McDonald's goes East: McNuggets come to ’Nam

Leslie Shaffer | Writer for
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McDonald's maiden store in Vietnam isn't just a landmark for the company, some are hailing it as a signal that the country is ripe for investment gains.

"It's very good for the country that well-reputed companies like McDonald's, Starbucks, Intel and Samsung are going there and putting the country on the investor map," Thomas Hugger, CEO of Asia Frontier Capital, told CNBC.

He noted Asia's first McDonald's opened in 1975 in Hong Kong, with locations in Beijing and Shenzhen coming around 20 years ago.

(Read more: Big Mac: Inside the McDonald's empire)

"If you go into Asia frontier markets today, it's like investing 40 years ago in Thailand or 20 years ago in China," he said. Hugger said his company's funds are positioning to play the Vietnam's growing consumer story.

Vietnam has the fastest-growing middle and wealthy classes in south-east Asia, Boston Consulting Group said in a report in December. It estimates this group of consumers will grow from 12 million to 33 million from 2012 to 2020.

STR | AFP | Getty Images

Don Thompson, McDonald's president and chief executive officer, told CNBC that the fast-food chain was not one to rush into a market without having a clear strategy in place

"We want to be in a market with the right infrastructure to the deliver the kind of quality products and safety standards that we have at McDonald's," he told CNBC. "We've not expanded into a lot of countries in the last 10 to 15 years. Part of that has been because we focus a lot more on core of our business and the existing assets that we've had, and we've had incremental growth in certain markets."

(Read more: In case you missed this: Vietnam stocks up 17%)

After more than a decade of failed attempts to get approval to enter the country, McDonald's clearly sees an opportunity in Vietnam's population of more than 90 million, targeting opening 100 branches over the next 10 years. In nearby Singapore, Asia's commercial and financial hub, the company has around 130 outlets for a population of less than 6 million people.

Thompson said that he expected the Vietnam market to be "tremendous" for the company. Vietnam's consumers tend to be among the world's most optimistic, with more than 90 percent of consumers there expecting not only to have a better standard of living than their parents, but also for their children to live better than themselves.

That's something Thompson will be keen to tap into, telling CNBC that he invests in the Asian market not for the long term.

(Read more: Posts on McDonald's employee site bashes fast food)

"We don't expect to just see a tremendous return on that investment in year one, two or three in some cases, but we do expect to build a fundamental awareness of the brand, of basic customers that are loyal to the brand and to satisfy those needs and to continue to build our business into the future," Thompson said.

Other commentators also see reasons to compare Vietnam's investment climate to China's a couple of decades ago.

"They have state-owned companies which are the backbone of the economy," said Jason Ng, director at Vina Capital, which has $1.5 billion under management. "They are trying to push all these SOEs (state-owned enterprises) to get listings, which China has done probably 10 to 15 years ago and achieved significant success."

Ng noted Vietnam Airlines is expected to list on the exchange soon, while BIDV, one of the country's biggest banks by assets, successfully listed last month.

(Read more: The emerging market to watch in 2014)

Bringing Big Macs to Vietnam

"A lot more opportunities are coming up," Ng said, citing changes to regulations, including those that have limited foreign ownership of companies.

But Ng is not as sure that McDonald's entry into the market signals a major change in the country's fortunes. "It's quite exciting," he said, but added, "it's oneof many fast food (outlets) already identifying opportunities in Vietnam," with Subway, Starbucks and Dominoes also recently entering.

He noted even Dunkin Donuts is also doing well there. "I was skeptical of Vietnamese eating donuts," he said. "The idea is to identify a niche opportunity."

Entry into an Asian country also hasn't guaranteed significant growth for the golden arches. For more than 20 years, McDonald's has been operating in Indonesia, a country with a population of around 250 million, but so far it only has around 150 outlets there.

Still, Thompson said that all McDonald's needed to do was to focus on the customer and to remain relevant to consumers. "Focus on each customer," Thompson said. "Affordability, making sure that the service is at the highest quality and making sure that the food is at the highest quality and providing choice and variety and a clean, contemporary environment like the one here in Vietnam"

There is at least one way Vietnam is living up to a comparison with China. A Big Mac in Ho Chi Minh City is going for around 60,000 dong, or around $2.82. On the Big Mac Index published by the Economist, it's just a tad more expensive than China's around $2.74 in January.

According to the index, China's yuan is around 40 percent undervalued on a purchasing-power parity basis, possibly suggesting Vietnam's currency is also due a bout of strengthening.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter