Vietnamese grow coffee, foreigners pocket profits

Though Vietnam is the second-largest coffee producer in the world, it is not earning profits corresponding to its ranking. 

In 2016, Vietnam exported nearly 1.8 million tons of coffee, worth $3.4 billion, accounting for 19 percent of the global coffee market.

However, as Deputy Minister of Agriculture and Rural Development Ha Cong Tuan said, Vietnam’s coffee industry is facing challenges, including climate change, drought and higher demand for arabica beans (Vietnam mostly grows robusta). 

However, the biggest problem is the low processing rate, with little added value and thus lower profits.

“We need to face facts that the bigger profits from Vietnam’s coffee plants go to foreign companies’ pockets,” Tuan said.

According to Luong Van Tu, chair of the Vietnam Coffee and Cocoa Association (Vicofa), the area of old and stunted coffee plants aged over 20 years account for 60 percent. 

Though Vietnam is the second-largest coffee producer in the world, it is not earning profits corresponding to its ranking. 

The replanting is expected to cost VND12 trillion, while only VND1 trillion has been disbursed so far. 

Three coffee trading floors have been licensed, but none of them has been operational because of the limited management capability. 

And as there is no standard for roasted and instant coffee, the coffee quality remains uncontrollable.

“In general, production only brings 10 percent of value in the value chain. Therefore, besides making roasted and instant coffee, it is necessary to diversify special products such as weasel coffee and Cau Dat coffee to increase the value,” Tu said.

A report from the agriculture ministry showed that there are 160 roasters in Vietnam with the total capacity of 51,000 tons, 19 instant coffee plants with the capacity of 170,000 tons a year in total, while deeply processed products just account for 10 percent of total output.

The government of Vietnam has reached agreements with some countries on the opening of processed coffee markets to Vietnam, under which the tariff will be cut to 0-5 percent.

Tu said many domestic companies have begun making instant coffee to take full advantage of the agreements.

German Neumann Gruppe has set up a coffee processing factory in Dong Nai province with capital of $12 million and designed capacity of 100,000 tons per annum. 

Other foreign investors are also considering making instant and roasted coffee to take full advantage of the local materials and free trade agreements.

According to Truong Hong, head of the Western Highlands Agriculture & Forestry Science Institute, 80 percent of coffee output in Vietnam is farmed on a small household scale.  

He said it is now the time to re-organize production by collecting households into cooperatives and enterprises. 

Only by doing this will Vietnam be able to control input materials, cultivation and harvesting and improve coffee quality.