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January 22, 2022, 7:20 am

Question “what way to follow?” beats coffee growers

(16:34:57 PM 21/05/2014)
(Tinmoitruong.vn) - Vietnam is the second biggest coffee exporter in the world, but it lacks a global coffee brand. Though it has a large material growing area, its coffee processing companies always complain about a material shortage.

Vietnamese dream of globally well known coffee brands


“Vietnam still does not really have a coffee industry,” commented Nguyen Quang Binh, a coffee expert. This explains why the Vietnamese dream of creating globally recognized Vietnamese coffee brands has not come true yet.


According to the Industry and Trade Department of Dak Lak, the “coffee metropolis” of Vietnam, up to 80 percent of coffee exports from the province do not bear any Dak Lak brands. Coffee beans are put into bags and then exported to third parties before they are sold to roasters who process them and sell under their brand names.


The number of companies that export coffee products under their brands in Dak Lak is so modest that they “can be counted with the fingers”.


Local businesses don’t export branded coffee products because they believe that the profits would not be big enough to cover the investments.


An executive of a coffee trade company said he can make a profit from contracts on exporting coffee beans to third parties. But it is too risky to export coffee products, because it would take a lot of money and time to build up brands, learn about the market’s taste and organize production.


“If your products do not fit consumers’ tastes, you’ll be surely go bankrupt,” he said.


A report showed that 80 percent of the total coffee output in the world is sold to the 10 biggest coffee roasters in the world. Vietnam and Brazil are the two biggest coffee exporters, but Nestle and Starbucks are the best known coffee brands.


What way to follow?


According to the Ministry of Agriculture and Rural Development, Vietnam now has 126,000 hectares of old coffee plants which need re-cultivation. And this is the opportunity for Vietnam to shift to grow Arabica, which has been favored in the world market, instead of Robusta, being grown in most coffee areas of Vietnam.


However, Vietnamese farmers are still wavering between continuing to grow Robusta or shifting to Arabica. A farmer making the switch would have to wait five years to harvest the first Arabica coffee crop, while being unsure whether price fluctuations in the volatile world coffee market would work out to his benefit or detriment. And the large upfront investment in such an endeavor would be a real burden on the typical farmer.


According to a recent report, 43 coffee enterprises in Dak Lak went out of business in 2012 alone just because they could not collect materials to fulfill their export contracts. Therefore, developing crop growing areas is vital for coffee processing companies.


Olam Vietnam Nestlé, Dakman, Anh Minh, Simexco, and Trung Nguyen have been running cooperation programs with farmers, under which they provide financial and technical support to help farmers grow coffee in accordance with 4C and UTZ. The companies promise to be responsible for the distribution of the products and pay more for products meeting the standards. However, only 22 percent of the total coffee output in Vietnam can meet the requirements.

Source: VNN

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