Good Franchising, Vietnam! A Deep Dive Into one of Asia’s Hottest Growth Markets
My first visit to Vietnam was in November 2008 when international franchises were just starting to appear in the country. The GDP per capita on a purchase power parity basis (PPP) was US$4,200. Having lived in China, Hong Kong, and Indonesia, I wondered what type of economy Vietnam would have. Would investors know what franchising is? Were there companies that could qualify for U.S. franchise licenses?
Before answering these questions, let’s take an in-depth look at the current Vietnamese economy and population to see what the real potential of the market is. Today the GDP (PPP) per capita is US$6,900 and international franchises are becoming well established.
The World Bank says Vietnam has transformed itself from being one of the poorest nations in the world 30 years ago to a country that is one of the hottest growth markets in Asia — and, according to some, resembles the growth trajectory of its bigger brother in years past, China.
Of the country’s 96 million people, 12 million (1 in 8) were classified as “urban middle-class consumers” in 2017, a number expected to nearly triple to 33 million this year. This part of the population has a very high desire for Western brands.
In my own trips to Vietnam over the years, everyone I met was an entrepreneur and wanted to be part of the middle- or upper-class consumer base. The country’s young consumers are seeking Western brands where they know they will get value, quality, convenience, and good customer service.
According to a recent Standard Chartered survey, Vietnam’s economy is one of only a handful expected to have a net GDP growth rate of 7 percent or higher from 2018 to 2030. Vietnam’s rapidly expanding middle class is anticipated to be the fastest-growing middle class in Southeast Asia. According to PwC’s “The World in 2050” report, Vietnam is forecasted to be among the Top 20 economies in the world by 2050.
Vietnam has also continued a longstanding shift away from agriculture and toward industrial output. Agriculture’s share of economic output shrank from 25 percent in 2000 to roughly 15 percent in 2018. While the global recession was a significant drag on the Vietnamese economy (GDP growth dropped to 5.25 percent in 2012), the country is now in a steady growth phase again. GDP grew at a rate and 6.5 percent in 2018.
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