Vietnam Coffee Industry: Gearing up for price growth momentum

Looking back on coffee industry in the first 6 months of 2020

Output 

Production output of Vietnam coffee industry witnessed many fluctuations in recent years. In the crop year 2019/2020, Vietnam’s coffee production output recorded more than 31.2 million bags, an increase of 2.63% compared to the output of the previous year. The recent coffee harvest is almost completed in March 2020 while the weather has been relatively stable with enough rainfall. Farmers have become fully aware by changing traditional harvesting habits, which contributed to improving the quality of Vietnamese coffee. 

Source: VIRAC, USDA

Import and export 

Vietnam currently imports a small amount of fresh and roasted coffee beans from China, Laos, Indonesia, America… In the first 6 months of 2020, Germany, the USA and Italy continue to be three Vietnam’s largest coffee consumption markets with the market share of over 30%.

Source: VIRAC, GDVC

 

According to figures from GDVC, Robusta coffee export quantity in May 2020 reached 109.5 thousand tons, estimated at USD $158 million, down over 14% in volume and value compared to May 2019. The average export price of Robusta coffee in the first 5 months of 2020 reached 1,480 USD/ton.

Vietnam mainly exports raw coffee beans; however, the export volume of processed coffee and roasted coffee has been increasing in recent years. In the domestic market, Vinacafe, Trung Nguyen and Nestle are three enterprises holding the largest market share of instant coffee.

Domestic coffee price volatility

According to the Ministry of Agriculture and Rural Development, looking back to the first 6 months of 2020, the domestic coffee price fluctuated with the global market. However, in the second quarter, the coffee price increased by 700-900 VND/kg. Specifically, coffee prices in Lam Dong and Kon Tum provinces recorded an increase of 700 VND/kg, coffee prices in Gia Lai province increased the most by 900 VND/kg.

In the upcoming future, the domestic coffee price would possibly increase due to the decline in supply at higher prices.

Source: VIRAC, Taynguyen.com

Vietnam is the second largest coffee exporter in the world with international standard quality. However, the export coffee price is only reach 65 – 85% of other countries. The reason is that domestic coffee trading enterprises have not determined their long-term business plans. Moreover, coffee is mainly available in bulk at the beginning of the season, creating opportunities for buyers to put pressure on prices.

Vietnam coffee industry gradually expands into instant coffee because profits are higher than traditional acreage. Nestle continues to be the leading company in the instant coffee consumption market in 2019 with the Nescafe brand (accounting for 46.5%) thanks to modern technology, large production scale and 75-year experience.

Vietnam currently has 9 instant coffee factories with capacity of about 58,500 tons/year from foreign enterprises such as Nestle, Olam International, Tata Group and CCL Products India, accounting for 70%.

2020 outlook

Data from USDA shows that Vietnam’s coffee production in the crop year 2020-2021 would reach 30.2 million bags, down 1.1 million bags from last year’s crop. The cultivated area remains unchanged with more than 95% of  Robusta production.

The COVID-19 pandemic changed coffee consumption habits from buying at restaurants or cafe shops to enjoying at home. Accordingly, coffee consumption demand is forecast to increase by about 5.8% in 2020. This is expected to have a good impact on the price of robusta coffee.

Masan ambitions to acquire Vinacafe Bien Hoa

Masan Beverage One Member Limited Company (MSB), a member unit of Masan Group JSC, announced that it wants to buy 401,000 shares of Vinacafe Bien Hoa Joint Stock Company (VCF). However, Masan Beverage only bought nearly 80,000 shares of VCF from mid-June to July because “the market did not meet expectations”.

In 2020, VinaCafé Bien Hoa revenue will reach 3,150 – 3,300 billion VMD with the planned growth rate of 1.7% – 6.5%. The company aims to maintain its leading position in the instant coffee segment to build up a strong reputation with two main brands, Vinacafe and Wake-up.

Trung Nguyen opened a “coffee marketplace” on Amazon and Alibaba

Trung Nguyen Group has officially launched coffee products on the two e-commerce platforms, Amazon and Alibaba. “The world of coffee” is the way that “King of Coffee” Dang Le Nguyen Vu stated the Trung Nguyen products on Amazon and Alibaba.

Due to the complicated context of COVID-19 in the world, the export activity faced many challenges. In contrast, e-commerce is seen as a promising and effective trend in the epidemic situation.


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