Vietnam struggles to deal with low coffee value

The lack of quality processed coffee for export and a neglected domestic market are preventing Vietnam from creating a recognisable coffee brand to the world.

Only 10% of the output was processed for the local market

Prime Minister Nguyen Xuan Phuc raised concerns about the coffee problem at a review meeting of the industry and trade sector.

According to the Ministry of Agriculture and Rural Development, Vietnam had 664,600 hectares of coffee last year, 14,100 hectares more than the previous year. The output also increased by 68.9 tonnes to 1.53 million tonnes. However, in 2017, Vietnam exported 1.42 million tonnes for USD3.21bn, decreased by 20.2% in the volume and 3.8% in value.

The coffee prices in Vietnam is decreasing to below VND40,000 per kilo because of excessive supply during harvest seasons. Exporters still have high inventories and refused to buy much.

Even though Vietnam is one of the top coffee exporters, it still imports lots of coffee, especially processed coffee. 90% of the output which is mostly raw coffee is exported. Minister of Agriculture and Rural Development Nguyen Xuan Cuong said only 10% of the output was processed for the local market. This is a huge weakness as Vietnam doesn't have quality coffee to export while neglecting the local market.

The world spends about USD500bn on coffee each year but Vietnam's coffee export revenue is only USD3.4bn.

The Agro Processing and Market Development Authority (AgroTrade) estimated that 80% of the coffee beans is only placed under the sun at the yards of local farmers. Because of low raw coffee quality and lack of processed coffee that Vietnam still can't make any global brands. Vietnam has many coffee companies but only a few of them succeeded in making a recognisable brand and have processing factories such as Trung Nguyen and Ngon Coffee.

Dang Le Nguyen Vu, founder and president of Trung Nguyen Group said foreign firms had totally controlled the local market and material sources. Some foreign intermediaries deliberately defame Vietnam's reputation to drive the prices low.

President of the Vietnam Coffee and Cocoa Association Luong Van Tu said even though Vietnam had 664,600 hectares of coffee, it was scattered which make the application of technology difficult. Tu said Vietnam must select better coffee beans, boost investment in processing technology, brand promotion and raise the local consumption rate to 30%.