In 2020, Vietnam exported 1.7 million tonnes of coffee worth US$2.7 billion, representing 10% of the world’s coffee value and 18% share of the coffee market in volume terms, according to latest data from the Ministry of Agriculture and Rural Development (MARD).
Coffee has become Vietnam’s top 10 key commodities, and top 6 in terms of export value. Vietnam boasts of 664,000 hectares of coffee plantations with a yield of 1.5 million tonnes per year, 93% being Robusta and the rest being Arabica. Vietnamese coffee is now present in more than 80 countries and territories worldwide.
Despite the tremendous progress in terms of volume, Vietnamese coffee has still not gained the reputation for its coffee quality as the country processes a small amount of its coffee into high value-added products. Currently, green coffee still accounts for a large proportion of its exports.
MARD Department of Science, Technology and Environment had approved Decision No.787/QD-TTg dated 5 June 2017, listing coffee in the programme to develop national products until 2020. This is to bolster the value of coffee and maintains Vietnam position as leading coffee exporter amidst fierce global competition.
A US$300 million World Bank-funded project called Vietnam Sustainable Agriculture Transformation has been effective in supporting sustainable development of the coffee sector in the country. This project chooses the best coffee variety, promote mechanisation, intercropping plants and improve management of variety.
Vietnam has also signed 14 free trade agreements (FTAs) including the EU-Vietnam Free Trade Agreement which is extremely beneficial in expanding its market for coffee. According to the commitments in the FTAs that Vietnam has signed, all member markets open to Vietnam’s roasted and processed coffee enjoy preferential tariffs of 0-5%. This has encouraged Vietnamese enterprises to invest in roasted and ground coffee processing and instant coffee in recent years. Currently, roasted and ground coffee take 12% share of the total coffee export turnover.
Several major investments in instant coffee production have also taken place. These include Intimex Group’s Instant Coffee Processing Factory built on advanced technological lines with investment of US$30 million and capacity of 550kg each hour, estimated at 4,000 tons each year. Nestle Vietnam has also put into operation the Nescafe Dolce Gusto tablet production line with an annual capacity of 2,500 tonnes of coffee. Meanwhile, Tin Nghia Coffee JSC inaugurated an instant coffee factory with a capacity of 3,200 tonnes of finished coffee in the 1st phase at Nhon Trach 3 Industrial Park. Meanwhile, Vinh Hiep invested in sophisticated German production lines to produce its L’mant branded coffee for exports. Vinh Hiep boasted of 45 hectares of high quality coffee plantation meeting USDA standards.
Vietnam targets US$6 billion in export turnover from coffee by 2030, and this might be achievable as the country is now focusing on boosting its exports for roasted and instant coffee.
Tea sector facing challenges
Meanwhile, its ‘distant cousin’, the tea industry is projected to record sales of US$522 million in 2020 with green tea contributing 51% and black tea 48%.
According to latest data from Vietnam Tea Association, the country exported 124,000 tonnes in the first 11 months of 2020, a 1.3% growth from previous year. Export contributed US$201 million to its revenue. The association estimated export to reach 135,000 tonnes for the whole year 2020.
The sector has been challenged this year by various hardships triggered by COVID-19, with disrupted supply, export contracts delayed, and lower tea prices sought, while transport costs remain high. Companies are seeking ways to bolster domestic consumption to offset the difficulties in exports.