Vietnam Leads Global Coffee Production Despite Lower 2015 Harvests

March 4, 2015 Posted by Vietnam Briefing Reading Time: 4 minutes

HCMC – Vietnam now rivals Brazil in coffee production. The country is currently the world’s leading exporter of robusta coffee, earning US$3.62 billion from coffee exports in 2014. However, coffee crops in Vietnam are now at their lowest levels in many years.

In January, coffee exports from Vietnam amounted to over 100,000 tons, with a total turnover of around US$200 million. This was a year on year decrease of 28.9 percent in volume and a 23.6 percent decrease in value. In fact, January exports were at their lowest level since 2012. However, this decline has not generated much surprise since production in Vietnam had been forecast to drop in 2015 due to factors such as inclement weather, aging trees, lack of moisture, and disease.

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Additionally, many Vietnamese farmers have been holding back their crops from the market as a way to increase prices. For example, farmers held back sales of coffee beans before the Lunar New Year in a bid to obtain higher prices after the holiday. As a result of the smaller crop in Vietnam, as well as lower harvests in Brazil and Indonesia, analysts predict that London futures may rise by up to 20 percent to US$2,300 a ton in the Q2 2015 – this would be the highest level since 2011.

In a recent survey by the Columbian Coffee Growers Federation, it was found that Vietnam is the fifth most recognized coffee producer in the United States, with 16 percent of the population associating the Southeast Asian country with coffee. However, Columbian coffee is still by far the most recognizable. Vietnam’s top coffee brand is Trung Nguyen Coffee, which operates numerous cafes within the country and exports its coffee worldwide. The biggest markets for Vietnamese coffee last year were the United States and Germany.

An interesting future trend that has been predicted for the Vietnamese coffee market is the possibility of foreign companies coming to Vietnam in order to invest in coffee processing – a high profit industry. Perhaps the first glimpse of this business beginning to germinate within the country can be seen in the recent opening of a roasting plant in southern Vietnam by Massimo Zanetti Beverage, a large Italian-based international company – this is the first of its kind in Vietnam.

Surprisingly, despite recognizing the profit potential of coffee processing, local Vietnamese coffee companies have stated that they will not follow that business path, preferring instead to focus on the selling of the raw product. Do Ha Nam, CEO of Intimex, one of Vietnam’s largest coffee exporters, has stated that “[Intimex] does not think we should inject money into roasters in Vietnam, because this means that we would have to compete directly with the world’s largest groups which have 100 years of experience…We target our specific markets. We should try to avoid the giant foreign competitors.”

To receive a personalized report on Vietnam’s coffee industry for your business, please contact editor@asiabriefing.com.

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Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

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