets and can purchase all they need.
Q: How quickly will you be expanding and what niche do you hope to fill?
A: We have three stores now. As Vietnam complies with the WTO agreement, the market will open in the next two years and we will progressively open stores where we can get sites.
Cash and Carry’s are basically wholesale, selling in bulk, more like member clubs, operating 120,000 square feet. Hypermarkets are 100,000 square feet, whereas ours are 15,000 square feet; closer in size to supermarkets in the U.S.
Q: How important are fresh foods to the mix?
A: We have a grocery department with preserved canned foods, then household product and general merchandise, health and beauty, etc. Our fresh segment has both local and imported foods, local and some imported vegetables, fresh beef, pork, chicken. The deli department is reasonably sized, with a refrigeration chiller for deli items.
Q: Do you have a service deli, where fresh foods are ordered and prepared?
A: Open case deli is not a thing here. We can’t afford to have open service behind the counter with a butcher slicing up ham. The cost structure won’t allow it. It’s just a matter of time; another year or two and I think it will be a common site.
Q: What is your target customer base?
A: We have a small expatriate community, but locals are gradually appreciating introduction of items not seen before. Vietnam is very influenced by the French; baguettes and pate are very common things.
The economy rate over the past five or six years has changed a lot. People are more enterprising, local entrepreneurs are making wise investments. There is potential for much growth.
Q: Do you import any products from North America?
A: We don’t import directly but we deal with suppliers of American products into our stores, canned products, such as the S&W brand, U.S. turkey, frozen chicken parts, sausages, breakfast cereals, and chocolates.
Q: Does a produce department carry the items Americans are familiar with, such as apples, pears, lettuce, tomatoes, potatoes, onions, berries, grapes, stone fruit, etc.?
A: We have the produce Americans know, the items you mention, apples, oranges… they’re a bit expensive but they are available in selected places, not in every store but selective stores, and I carry them.
Q: What are the major sources of produce imports? Australia? China?
A: It’s mostly local produce. Imported fruits and vegetables consist of an assortment. China, much less. Australia and U.S. are the major suppliers of imported items, but compared to local produce, the amount is insignificant.
Q: What are the greatest challenges you face?
A: There are restrictions and challenges like anywhere. There are restrictions for foreign retailers, what you can do, and what you can import. Everything imported you have to have registered with the authority, and get approval. It’s a time-consuming process.
Also, you need to be very careful bringing in imported products; you must be responsible for labeling, and quality, and it increases costs of doing business here. Local products are good and quality is good but handling is sometimes questionable. There is a good range of produce.
There are other obstacles. You have to apply for import certificates and health certificates and it takes longer here. It is a challenge to educate authorities on what you are bringing in, a lot of testing, certifications to submit.
We don’t import anything directly at the moment. We buy from local importers because we want to avoid hassles. We are learning the ropes. What we do is use local producers and local suppliers.
Q: How do you market and merchandise your products?
A: Recently, we launched a monthly promotion featuring local products mostly, and some imported. Our customers want value for their money and deals. We are also bringing in sampling and demo activities, particularly for new items, whether produced locally or introducing consumers to imports that would be of interest to them.
For instance, during the holidays, we did a Christmas turkey program, where a chef from a hotel taught consumers how to appreciate roasted turkey in the traditional American way, and cooked in a Vietnamese way. We bring in imported turkey.
There are some very high-end, five-star hotels that offer a very good Christmas lunch. We want to introduce turkey in the house, at a reasonable price, to teach our customers to buy and roast it themselves. This was introduced for the first time here. The consumer could pick up a roasted turkey the day needed, or could preorder for Christmas day. We are reaching out to the housewife and consumer directly.
We reach out to the Vietnamese consumer. This is common in the U.S. and everywhere else in the world. With limitations in retailing, and gradual awareness of good meals and good food, the educated consumer is looking for more options.
Q: Do you offer freshly prepared foods to go?
A: We are doing prepared ready-to-eat and ready-to-cook meals in a small way; marinated chicken drumsticks consumers can buy and cook at home. Also more and more young people are working, like in any big city, and can’t afford time to cook and are looking to pick up meals to eat on the run.
Q: Tell us about your produce department and how it fits into your overall strategy.
A: We have a separate produce department, which we embarked on six months ago. We used to depend on the local wholesaler. Now it’s done differently. We go to a distribution center for produce. We go out to a big wholesale distribution center, where produce is auctioned off to companies that supply small restaurants.
We go early in the morning, make our selections, package product ourselves and set it in the store. We are gradually expanding. We go to the market direct, pick fresh, clean the product up and merchandise it. It helps us control the quality, and we have the ability to offer the customers what they want. As you know, some produce is seasonal and can get very expensive. It’s difficult being dependent on the wholesaler.
If we want spring onion or parsley, people buy those items in small quantities, but it’s important for our customers. We have the opportunity to bring it in. The big boys sell cabbage and tomatoes by the tons. They don’t want to be bothered by small bunches. Certain fruits are popular with the locals and some foreigners, and we like to make them available to them. Some of our customers don’t have time to get to the wet market. Providing specialty items is a way for us to differentiate from the retail competition.
Q: The strength of your parent company and experience throughout Asia must help you in developing your presence in Vietnam.
A: We’re still learning. We’re only a year here, so we are still on a learning curve. It sounds easy, but I assure you it’s not easy. We have been operating in Asia for a long time, in very many countries and have learned lessons over the years to be very cautious in entering new markets. There are differences in each country.
In the U.S., Chicago and Seattle are very different. Try to impress people in California with the way you do retail in another part of the country and they say, go home. Some say they want to select vegetables in bulk, some like them wrapped up ready to go. Customer preferences are diverse. Demographics impact strategy.
In Asia, a product may do well in Hong Kong and poorly in Vietnam. Taiwanese like hot and spicy, Vietnamese like spicy but sour, while in Hong Kong it’s bland and clear. Spices need to be adjusted to local tastes. These countries may be neighbors but are dissimilar in so many ways. It is important to show sensitivity to the differences.
Q: Do you find distinctions among individual stores in Vietnam?
A: Slightly different; one store in the city comprises more mid-income and more modern working class. Others are in housing areas that are in the providences, and more customers are housewives with additional time to browse around and compare prices.
Consumers who go to the one in the city are still concerned about prices, but their desires are different. They want fast and convenient. They don’t want to waste time. In the smaller providences, consumers have more time for picking and choosing.
Q: On a personal note, are you a native of Vietnam? What is your vision for developing retail in Vietnam?
A: I‘m Singaporean. I’m not Vietnamese, but the company brought me into Vietnam to develop retail operations here. With my background, I’ve been with the group 20 years now. I’ve worked in many parts of Asia and am now responsible for business in Vietnam.
We’re developing our business slowly. We don’t need the marketing and exposure. Telling the public now about big expansion plans is all nonsense. We want to do well internally before shouting. We want to be moderate in our prospects and don’t want to oversell. I’m a strong believer that you walk before you run. We are still learning to stand up properly. We don’t want people to have expectations we can’t fulfill yet.
We have no real expectations, but we confess that we read words like this and smile:
…during the holidays, we did a Christmas turkey program, where a chef from a hotel taught consumers how to appreciate roasted turkey in the traditional American way, and cooked in a Vietnamese way. We bring in imported turkey.
There are some very high-end, five-star hotels that offer a very good Christmas lunch. We want to introduce turkey in the house, at a reasonable price, to teach our customers to buy and roast it themselves. This was introduced for the first time here. The consumer could pick up a roasted turkey the day needed, or could preorder for Christmas day. We are reaching out to the housewife and consumer directly. Cash and Carry deals in bulk and supplies to hotels or restaurants. A restaurant in the city charges an arm and leg for a nice meal.
We reach out to the Vietnamese consumer. This is common in the U.S. and everywhere else in the world. With limitations in retailing, and gradual awareness of good meals and good food, the educated consumer is looking for more options.
It just strikes us that if we are talking about Vietnam and the issues are supermarkets and turkey dinners, then the lot of the Vietnamese people must surely be on an upswing.
We hope the Vietnamese government will continue with its policy known as Ðổi Mới in which the economy is increasingly liberalized. And we commend companies such as Dairy Farm which seek business opportunities yet also serve to bring to the people of Vietnam new technology, new products and new management systems… and thus the prerequisites for a more prosperous future.
A special thanks to Benjamin Eng and to Dairy Farm International for sharing their uplifting example with the industry.
