Strengthening competitiveness of Vietnamese coffee

In order to develop the coffee industry sustainably, relevant firms need to incorporate deep processing into their development strategies.

Vietnamese agro export items, such as rubber, tea, cashew nuts and pepper, have registered growth so far this year, both in terms of volume and value , in comparison to the same period of 2016. However, coffee saw respective annual declines of 22.5% and 3.8%, by 1.27 million tonnes and US$2.9 billion in the first 11 months of 2017, according to the Ministry of Agriculture and Rural Development (MARD).

These figures are not surprising, as they are an inevitable implication of the numerous shortcomings and weaknesses that have existed for years in the coffee industry. In the manufacturing and processing section, old coffee accounts for a high proportion, seriously affecting the productivity and quality of products. Furthermore, there is a lack of professionalism regarding coffee harvesting, preliminary processing and processing technologies in a number of key specialised cultivation areas, including the Central Highlands and Southeastern regions. Although known as the second largest coffee exporter in the world, Vietnam mainly exports raw coffee at low prices.

Over the past few years, Vietnam’s coffee industry has made use of its outputs to create a competitive advantage. However, with the falling productivity and lower yields at present, that competitive advantage is decreasing as a result. Meanwhile, the replanting of coffee to improve productivity and product quality is not an easy task. In 2013, the MARD kick-started a coffee replanting programme, but the re-cultivation area is now only 40%, which is mainly due to the lack of investment capital and limited access to preferential loans.

In recent years, coffee prices have seen many fluctuations against the producers, while domestic coffee growers are not very interested in re-cultivation investment in the context that various other crops generate higher incomes. Even, in many places, people have cut down their coffee trees and switched to other crops. The risk of a sharp decline in the coffee cultivation area is threatening the development of the entire industry.

In order to develop the coffee industry sustainably, the functional sectors need to be more drastic in removing any difficulties for the growers, as well as the businesses involved in processing and exporting coffee, alongside the provision of special support mechanisms in terms of capital, science-technology and re-planting facilitation. Particularly, focus should be put on removing the any obstacles in accessing the State’s support policies.

Firms need to incorporate deep processing into their development strategies, whilst gradually moving from the export of raw coffee beans to the export of roasted, ground and instant coffee. As the export value improves, it will have a positive impact on people’s lives, therefore enhancing the producers’ awareness of the improvement of product quality. At the same time, it is necessary to set up organisations in charge of input and output services, in order to support the people, create a linkage chain in the coffee sector, as well as support export companies in trade promotion activities and the search for consumer markets.