While McDonald's Struggles, Lotteria Soars in Vietnam by Perfecting Chicken Seasoning [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. Taking a bite of the popcorn chicken, coated in a glossy sauce, a strong sweetness spreads in the mouth. Woojoo Lee, Head of Operations at Lotteria Vietnam, explained, "Our research and development team, made up of local staff, has localized the sauce consistency and chicken seasoning to suit the Vietnamese preference for rice and chicken combinations at quick service restaurants (QSR), rather than burgers."

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

In Korea, burger sales account for more than 70% of Lotteria's total sales, while chicken items make up less than 5%. In Vietnam, however, chicken menu items account for more than 50% of sales. This is because local consumers prioritize satiety and value for money when choosing dining options. The popularity of the Vietnamese banh mi sandwich-a baguette filled with meat, pickled vegetables, fresh vegetables, and herbs-which is much cheaper than a burger, also plays a role.

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 strong preferences and clear criteria regarding taste, style, and price, making it difficult for foreign restaurant brands to take root locally. Even with the high interest in Korean culture, simply copying the Korean approach or focusing solely on local preferences is not the answer. The key is to strike a balance between the two." He also shared examples of global fast food brands that failed in Vietnam because they insisted on global operating standards without considering these local characteristics.

For example, Burger King pushed its signature Whopper and set prices at global levels, which led to rejection by local consumers. McDonald's also struggled when it entered Vietnam using its global standard approach centered on burgers. In recent years, it has shifted its strategy to emphasize chicken menu items. Additionally, McDonald's introduced burgers with pho-flavored sauces to appeal to local tastes, but these efforts failed to gain traction.

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

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

Offering chicken by the piece-including options like K Sauce Chicken and Cheese Sauce Chicken, which are similar to fried or seasoned chicken-expanded the choices and optimized the level of saltiness and sweetness to local tastes. Set menus with rice or tomato sauce spaghetti also reflect these preferences.

The number of stores grew rapidly during this period as well. The 100th store opened in November 2011, and the 200th in September 2014. In December of the same year, Lotteria attracted its first franchise store 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 approximately 150%.

Lotte GRS, which operates Lotteria, is using the localization success in Vietnam as momentum to expand its overseas business to countries such as Myanmar, Laos, and Mongolia. In August of last year, Lotteria also opened its first store in the United States, the home of burgers. Lotteria plans to expand the 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 highlighting K-content by launching chicken products with tteokbokki-flavored sauces and other K-food trends, but we believe that relying on trends is not sustainable. We plan to refrain from emphasizing the 'K' aspect as much as possible and instead focus on continuously providing menus and services that match local preferences."