Vietnam may become the world’s largest producer and exporter of coffee

Vietnam could be poised to become the world’s largest producer and exporter of coffee. Currently, the country is the world’s second largest coffee exporter, behind only Brazil. However, many experts believe that Vietnam has the potential to overtake Brazil thanks to its favorable climate conditions, lower cost production and a bumper coffee crop.

The main challenge that Vietnam must overcome before it reaches the top position is the need to improve its product quality by investing more in research, harvest technology and processing facilities. In recent years, coffee has become one of Vietnam’s key agricultural export products – with 95 percent of output being shipped abroad.

Per year, on average, coffee exports from Vietnam bring in around US$3 billion in revenue to the country. According to a report issued by Vietnam’s Ministry of Agriculture and Rural Development, in the first seven months of 2014, Vietnam exported 1.12 million tons of coffee beans, worth US$2.31 billion. When compared to the same period last year, coffee exports increased by 26.8 percent in volume and 21.9 percent in value.

Germany and the United States are the largest Vietnamese coffee importers. However, Belgium is also fast becoming a key market for Vietnamese coffee – in the first half of 2014, exports to Belgium increased by 2.5 times in volume and 2.35 times in value compared to the first half of 2013.

As the country becomes more dominant in the coffee industry, international coffee companies are helping to further build up the expertise of local Vietnamese suppliers. For example, last year, the U.S. company, Mondelez International, invested in a project to empower Vietnamese coffee farming entrepreneurs.

As a result of this project, Vietnamese suppliers will be able to strengthen their agricultural and business skills, as well as increase their growing capacity. Like many companies in Asia, Mondelez International is aiming to improve its supply chain and achieve more sustainable operations in order to meet the growing demand of coffee consumption in Asia.

Asia is a key growth market for coffee. According to the International Coffee Organization, over the past 10 years, the demand for coffee grew four percent annually in the region – the growth rate in other developed countries was only 1.1 percent. Particular areas of interest for coffee merchants are Thailand, Korea, India and Indonesia, where coffee consumption is growing fast. China also represents a key market where coffee consumption is expected to see strong growth in future years – in large cities, like Shanghai and Beijing, coffee consumption is already comparable to European cities.

This article was first published on Vietnam Briefing.

Dezan Shira & Associates 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 emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy and the United States.

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