"From Sauce Consistency to Chicken Seasoning: Lotteria Thrives in Demanding Vietnam [K-Wave 3.0]⑨"

Entered Vietnam in 1998 with First Store in Ho Chi Minh City
Local Preference for Chicken over Burgers Drives Strategy
Menu Development Reflects Local Tastes and Preferences
Turned Profitable by Balancing Korean Model and Localization
Focusing

Woojoo Lee, Head of Operations at Lotteria Vietnam, is introducing the menu items currently sold locally. Photo by Heungsun Kim

The Lotteria Lac Long Quan branch offers a view of West Lake, the largest lake in Hanoi, Vietnam. When ordering the Chicken Ball Rice for 46,000 dong (about 2,500 won), a plate arrives with about ten pieces of popcorn chicken, a serving of rice made with Indica rice, a fried egg, tomato, and cabbage salad. The glossy sauce-coated popcorn chicken delivers a strong sweetness with the first bite. Woojoo Lee, Head of Operations at Lotteria Vietnam, explained, "Our research and development team, composed of local staff, has localized the sauce's consistency and chicken seasoning to suit the Vietnamese palate, as locals at quick service restaurants (QSR) prefer rice and chicken over burgers."

Lotteria Lac Long Quan Branch near West Lake in Hanoi, Vietnam. Photo by Kim Heungsun

In Korea, burgers account for over 70% of Lotteria's sales and chicken items less than 5%, but in Vietnam, chicken menu sales exceed 50%. This is because local consumers prioritize satiety and value for money when choosing dining options. The Vietnamese favorite, banh mi sandwiches-baguettes filled with meat, pickled vegetables, fresh greens, and herbs-are also much cheaper than burgers, which further influences this trend.

Chicken Ball Rice, a popular menu item at Lotteria Vietnam. Provided by Lotteria GRS

K Sauce Chicken (above) and Cheese Sauce Chicken sold at Lotteria Vietnam. Provided by Lotteria GRS

Lee noted, "Vietnamese consumers have very strong preferences regarding taste, food choices, and price sensitivity, making it difficult for international restaurant brands to take root locally. Even with high interest in Korean culture, simply transplanting the Korean approach or focusing solely on local characteristics is not advisable; the key is to strike a balance between the two." He shared examples of global fast-food brands that failed in Vietnam because they stuck to globally proven operational models without considering these local characteristics.

For instance, Burger King pushed its flagship Whopper and set prices at global levels, which led to local consumers turning away. McDonald's also struggled when it tried to penetrate the Vietnamese market with its burger-centric global standard menu, and only in recent years has it shifted to highlighting chicken items. McDonald's also launched burgers with pho-inspired sauces to localize, but these efforts did not gain traction.

Lotteria entered Vietnam in February 1998, opening its first store in Ho Chi Minh City. As of November last year, it operated 260 stores in Vietnam alone, surpassing global fast-food chains such as KFC (estimated 230 stores) and Jollibee (estimated 213 stores) to claim the top market share. McDonald's currently runs about 40 stores in Vietnam, just one-sixth the number of Lotteria locations, while Burger King operates only about ten stores in Hanoi and Ho Chi Minh City combined.

Lotteria has differentiated itself from these brands by gaining know-how through numerous trials and perseverance, and by focusing on localization strategies. Lee explained, "As the number of menus tailored to local tastes increased dramatically, we reached a turning point in the Vietnamese market. We have consistently conducted research for menu localization since the early 2000s, and between 2010 and 2015, popular menu items began to emerge in earnest."

Chicken sold by the piece, such as K Sauce Chicken and Cheese Sauce Chicken-akin to fried or seasoned chicken-expanded customer choices and optimized the balance of salty and sweet flavors for local tastes. Set menus with rice or tomato sauce spaghetti also reflect these preferences.

The number of stores also grew rapidly during this period. The 100th store opened in November 2011, the 200th in September 2014, and in December of that year, Lotteria attracted its first franchisee in Vietnam. Building on this, Lotteria achieved its first operating profit in Vietnam in 2017, 19 years after entering the market, and has recorded annual sales of over 100 billion won since 2022. Last year, Lotteria Vietnam's sales are estimated to have increased by 9% year-on-year, with operating profit rising by about 150%.

Lotte GRS, the operator of Lotteria, is leveraging the localization experience in Vietnam to expand Lotteria's overseas business to countries such as Myanmar, Laos, and Mongolia. In August last year, Lotteria also opened its first store in the United States, the home of the burger. Lotteria plans to expand its number of stores in Vietnam to 400, strengthen QR ordering and delivery services, and enhance quality and hygiene management to further build trust with local consumers.

Lee stated, "Competitors are riding the wave of K-food popularity by launching chicken items with tteokbokki-flavored sauces and highlighting K-content, but we believe relying on trends cannot ensure long-term success. We plan to refrain from overtly using the 'K' label and instead focus on continuously offering menus and services that match local tastes."