VietNamNet Bridge - Starbucks’ announcement to sell Vietnamese coffee at more than 21,500 shops in 56 countries is good news, but it also reveals weaknesses of the Vietnamese coffee industry, according to Dien Dan Doanh Nghiep Newspaper.

Many people were surprised to see Vietnam coffee packs with the trademark "Da Lat Blend" at many shops selling Starbucks’s top of the line Reserve products. It was difficult for Vietnamese coffee to set foot in Starbucks stores, so what will happen next?

Enter Starbucks

The Vietnamese coffee product sold by Starbucks.

Packs of Vietnamese coffee sold in Starbucks stores in the US have elegant and bright colors, with the words "Viet Nam - Da Lat". The weight of each package is 250 grams, priced at US$12.5.

Starbucks includes the details of the origin and quality of Da Lat coffee from Vietnam. Starbucks emphasized that Da Lat is known as the city of flowers, and also an ideal place for growing coffee. Coffee here grows in the characteristic red soil of volcanic lava and cool climate of the Highlands.

Ms. Leslie Wolford, a senior expert at Starbucks, said: "Upon receiving coffee samples from Dalat, we were very pleased with its quality and it is perfectly suitable for mixing different types of coffee."

Mr. Nguyen Quang Binh, Director of Chanh Tinh Anh Coffee Ltd said, to be selected as one of the products in Starbucks stores, the coffee must meet strict standards for aroma, taste, safety and stable source of supply. Vietnam is the 7th country supplying coffee for Starbucks, after Indonesia, Kenya, Rwanda, Brazil, Colombia and Guatemala.

Starbucks is one of several foreign companies that are putting their mark on Vietnam's coffee sector.

Mondelez International has also announced that it will open a coffee training center for Vietnamese farmers, with a total investment of up to US$200 million. Mondelez International expects to train 1,500 farmers in agricultural practices in order to create a stable supply of 7,000 tons of coffee up to 4C standards by 2020.

What's next?

However, according to Mr. Tran Thanh Hai, from the Buon Ma Thuot coffee and goods exchange JSC, many foreign enterprises had invested heavily in farmers but they had also "stolen" their brand.

The Vietnamese coffee product sold at Starbucks stores contains processed Arabica coffee beans. This is the hindrance of Vietnamese coffee industry. While Trung Nguyen Corporation has made efforts to bring its instant coffee brand G7 to China, the US, and Singapore, one brand is too small for a country that exports nearly 1.6 million tons of coffee, with turnover of more than $3 billion a year like Vietnam.  

In the coffee development plan, Vietnam aims to have processed coffee output make up about 30% of the total output by 2020. So it was not a surprise when Mr. Nguyen Nam Hai, vice president of the Vietnam Coffee Cocoa Association (Vicofa), said that perhaps the coffee industry has failed in the last 10-15 years as it could not to develop processed coffee products. At present, processed coffee accounts for only 7-8% of the country’s total coffee output.

Mr. Do Ha Nam, general director of Intimex Corporation, said although investing in processed coffee products can bring about big profits, local businesses do not invest in this direction because they will have to compete with the major corporations worldwide. Vietnam's coffee industry has been for years the supplier of raw materials for the world’s coffee roasters.

Mr. Tran Viet Hung, deputy head of the Steering Committee of the Central Highlands, said Vietnam is the second-highest coffee exporting country in the world and ranks first in the export of Robusta coffee, but Vietnam does not have a true coffee brand. Vietnam mainly sells coffee beans to major coffee roasters and the processed products are then sold under their brands at very high prices.

While raising the value of Vietnamese coffee by building Vietnam’s brands and making processed products, it is very hard to create the value of Vietnamese coffee by developing Arabica coffee in Vietnam.

Mr. Le Ngoc Bau, Director of the Institute of Agricultural-Forestry Science and Technology of the Central Highlands, said that growing Arabica coffee requires strict ecological conditions, such as temperatures ranging from 20 to 22 degrees Celsius, and the trees must be grown at an altitude of 1,000 -1600 meters above sea level. Vietnam still has areas suitable for this variety, such as Da Lat, Yen Bai, Dien Bien, Quang Tri, Nghe An ... but to grow this variety for export requires a large output and stable source of supply. Arabica coffee beans also require wet processing procedures to ensure the quality of the beans.

According to Mr. Luong Van Tu, Vicofa chair, Robusta coffee now accounts for over 90% of Vietnam’s coffee output. Thus, for Vietnamese coffee to get into multinational coffee chains like Starbucks, it will still be a long way ahead.

Nguyen Nam