Vietnam has only exploited a very small part of the value chain of the coffee industry. Photo: N.H

Potential space to increase coffee value

Speaking at the program Honoring Vietnamese coffee 2023 organized by Nguoi Lao Dong newspaper last weekend, Dr. To Dinh Tuan, Editor-in-Chief of the Labor Newspaper, said that for many years, coffee has always been a key industrial crop of Vietnam, currently ranked second in the country in terms of area with 710,000 hectares. The coffee industry contributes 3% of the country's GDP, creating jobs and stable incomes for over 600,000 farming households. In particular, Vietnam is the world's largest producer of Robusta coffee and the second-largest exporter of coffee.

In recent years, although the world economy had many difficult times leading to a decrease in purchasing power, Vietnam still maintained an encouraging growth rate of coffee exports - reaching 8.2%/year with an average turnover of USD 3.13 billion /year in the period 2011-2018, accounting for 15% of the country's total agricultural exports. In particular, in 2022, coffee export turnover reached a record high of more than USD 4 billion, up 32% compared to 2021, mainly coming from price advantage in the context of a shortage of coffee supply.

Experts and businesses in the coffee industry all see the results of coffee exports in 2022 as a good sign for the coffee industry after more than 10 years of difficulty.

Accordingly, the coffee industry needs to quickly plan for the development of the industry in the future in order to achieve the target of export turnover of USD 6 billion by 2030.

Specifically, deep processing is one of the important solutions to improve the value of Vietnamese coffee.

As a fairly successful enterprise in exporting deep-processed coffee to the world market, the products of Global Trade Link Company (Meet More coffee brand) are different from many other coffee products. Coffee is available for the market when there are more flavors of Vietnam's specialty fruits such as taro coffee, green beans, mango, and coconut.

Currently, Meet More has officially exported to more than 10 countries around the world, of which the Korean market alone accounts for about 30% of the company's export volume. Mr. Nguyen Ngoc Luan, General Director of Global Trade Link, said that each export container of Meet More coffee is worth up to USD 100,000, much higher than the USD 20,000-30,000 of each container of raw coffee. This is a concrete demonstration of how deep processing will help enhance the value of Vietnamese coffee.

Minister of Agriculture and Rural Development Le Minh Hoan also pointed out that the world's access to coffee is not just a drink. Many products use coffee or coffee-related materials such as coffee flower honey, fertilizer made from coffee grounds; fabric dyes made from coffee, coffee-flavored pastries.

“The world has made a lot of things out of coffee, but we are still mainly exporting raw coffee. Thus, there is still a vast space for us to create coffee value. This space is completely vacant or just beginning to be exploited," said Minister Le Minh Hoan.

Need support policy

In order to meet the needs of import markets, Vietnam's coffee production has strongly changed in the direction of production according to standards such as 4C, Rainforest, Organic.

For example, in Gia Lai province, Mr. Doan Ngoc. Yes, Deputy Director of the Department of Agriculture and Rural Development of Gia Lai province said that out of 99,000 hectares of coffee cultivation, 46,000 hectares are produced according to 4C, Rainforest, Organic standards, etc. In addition, 15,000 hectares are applied with advanced irrigation technology to ensure productivity and quality in the context of climate change.

In 2022, Gia Lai coffee export turnover reached USD 490 million while in 2021 it reached USD 323 million, showing that Gia Lai's coffee export value is increasing very quickly. In the future, Gia Lai province will strive to increase the standard coffee cultivation area to 80% and apply advanced irrigation technology on the entire cultivated area. Besides, promoting mechanization is also one of Gia Lai's key solutions to reduce production costs. “If hand-picking, each hectare of coffee takes about 60 workers with the labor current cost at VND 400,000, coffee harvesting will cost about VND 24 million/ha. Therefore, it is necessary to accelerate the mechanization to cut down this cost,” said Mr. Co.

In addition, Gia Lai is also continuing to develop standard coffee production, implement product traceability, register for product protection and promote Gia Lai coffee to the international market.

However, Mr. Thai Nhu Hiep, Vice Chairman of the Vietnam Coffee and Cocoa Association, Chairman of the Board of Directors and Director of Vinh Hiep Co., Ltd. acknowledged that capital problems are still a big bottleneck for improving the value of Vietnamese coffee.

"With an interest rate of 12%, no one can do agriculture," Mr. Hiep said. Accordingly, it is necessary to have an agricultural credit policy to support farmers, cooperatives and businesses to carry out product consumption. For export enterprises, coffee is not only a product and service, but also associated with a series of responsibilities such as conserving soil and water resources, responsibility not using child labor, and not cultivating on destroyed forestland.

To increase the proportion of deep-processed coffee, Mr. Nguyen Ngoc Luan said that it is necessary to have policies to encourage domestic enterprises to focus on research and development, creating diverse product lines to serve the market. This is also the premise to build the brand of the product with the domestic and international markets.

Meanwhile, Mr. Tran Thanh Hai, Chairman of the Board of Directors of Buon Ma Thuot Coffee and Commodities Exchange Joint Stock Company, questioned the necessity of establishing a Coffee Exchange to change and create value for Vietnamese coffee because Vietnam is the largest Robusta coffee producer in the world with 60% market share, Vietnam should be the one to decide the price of Robusta coffee because we account for 60% of the world market share, but in reality, the price of Vietnam's coffee exports are decided by the London market.

Besides, despite the large export turnover, the value of the coffee chain in the growers and exporters is not much compared to the roasters and retailers.