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Opportunities for Foreign Investors in Vietnam’s Coffee Industry
Vietnam is the second-largest exporter of coffee after Brazil, accounting for 8.3 percent of the global coffee share and 16 percent of the market share in the EU. However, the majority of exports remain in the form of unprocessed beans and little added valuation.
Despite the pandemic, Vietnam’s coffee industry saw over US$3 billion worth in coffee export revenue in 2021, which accounted for three percent of the country’s GDP and 10 percent of its agricultural exports. As the country looks to step up its coffee processing industry, total exports are expected to reach US$6 billion by 2030.
The coffee bean was first brought to Vietnam in 1857 by French colonialists who discovered that the environmental conditions in the country’s central highlands were suitable for the cultivation of many foreign crops. The French originally brought the Arabica variety; in 1908, the high-yield Robusta variety was introduced and cultivated alongside Arabica.
In 1986, after the reunification of Vietnam, the Doi Moi (renewal/new age) reforms to the economy saw increased privatization of land and commodities. The government saw potential in coffee as a cash crop for exports as well as domestic use thus introducing state-funded farms while also encouraging families with land to cultivate coffee within the Central Highlands.
Some 95 percent of the coffee produced in Vietnam is from Robusta beans compared to just five percent from Arabica.
When introduced in 1908, Robusta was found to thrive in lowlands, providing a higher yield of bean per hectare. It could grow at altitudes of 200-700m above sea level and be found to be less susceptible to diseases.
Between 1989 and1995, the Vietnamese government-controlled coffee exports by purchasing coffee beans from all farmers at set prices. The low prices for coffee beans pushed farmers into growing Robusta as their main cash crop, thereby making Vietnam the world’s largest producer of Robusta beans. Robusta currently is estimated to provide 2.8 tons of coffee bean yield per hectare.
What are the challenges facing Vietnam’s coffee industry?
Although Vietnam’s coffee industry has fared well over the past decades, the industry faces a multitude of challenges that are hindering its progress up the value chain.
This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].
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