Changes brewing impressive coffee exports

09:35 | 26/01/2017 Trade

(VEN) - Despite serious damage due to droughts, the Vietnamese coffee sector achieved impressive export results in the 2015-2016 season.  

Many coffee businesses have taken the initiative in improving product quality

According to the Vietnam Coffee and Cocoa Association (Vicofa), in the 2015-2016 season from October 1, 2015 until September 30, 2016, Vietnam exported nearly 1.75 million tonnes of coffee worth US$3.16 billion, up 34.8 percent in volume and 17.2 percent in value compared with the previous crop of 1.34 million tonnes and revenues of US$2.67 billion. The 2015-2016 coffee crop saw the highest export volume in the past three years, maintaining Vietnam’s position as the world’s second largest coffee exporter, after Brazil.

Germany and the US remain the two largest importers of Vietnamese coffee, respectively accounting for 15.4 percent and 13.2 percent of the total export value, followed by Italy, Spain and Japan. Coffee prices have risen continuously since April 2016. Processing facilities currently purchase coffee from farmers at a price of VND46,000 per kg - the highest price in the past five years.

Vicofa President Luong Van Tu said that in the 2015-2016 crop, Vietnam exported nearly 86,500 tonnes of processed coffee worth US$325 million, up 28.4 percent in volume and 10.3 percent in value compared with the previous crop. In 2016, processed coffee exported reached an estimated US$350 million.

According to the deputy director of the Huy Hung Coffee Company, Dao Duy Tung, price rises in the past several months have benefited coffee businesses. In 2016, his company exported 10,000 tonnes of coffee, mostly to European countries and the US. Ordinary coffee sells for US$2,000 per tonne, while coffee winning certification from the Fairtrade Labeling Organizations International (FLO) can sell for US$2,700 per tonne. “We expect to export about 12,000 tonnes of coffee in 2017 at better prices,” Dao Duy Tung said.

Product diversification

Do Ha Nam, General Director of the Intimex Group Joint Stock Company which contributes 30 percent to the export volume of Vietnamese coffee, attributed increased export volume in the 2015-2016 crop to high inventories from the 2014-2015 crop as farmers and exporters kept 300,000 tonnes of coffee in stock due to price drops.

While many other coffee exporters faced a bad harvest in the 2015-2016 crop, Vietnamese coffee accounted for more than 60 percent of Robusta coffee in the global market.

However, Vietnamese coffee output in the 2016-2017 crop is forecasted to reach about 1.3 million tonnes, down more than 20 percent compared with 2015-2016. One of the main reasons is the adverse impact of the strongest and longest spell of El Nino in the past two decades. Moreover, coffee farmers currently have almost nothing in stock. Therefore, along with action taken by the Ministry of Agriculture and Rural Development and localities to cope with the El Nino’s impact, Vietnam needs to diversify coffee products through deep processing in order to maintain its leading position in the global market.

According to Vo Thanh Do, Deputy Director of the Agency of Processing for Agro-Forestry-Fisheries Products and Salt Production under the Ministry of Agriculture and Rural Development, the ministry has provided directions for intensifying coffee processing. Under its plan, by 2020 at least 25 percent of coffee bean output will be processed to create 50,000 tonnes of roasted and ground coffee and 255,000 tonnes of instant coffee for sale each year. By 2030, instant coffee output is set to increase to 350,000 tonnes per year. Intensified processing is expected to raise the added value of the coffee sector by about US$1 billion and increase its export value to US$3.8-4.2 billion by 2020.

Dao Duy Tung said that global consumers still know too little about Vietnamese coffee although Vietnam is one of the world’s largest coffee exporters. Therefore, along with selling raw coffee beans, his company has promoted the export of instant coffee and coffee filter bags under the DakMark brand.

Many coffee businesses have invested in new processing facilities. For example, the Nestle Group has invested US$80 million in building a plant to produce caffeine-free coffee; Neumann Gruppe Vietnam has opened a new coffee processing plant in Dong Nai Province with a capacity of 26 tonnes per hour; Massimo Zanetti Beverage Group Vietnam has built a 3,000-tonne-per-year processing facility in Binh Duong Province; and the Intimex Group Joint Stock Company has inaugurated a new plant in Binh Duong with a capacity of 90,000 tonnes per year.

According to Vicofa, processed coffee products account for about four percent of the total export volume but 10 percent of the total export value. Under Vietnam’s free trade agreements with the EU, the Eurasian Economic Union, and the Republic of Korea, Vietnamese processed coffee exports to these markets are taxed at low rates ranging from 0-5 percent. This promises Vietnamese coffee businesses big export opportunities.

Quynh Nga & Lan Anh