Sustaining growth solutions for coffee exports

Tourists attending the Vietnam Coffee Product Introduction Day organized by the Vietnam Trade Office in Algeria. Photo: Ministry of Industry and Trade

Holding onto US$5 billion, but...

Speaking at the seminar "Solutions for achieving US$5 billion coffee exports" held last weekend, Do Ha Nam, Chairman of the Board of Directors and CEO of Intimex Group JSC, Vice Chairman of the Vietnam Coffee-Cocoa Association (Vicofa), said that in the 2023-2024 crop year, especially since the beginning of 2024, coffee prices have continuously increased. Currently, domestic coffee prices have reached a record level of VND102,000/kg. "With the current trend, the goal of exporting US$5 billion worth of coffee is not difficult," said Nam.

Nguyen Quang Binh, a coffee analyst, shared the same opinion: "With the current price level, no specific solutions are needed for coffee exports to reach US$5 billion."

However, behind that optimistic forecast, there are still many concerns for businesses as well as stakeholders in the value chain of the Vietnamese coffee industry.

Nam stated that when prices were high, it became very difficult for businesses to purchase coffee for export according to signed contracts. Many businesses have incurred losses because they have to compensate for a large price difference to fulfill the quantity of goods agreed upon. "Vicofa has received letters from leading global companies warning that if Vietnam does not deliver goods on time and continues the current situation, they will consider sourcing coffee from other countries," stated Nam.

From the perspective of State management agencies, Le Thanh Tung, Deputy Head of the Department of Crop Production in charge of the South - MARD, also expressed many concerns. When restructuring the agricultural sector, the MARD had to balance the area of ​​various crops to ensure the harmony of Vietnam's strengths. The planned area for coffee cultivation nationwide is 660,000 hectares, but even when prices were low, the coffee area had increased to 714,000 hectares. "Now that coffee prices have reached VND100,000/kg, will the coffee area increase to 1 million hectares?" Tung expressed his concern. This is also the issue that has happened with durian trees, with a planned area of ​​only 60,000 hectares but the actual area has increased to 120,000 hectares, or like pepper trees with an expected area of ​​only 100,000 hectares but at one point had increased to 150,000 hectares. Therefore, solutions are needed to bring about harmony in the interests of producers and exporters to prevent disruptions in the production chain.

Based on the above reality, experts all agreed that although the coffee industry had firmly grasped the goal of achieving a US$5 billion export turnover, many solutions are still needed to sustain the industry's development, as this year's growth is entirely due to positive price trends

Expectations for specialty coffee, processed coffee

In recent years, Vietnamese companies have established distribution channels through importers and distributors in various countries, actively participating in international exhibitions and trade fairs to introduce products and seek new business opportunities. However, one fact is that importers currently only act as intermediaries buying coffee from Vietnam and selling it to retailers, roasters, or food service businesses. Therefore, the value obtained from coffee exports is not high. The reason for this problem is due to the limit ed processing stage.

Nguyen Ngoc Luan, CEO of Global Trade Linkage Company Limited (Meet More coffee brand), believed that the US$5 billion export turnover should be allocated to deeply processed coffee. This is also the dedicated direction that Meet More has been persistently pursuing for many years. "We build the brand and enhance the value of coffee products through deep processing, suitable for the tastes of global consumers. Currently, major global supermarkets have approached us to process such flavors for them," said Luan.

Duong Hai Dang, Assistant to the Chairman of the Board of Directors of Trung Nguyen Group JSC, also pointed out three main segments in the coffee value chain, including raw coffee, processed coffee, and coffee experience. Currently, the US$5 billion target that Vietnam is aiming for mainly focuses on the raw coffee segment, while the other two segments with higher added value have not been fully exploited. In particular, at Trung Nguyen, the development of the coffee experience segment has achieved the most success. At the end of 2023, the Discovery Channel produced a documentary called "The Coffee Road," telling the story of Trung Nguyen's efforts to elevate Vietnamese coffee culture into a way of life and experience. Through this, Trung Nguyen has not only stopped at opening coffee shops but also built coffee museums, coffee cities, and even elements of coffee therapy. Thereby, Trung Nguyen has contributed to promoting Vietnam's coffee culture to international friends.

Nam believed that although there has been significant development in recent years, Vietnamese processed coffee still accounts for a small proportion. To further improve coffee processing activities, Nam believed that many solutions were needed with the participation of the Government, the MARD, as well as associations, domestic, and foreign businesses. "Currently, almost all of the world's largest coffee companies have a presence in Vietnam in the form of representative offices or processing plants, and quite a few companies are continuing to invest in soluble coffee processing plants in Vietnam," said Nam.

Expert Nguyen Quang Binh also raised the issue of developing specialty coffee. "Each ton of normal coffee has a price of US$4,000, but specialty coffee can reach US$6,000-8,000. Therefore, it is necessary to enhance support for businesses producing and processing specialty coffee to increase the value of Vietnamese coffee exports," said Binh.

Regarding this issue, Tung said that currently specialty coffee only accounts for 2% of the total coffee cultivation area in Vietnam. The target is for Vietnam's specialty coffee area to reach 11,000 hectares by 2025 and 18,500 hectares by 2030. However, up to now, the area has only reached approximately 5,000 hectares, with 3,500 hectares in Lam Dong province and the rest in other provinces. Tung also has high expectations for the development of specialty coffee, landscape coffee to create a trademark for Vietnam in the world market.