NATIONAL ECONOMICS UNIVERSITY
SCHOOL OF TRADE AND INTERNATIONAL ECONOMICS
GROUP ASSIGNMENT
TOPIC: EXPORTING VIETNAM’S COFFEE TO EU IN
THE PERIOD OF 2015-2020 AND OUTLOOK 2025
Supervisor
Assoc.Prof.Dr. Nguyen Thuong Lang
Tel
Email
Student’s Full name
Student ID
Student Email
0983478486
langnguyen2200@gmail.com
Bùi Khánh Sơn
Đặng Hà Thái
11194542
11194631
Khanhson.neu@gmail.com
Major
International economics
Class
Advanced International Economics 61 B
Type of Education
AEP
Hanoi, 1/2021
Table of contents
Introduction ………………………………………………………………………………………… 3
Chapter 1.The coffee export situation in the world ……………………………. 16
Chapter 2. The expansion of Vietnamese coffee export to Eu market in period
2015-2020 ………………………………………………………………………………………………………. 22
1.Coffee production in Viet Nam ………………………………………………………… 22
2.The expansion of Vietnamese coffee export to Eu market in period 20152020 …………………………………………………………………………………………………… 23
3. Evaluate the expansion of Vietnam’s coffee to Eu market ………………… 26
3.1 Outcomes …………………………………………………………………………………….. 26
3.2 Drawbacks ………………………………………………………………………………….. 27
Chapter 3. Orientations and solutions to expand Vietnamese coffee to Eu till
2025 ………………………………………………………………………………………………………. 27
1.Coffee export market forecast ………………………………………………………….. 27
2.Orientations ……………………………………………………………………………………. 28
3.Solutions ………………………………………………………………………………………… 28
4.Recommendations…………………………………………………………………………… 29
CONCLUSION………………………………………………………………. 31
REFERENCES………………………………………………………………. 31
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INTRODUCTION
1.The inevitability of choosing this topic
As one of the biggest economy in the world, Europe is a potential for all export
sectors. For Vietnam, The European Union is one of the leading trade partners with
bilateral trade turnover increases by 15 to 20 percent annually. According to The
Socialist Republic of Vietnam Government Portal, Trade is an important pillar in
the relation between Vietnam and European Union. Currently, the EU is the third
largest trading partner and the second largest export market of Vietnam. In the
period from 2000 to 2010, bilateral trade turnover increased 4.3 times (from USD
4.1 billion in 2000 to USD 17.75 billion in 2010, and approximately USD 24.29
billion in 2011). In addition, European Union is the largest market for a number of
Vietnamese key export commodities, such as footwear, garments, seafood,
agricultural products, furniture, electronics, and consumer goods (The Socialist
Republic of Vietnam Government Portal, 2011).
Coffee is one of the most important agricultural commodities, which brings a high
economic value for Vietnam and is sold in many European countries. As the
information from Vietnam General Statistics Office (2012), coffee accounts for 20
to 25 percent of the total Vietnamese export turnover of agricultural commodities
annually. As a result, promoting and enhancing exports of coffee are determined as
the strategic target in Vietnamese economy.
The thesis offers theoretical knowledge of exports and provides a review on
concerning the Vietnamese coffee exports to the EU’s market. Data for this thesis
was gathered by the process of literatures review and statistics research. The study’s
scale is at international level, thus collected information in entire the thesis is based
on secondary data by both of qualitative and quantitative methods.
Results of the study has demonstrated positive signs even though there are existing
problems need to be improved. This is also the basis to devise strategic solutions for
the development of Vietnamese coffee exports in general as well as Vietnam
National Coffee Corporation in specifictions.
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2. Study overview
The research is referenced from many domestic and foreign documents included:
- Report coffee market YEAR 2015, 2016, 2017, 2018, 2019, 2020 conducted by:
vietnambiz
Content: Tran Duc Quynh, Bui Tung Lam, Tran Hanh, Nguyen Te Huy
- Country Coffee Profile: Vietnam
Created by: ICO (international coffee organization)
- Impact of covid-19 on the global coffee sector: The demand side
Created by: ICO (international coffee organization)
- Emerging coffee markets: South and East Asia
Created by: ICO (international coffee organization)
- Volatile coffee prices: covid-19 and market fundamentals
Created by: ICO (international coffee organization)
- National coffee policy of Viet Nam
Statement by H.E Mr Le Quoc Doanh, Vice Minister Ministry of Agriculture and
Rural Development at the 125th Session of the International Coffee Council on 26
September 2019
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3. Aims of the study
The thesis’s core purpose is to draw an overall picture of the current situation of
Vietnamese coffee exports to the EU’s market and identify EU potential markets for
the market expansion of the Vietnam National Coffee Corporation. By this
orientation, the corporation can find out appropriate strategy and effective solutions
for the development in these identified markets as well as enhance its own export
operation.
4. Research subjects and research ranges
4.1 Research subjects: Vietnamese coffee exports
4.2 Research ranges: The export of Vietnamese coffee to the market of European
Union in period of 2015 to 2020 and orientate to
5. Research methods
Using methods of analysis, synthesis and comparison to solve the problem posed. Data
collected from the Customs offices, the General Statistics Office of Vietnam coffe and
some other countries.
6. Theoretical basis
6.1 Definition and Role of exports
Export is a concept belonging to the International Marketing. Gerald Albaum and
Edwin Duerr (2008, p.11) defined “International marketing is the marketing of
goods, services, and information across political boundaries”, and simply “export is
the selling to foreign markets”.
It is impossible to deny the importance of exports in the economic development. For
instance, the boosting up of export activities has contributed to the positive change
in a number of Southeast Asian countries, such as: Brunei, Cambodia, Indonesia,
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Laos, Myanmar, Thailand, and Vietnam. Other typical example, which proves for
the role of exports, is Japan. Japan has become one of the global leading economies
by boosting up their exports. This is the reason for the need of developing exports
in every nation.
Gerald Albaum and Edwin Duerr (2008, p.64) stated,“ No country is entirely selfsufficient in terms of its ability to satisfy effectively and economically the entire
range of the every changing desires of its populace”. Moreover, international trade
not only contribute to the prosperity of a nation, but also create other social values,
such as: employment opportunities, literacy levels enhancement, and global
intercultural promotion.
According to T.S Eliot (2003, p.12), exporting can uphold a company’s status as a
“learning” organisation. A company can gather useful lessons from the international
customers’ contacts, foreign marketing and distribution techniques. Furthermore,
doing business in more than one market may reduce risk because company no longer
entirely dependent on sales from only a single market. As a result, even though the
sales in domestic market are not positive, the company still can be strong in its own
export markets. Moreover, economies of scale can be obtained with export training.
Specifically, if firms’ personnel are trained for international trade for one market,
they can apply this knowledge to trade in future markets.
In summary, exports keep an essential position in each nation’s economy and have
significant influence to company’s development. A firm can be placed at a
disadvantage if its competitor is doing exports. A nation also can fall behind in the
global economic development if it does not see strong exports to be necessary for
its own healthy economy.
6.2 Export market selection
Determining what foreign markets to enter and the best direction to take in those
markets are important in exports. Obviously, the evaluation process of export
opportunities is complicated for several reasons. The difficulty consists in checking
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all possible export opportunities to countries over the world as well as the
availability of data for a specific consumer group, business or government has
limited the screening to use published data only (Jeannet and Hennessey,
1988,p.137; Brewer, 2001, p.155). According to Gerald Albaum and Edwin Duerr
(2008,p. 188), choosing a market expansion policy is a key strategic option in export
marketing and an expansion policy has various dimensions containing nature of
market research activities in selecting export markets, the procedures of screening
export markets, and the methods of distributing attempts and resources among
different export markets. These dimensions can be seen under three major parts in
export market selection: market selection process, market selection procedures, and
market selection strategy.
There is two identified main ways of approaching in market selection process:
reactive approach and proactive approach. The reactive market selection approach
describes the circumstance where exporters play a passive role in the selection of
the market by filling unsolicited orders or pending initiatives on the part of foreign
customers, foreign representatives or other kinds of change agent that choose the
company’s market indirectly. In this case, exporters keep the role of market response
when market’s demand appears. Thus, reactive approach is not formal, systematic,
and purchase oriented. On the other hand, proactive market selection approach
characterizes the situation, where exporters are active commencing the selection of
export markets. Consequently, this is a formal process because it is normally related
to systematic market research and abroad visiting. However, this approach is used
informally in some cases, when foreign markets are selected on the basis of
discussion with business partner. Commonly, exporters tend to use proactive
approach in primary markets and reactive approach in secondary of marginal
markets (Albaum and Edwin Duerr,2008, p. 189).
Expansive and contractible methods are two procedures, which can be considered
to be applied in executing a proactive, or initiative-based to screen export markets.
In details, expansive methods select market relied on similarities, such as nearest
neighbor. The starting point is always home market or the existing market core.
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Thus, the most advantage is minimum adaptation. In contrast, contractible method
starts with large number of markets. It involves three main stages: preliminary
screening, countries ranking, and determining specific factors (Albaum and Edwin
Duerr,2008, p. 190 -196).
In market expansion, market concentration and market spreading are seen as
strategic alternatives. Each strategy has its own typical features. Market
concentration strategy’s characteristics includes: slow and gradual rate of growth in
a number of market served by a company, channeling available resources, and much
devoting in marketing efforts and resources. This strategy is designed to win
significant market share. Otherwise, market- spreading strategy is commonly
described by fast rate of growth in a number of markets served at the early stage of
expansion, distributing resources of marketing over a huge number of markets. This
strategy tends to reduce risks of concentrating resources and exploit the flexible
economics (Albaum and Edwin Duerr,2008, p.197-199).
6.3 Export entry modes
Choosing mode of entry in entering a foreign market is an important stage in exports
activities. Albaum and Edwin Duerr (2008,p. 270) stated that entry mode is what is
used to penetrate a target. There are two alternative entry modes, which are
differentiated based on they way an exporting company implements the transactions
flow between itself and the importer: direct export and indirect export.
Generally, indirect export is seen as the market-entry technique with the lowest risk’s
level and the least market control. Indirect export means that the exporting producers
uses independent local export organization. In some cases, manufacturers have a
dependent export organization, such as their own export department or export
subsidiary, which cooperate to independent marketing organization. Thus, this
dependent organization does not engage in any international sales activities. Exporters
have two board alternatives available in indirect export including using international
marketing organization, and exporting via a cooperative organization. Merchants and
Agents are two hinge categories of independent wholesale marketing intermediaries.
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Home-country based merchants include export merchants, trading company, and
export desk jobber; while home-country based agents include export commission
house, export management company, and manufacturer’s export agent. The merchant
takes ownership of sold products but the agent does not do. Differently, cooperative
exporting organizations interpret a cross between indirect and direct export.
Piggyback marketing and exporting combination are two types of cooperative
international marketing organization (Albaum and Edwin Duerr, 2008, p. 308-320).
Direct export means the exporting producer (exporter) sells to the importer of the
foreign market area directly. This entry mode allow the exporter itself performs all of
export tasks, from market contact market research to physical distribution, export
documentation and pricing. Consequently, the exporter’s dependent organization or a
foreign-based marketing organization or customer is who handle directly the actual
transaction flow between two countries. This approach is considered more difficult
than indirect export entry mode. However, its advantage is the control keeping of
products and consumer relationship. Direct export has different modes, such as: home
country based department (built-in department, separate export department, and
export sales subsidiary), foreign sales branch, storage or warehousing facilities,
foreign sales subsidiary, travelling salesperson, and foreign-based distributors and
agents or representatives. (Albaum and Edwin Duerr, 2008,)
6.4 Financing and methods of payment
Generally, there is a wide range of export financing methods or terms of payment
available in international trade and each of method has its pros and cons. Naturally,
exporter prefers as much as secure method while importer expects minimum cost.
According to Albaum and Edwin Duerr (2008, p. 511-517), there are seven different
ways in which credit can be extended and payments made in exporting: Consignment,
Open account, Documentary collections, Letter of credit (L/C) Documentary credit,
cash on delivery (COD), Cash with order, and Long-term financing. In consignment,
the payment requirement is usually performed by means of a clean draft with no
attacked documents, drawn on the consignee or importer by the exporter. Therefore,
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the payment is paid after the importer resells products. This method is relatively risky
because unclear laws on consigned merchandise’s ownership; difficulty of seller’s
following consigned merchandise in foreign country, and exchange controls can
preclude payment by the consignee. The method of open account means that the export
trade is done by the similar domestic procedure and methods. Open account is usually
used when the exporter is confident in the importer’s creditworthiness. Documentary
collection is the method, which allows the exporter can get a better measure of
payment guarantee by warranting that the importer cannot have the shipment before
their agreement in paying on time (documents against payment D/A), or before the
importer did the payment actually (documents against payment D/P). The letter of
credit (L/C) is a documentary credit as defined in ICC Publication 500, to which the
almost credits are subject. This method occurs when the importer creates a commercial
credit through their bank and make out conditions of which payment can be made to
the named exporter. Normally, the exporter’s bank will notice about the available
credit to this exporter. Cash on delivery (COD) is the method, which is usually used
for connecting with air transport, road transport, or inland water transport between
nations. The next method is cash with order. It referred to as advance payment. In this
method, there is commonly part cash, with the an adequate amount of covering
transport costs to the import’s stop and back to the export’s point. Long-term financing
is the last one in seven financing methods. It is appropriate to major projects, large
capital equipment sales, and special exports. This method enables the exporter gets
funds in near future while still accepts for importer spreads payments over several
years.
Payment or financing procedures is also a major part in exporting. There are two
categories of export financing procedures in common usage: letters of credit, and
drafts or bills of exchange. According to Albaum and Edwin Duerr (2008, p.517-535),
a commercial letter of credit, or documentary credit is “an instrument, usually issued
by a bank, at the request and for the account of its client, which indicates that the bank
agrees to pay to the named beneficiary a sum of money upon the presentation of certain
documents or written representations as stipulated in the letter of credit”. Using letter
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of credit in is popular for exporters because this type of procedure grants a high level
of security to prevent inevitable risk arising in exporting. Letters of credit have
different forms, such as: revocable and irrevocable, confirmed and unconfirmed, clean
and documentary, transferable and nontransferable, assignment of proceeds, revolving
letters of credit, deferred payment credit, and standby letter of credit. The second
category of financing procedures is drafts or bills. A draft is “an unconditional order
in writing prepared by one party and addressed to another directing the drawee to pay
a specified sum of money to the order of a third person, or to the bearer, on demand
or at a fixed and determinable future”.
Obviously, the main typical difference between domestic and international trade is
that the higher level of risk in international trade. In order to reduce political risk, risk
of non-convertibility of currency, and possibility the commercial risk of nonpayment
by buyers, export credit insurance is created based on three basic principles (Ghose,
1993): Co- sharing of risks, Spread of risk, and Reduction of risk. This kind of
insurance is considered as one of the key security devices employed by exporters.
6.5 Export promotion and marketing communication
Obviously, communication plays an important role in international marketing
activities because it helps firms in different countries to work together and improves
the conduct of international business. Each nation has its own culture and typical
features thus, cross- cultural communication brings challenges to business. Good
communication practice is a major factor to solve intricate business dealings. Albaum
and Edwin Duerr (2008,p. 547) given out a number of problems, which can be barriers
in export promotion and marketing communication, such as: language differences,
government regulations, media availability, economic differences, tastes and attitudes,
and buying process. These problems can affect each other or have independent effects.
In export, promotion has several forms that can be listed as: Personal selling (face to
face communicating is used mostly between sales people and prospective customers),
Advertising (advertisers are paid to use different mass media to deliver messages
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without personal presentation), Sales promotion (all sales activities are used to support
and enhance personal selling and advertising), and Publicity (company’s news and
products’ information are reported by medias without payment from company). Each
form has its own pros and cons so all of them are relative. The advantage of Personal
selling works in the situation, in which the ratio of sales made to number of prospects
contacted is often more than in non-personal promotion. The disadvantage of this form
is expensive cost per sales contact. The form of Advertising has the strength of
attaining a lot of potential customers at a quite low cost for each contact but the
weakness is all-too-frequent failure to persuade a large share of people exposed to it
to buy products. The benefit of sales promotion is that sales performance of channel
members or personal sales people are supported by several techniques, such as: sales
aids, displays, and training. Most advantage of publicity is the credibility however; it
is not easy to have this form of promotion. The international marketer need consider
when choosing the suitable form of promotion activities and their combination if
necessary. In addition, factors, which can influences this decision can be: availability
of promotion’s funds, promotion activities’ cost, type of product involved and its
seasonality, product’s price, entry mode, market’s nature, market’s size, availability
of different media, sizes of relevant segments, etc (Albaum and Edwin Duerr, 2008,p.
548-549).
According to The Economist (2004,p.69), there are two points that need to pay
attention in export marketing promotion and communication decisions. The first one
is that even personal selling by an exporter’s salesperson or marketing intermediary
in the export channel can apply general principles to all communication activities. And
the second one is that there are a lot of alternatives to straightforward advertising, such
as marketing and communication services. Advertising is only one of various
components in the broader communication or promotional mix.
6.6 Logistics and supply chain management
Logistics and supply chain management are popular concepts in exports as well as
business activities. In general, there are many ways of defining logistics. The Council
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of Logistics Management (1992), provided the definition is that: “Logistics is the
process of planning, implementing and controlling the efficient, cost- effective flow
and storage of raw materials, in-process inventory, finished goods and related
information from point of origin to point of consumption for the purpose of
conforming to customer needs”. Martin Christopher (2011,p.2) also defined in similar
way about logistics as: “The process of strategically managing the procurement,
movement and storage of materials, parts and finished inventory (and the related
information flows) through the organization and its marketing channels in such a way
that current and future profitability are maximized through the cost-effective
fulfillment of orders”. Furthermore, this author Martin Christopher (2011, p. 3) also
explained about the concept of supply chain management in his book as: “The
management of upstream and downstream relationships with suppliers and customers
in order to deliver superior customer value at less cost to the supply chain as a whole”.
According to USAID Deliver Project (2011,p.1-2), logistics activities are considered
as an operational component of supply chain management, including: quantification,
procurement, inventory management, transportation and fleet management, and data
collection reporting. Therefore, logistics is a concept, which belongs to supply chain
management. As the statement of Albaum and Edwin Duerr (2008,p.615), there are
several approaches in supply chain management, which are built aimed to minimize
costs, such as: just-in-time approach, material requirements planning (MRP1),
manufacturing resource planning (MRP2), and enterprise requirements planning
(ERP1) and (ERP2). It is necessary to mention to international transport in logistics
and supply chain management. Transport impacts directly to key sale elements, such
as: price, delivery’s speed, and risk of loss or damage. There are various modes of
transportation available in exports: ocean, air, ground, and pipeline transport. In total
types of international transportation, the mode of ocean is the most dominant because
its advantages are low cost and ability of handling large shipments. However, not all
countries can use this mode because the geographical factor; the time of delivery is
slow; and the level of security is relatively low. Air transportation has the strength as
fast delivery’s speed and far distance shipments in high level of security, but its
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weaknesses are high cost and limitation of shipments’ volume. Ground transportation
is appropriate to exporting to near countries because its features are slow delivery’s
speed, need of reasonable geographical conditions, and low level of security. Its
advantage is low cost. Pipeline transportation is expensive and only suitable to certain
products. It is safe and company’s economic efficiency is enormous (Albaum and
Edwin Duerr 2008,p.620). Besides, there are a lot of factors in logistics and supply
management that need be considered in export activities, such as: stock, transportation
insurance, export packing, documents required, and so on.
6.7 The risks of exporting
The risks that may occur are inevitable in almost business activities, including exports.
T.S Eliot (2003) pointed out six possible risks in international trade: transport-related
risks, credit risk, quality of goods risk, exchange rate risk, unforeseen events, and legal
risks.
Firstly, transport-related risks include risk of damage, loss or theft. Bill of lading,
evidences the terms of the contract of carriage, is the needed document to solve this
kind of risk. Credit risks contain non-payment risk, late payment, or outright fraud. In
order to prevent this type of risks, the exporter should always alert by irrevocable
documentary credit. The third one is quality of goods risk. It is difficult for importers
to check the quality of goods before shipment. Therefore, inspection certificate is a
document, which helps the importer to avoid this risk. Exchange rate risk occurs when
the price has been set in a particular currency in an international contract, then the
exchange rate fluctuation happened. The simplest solution in this case is to stipulate
contractual prices in the currency of the party, who are afraid the uncertainty. Other
solution is to purchase exchange forward or option contracts. The next kind of risks is
unforeseen events. It happens when unexpected events, such as a strike, natural
disaster or war encumber the delivery. The best way to protect this risk is by welldrafted contractual force majeure provisions. Legal risks can occur if the foreign laws
or regulation change or be applied differently from the past that can render break the
14
transaction. The way to avoid this risk is to stipulate contractually that dispute
resolution will be by international commercial arbitration.
7. Outline of the study
In addition to the introduction, the ending, the table of contents, the list of references,
the topic includes 3 parts. Main as follows:
Chapter 1: The coffee exports situation in the world
Chapter 2: Current situation of Vietnam's coffee export market and expansion to some
Europe countries 2015-2020 period
Chapter 3: Orientations and solutions to expand the export market of coffee in
Vietnam to some European countries by
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I. THE COFFEE EXPORTS SITUATION IN THE WORLD
Global coffee production in 2019/20 is estimated at 168.84 million bags, 2.5% lower
than last year, while world coffee consumption is estimated to decrease by 0.9% to
167.59 million bags, resulting in a surplus of 1.24 million bags. The monthly average
of the ICO composite indicator fell by 8.9% to 105.85 US cents/lb in October 2020,
nearly reversing the gains made in the last two months.
The daily composite indicator continued the descent that began in mid-September,
going from a high of 107.94 US cents/lb on 9 October 2020 to a low of 103.3 US
cents/lb on 21 October.
In the last seven days of the month it ranged between 104.49 US cents/lb and 106.5
US cents/lb. Increased exports in September, signalling availability of supplies at the
end of the crop year, and the larger crop from Brazil are weighing on prices.
Prices for all group indicators declined in September 2020 after three months of
increase. The largest decrease occurred in the average price for Brazilian Naturals
which fell by 11.8% to 100.37 US cents/lb. The average price for Other Milds
decreased by 8.7% to 152.06 US cents/lb while the price for Colombian Milds fell by
8.4% to 154.28 US cents/lb.
As a result, the differential between Colombia Milds and Other Milds grew by 23.3%
to an average of 2.22 US cents/lb as the supply of Colombian Milds became relatively
scarcer. Robusta prices averaged 68.36 US cents/lb, 6.1% lower than in September
2020.
The average arbitrage in October, as measured on the New York and London futures
markets, fell by 12.2% to 51.56 US cents/lb. After falling for eight consecutive
months, stocks of certified Arabica increased by 3.2% to 1.3 million bags in October
2020. Certified Robusta stocks amounted to 2.04 million bags, 10.3% higher than in
September 2020.
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The volatility of the ICO composite indicator price increased by 0.1 percentage points
to 8.8% as the volatility for Robusta prices rose by 1.1 percentage points to 9.5%. The
volatility for Colombian Milds declined by 0.3 percentage points to 8.2%, and the
volatility for Other Milds fell by 0.2 percentage points to 7.8%. Brazilian Naturals
volatility declined by 0.1 percentage points to 12.2%.
Global output in 2019/20 is estimated at 168.84 million bags, 2.5% lower than in
2018/19. Arabica output is estimated to decrease by 5% to 96.05 million bags while
Robusta output is expected to rise by 1.1% to 72.78 million bags. The decrease in
output is attributed primarily to the reduction in Brazil as it was an off-year for its
Arabica production. Additionally, the ongoing low prices as well as the effects of
covid-19 on labour supply have also contributed to the lower output.
In 2019/20, global coffee consumption is estimated to fall by 0.9% to 167.59 million
bags following an increase of 4.6% in 2018/19 to 169.11 million bags. Demand is
estimated downwards due to ongoing pressure from a global economic downturn and
limited recovery in out-of-home consumption as social distancing measures remain in
place globally.
Although both production and consumption decreased, 2019/20 is seen in surplus,
with global output exceeding consumption by 1.24 million bags. The ICO composite
indicator reached 107.25 US cents/lb in coffee year 2019/20. This compares to an
average of 100.47 US cents/lb in 2018/19 when the surplus reached nearly 4 million
bags. Further recovery in prices over the next few months will likely be limited by this
surplus and the prospects of more coffee reaching the market, particularly Brazil’s
2020/21 crop, an on-year of the biennial Arabica production cycle.
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Table 1.1: World coffee supply and demand balance
In September 2020, world coffee exports rose by 0.9% to 10.16 million bags compared
to September 2019. Shipments of Arabica fell by 4.1% to 6.17 million bags, but
Robusta exports offset this fall, rising by 9.6% to 4 million bags. Colombian Milds
recorded the largest decrease in September, falling by 12.5% to 953,000 bags. Exports
of Other Milds fell by 6.9% to 1.82 million bags, while Brazilian Naturals rose by
0.2% to 3.39 million bags.
In coffee year 2019/20, global coffee shipments fell by 4.9% to 126.9 million bags
compared with coffee year 2018/19. In October 2019 to September 2020, Robusta
exports recorded the smallest decrease, declining by 1.4% to 48.68 million bags.
Shipments of Other Milds fell by 9.8% to 25.15 million bags, Colombian Milds by
7.2% to 13.88 million bags and Brazilian Naturals by 4.9% to 39.18 million bags. The
total value of coffee exports fell by 3.6% to 17.87 billion USD compared to coffee
year 2018/19 while the average unit value per pound of green bean equivalent
decreased to 148.66 US cents compared to 177.50 US cents in 2018/19.
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Green Arabica exports fell by 7.7% to 71.98 million bags in 2019/20. Shipments from
four of the five largest green Arabica exporters, which represent 78% of total green
Arabica exports, fell in 2019/20. Brazil’s exports of green Arabica declined by 8.1%
to 31.84 million bags, Colombia’s by 7.2% to 11.59 million bags, and Honduras’ by
19.1% to 5.51 million bags.
However, Ethiopia’s shipments of green Arabica rose by 1.3% to 3.85 million bags
while Peru’s exports decreased by 9.5% to 3.63 million bags. The total value of green
Arabica exports fell by 2.8% to 12 billion USD from 12.35 billion USD in 2018/19
and 13.48 billion USD in 2017/18. The average unit value grew by 5.3% to 126.07
US cents/lb.
In 2019/20, green Robusta shipments fell by 1.6% to 42.65 million bags, due largely
to the decrease in exports from Viet Nam, which accounts for 56% of all green
Robusta exports. Viet Nam’s shipments fell by 8.6% to 24.05 million bags. However,
Brazil’s green Robusta exports rose by 21.2% to 4.63 million bags, Uganda’s by
25.9% to 4.39 million bags, and Indonesia’s by 31% to 3.93 million bags.
On the other hand, India’s shipments of green Robusta fell by 14.3% to 2.78 million
bags. The total value of green Robusta exports declined by 8% to 3.93 billion USD
from 4.27 billion USD in 2018/19 and 4.77 billion USD in 2017/18. The average unit
value fell by 6.5% to 69.6 US cents/lb.
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Table 1.2: World coffee export changes in recent years
Shipments of roasted coffee have grown in each consecutive year from 370,000 bags
in 2014/15 to 788,000 bags in 2018/19. However, roasted coffee exports fell by 15%
to 669,000 bags in 2019/20. Colombia is the largest exporter of roasted coffee, and its
shipments grew by 15% to 198,000 bags.
However, Mexico’s exports fell by 12.7% to 194,000 bags. Indonesia’s roasted
shipments more than doubled to 48,500 bags while Brazil’s shipments fell by 11.2%
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to 23,000 bags. While the volume of roasted coffee exports declined in 2019/20, the
total value rose by 7.8% to 176.36 million USD. Additionally, the average unit value
of roasted coffee increased by 26.8% to 199.18 US cents/lb.
In the previous five years, soluble coffee exports have grown by an annual average
rate of 5% from 9.01 million bags in 2014/15 to 11.34 million bags in 2018/19. In
coffee year 2019/20, shipments of soluble coffee rose by 2.3% 11.60 million bags.
Brazil is the largest exporter of soluble coffee, and in 2019/20, Brazil shipped 3.94
million bags, 2.1% lower than in 2018/19.
Indonesia’s exports of soluble coffee rose by 36.1% to 1.81 million bags while India’s
fell by 7.8% to 1.8 million bags, which is the third year of decrease for India. Viet
Nam’s shipment of soluble coffee decreased by 3.2% to 1.32 million bags. However,
Mexico’s soluble coffee exports grew by 8.8% to 861,000 bags. The total value of
soluble coffee exports rose by 0.3% to 1.76 million USD in 2019/20, and the average
unit value decreased by 2% 114.81 US cents/lb.
21
II. THE EXPANSION OF VIETNAMESE COFFEE EXPORT TO EU MARKET
IN PERIOD 2015-2020
1. Coffee Production in Vietnam
Coffee culture is an established social tradition in nearly all countries. Coffee beans
have been one of the most impactful and cultivated products dating back to the 15th
century. Societies changed with the creation of coffee houses and advances in
technology to keep up with demands. The spike in crop exportation shifted coffee from
an early morning refreshment to a global trade phenomenon.
Coffee production in Vietnam stems from French colonization in the mid-1850s. The
Robusta bean became widespread throughout the country. After WWII and the Vietnam
War, private farming opened up for more business opportunities. Vietnam began to
slowly regain economic security in the late 1980s. Since then, 3 million jobs have been
generated from coffee-based agriculture.
According to Vietnam’s Ministry of Agriculture and Rural Development (MARD), the
total coffee replantation and grafting area in the Central Highlands over the past five
years reached 118,000 hectares (HA), mainly in Lam Dong and Dak Nong Provinces.
(Note: MARD had originally planned for 120,000HA.) From now until 2025, MARD
plans to expand the re-planted and grafted area by 30,000 to 40,000HA to replace old
trees and improve yields. Evidentially, declining area and production in Dak Lak, the
largest plantation province, was offset by progress in Lam Dong and Dak Nong
Provinces. MARD’s policy is to maintain coffee cultivation in the Central Highlands
steady at approximately 600,000HA
Robusta Production
As noted above, the contraction in the cultivation area in the Dak Lak province was
fully offset by the expansion in other provinces, including Lam Dong and Dak Nong,
leading to a net expansion in Robusta cultivation area in MY19/20. This expansion
carried over to MY20/21. However, despite this stable cultivation area, Post forecasts
that yields may still be affected by unfavorable weather conditions, leading to lower
MY20/21 production at 29.2 million bags.
Arabica Production
Arabia production accounts for 3 to 4 percent of Vietnam’s total coffee production. It
is mainly grown in elevations above 1,000 meters in remote mountainous areas with
ethnic minority populations. Considering relative inaccessibility and difficulties with
transportation, warehousing, and processing, cultivation expansion remains limited in
these regions. Coupled with unfavorable weather conditions, Post forecasts Arabica
production in MY20/21 at slightly over 1.0 million bags, lower than the previous year.
22
2.The expansion of Vietnamese coffee export to Eu market in period 2015-2020
COVID-19 has affected global trade flows for coffee, disrupting logistics and affecting
demand following widespread lockdowns in many countries. Despite the gradual
easing of social distancing requirements in many parts of the world, COVID-19’s
impacts on trade may continue until the end of June. Similarly, although industry
expects global coffee consumption to revive post-social distancing, demand will require
time to return to pre-pandemic levels. Many researchers cited the International
Monetary Fund’s forecast of a 3 percent drop in global GDP in 2020 and the
International Coffee Organization’s study of the correlation between GDP growth and
coffee consumption.
Post revised its MY19/20 export estimates down to 26.3 million bags, lower than the
USDA official number. High differentials of Vietnamese Robusta prices in the futures
market diverted exports opportunities to Brazilian Conilon and Robusta from other
sources, such as Indonesia. Traders also noted that the ongoing currency depreciation
in Brazil and pressure to sell the coming crop have pushed Brazilian farmers to de-stock
quickly. According to some research cited by local industry, Conilon, which was only
used in certain blends in the United States and other small niche markets, has recently
found new markets. This included first-time importers such as Spain, Russia, and some
African countries. Sources note that Indonesia currency’s depreciation also made their
Robusta beans cheaper than Vietnam’s.
Exports of Vietnamese coffee in the first six months of the MY19/20 saw a 6 to 7
percent contraction from the previous year, to 12.8 million bags (Figure 3). Germany,
the United States, and Italy continued to be the largest import markets.
Figure 3: Coffee Exports to Major Destinations in the First Half of the Marketing
Year
Mil
lio
n 3
ba
gs 2
(60
kg) 1
15
14
13
12
0
11
MY15/16
MY16/17
MY17/18
MY18/19
Germany
USA
Italy
Japan
Spain
Russia
Belgium
Algeria
Total
MY19/20
Source: Customs, Trade, Post Calculations
Figure 3 shows coffee exports in the first half of marketing year, from MY15/16 to
23
MY19/20. Germany, the United States, and Italy remain the top three buyers of
Vietnamese coffee. As mentioned in the Consumption section, COVID-19 has spurred
changes in global coffee consumption patterns, most notably causing a temporary
switch from out-of-home to in-home consumption. Higher quality blends with higher
Arabica contents are normally served in coffee shops, while packaged coffee designed
for in-home consumption is generally of lower quality, with a higher ratio of Robusta.
This trend may continue post-COVID as global economic uncertainty may affect
disposable incomes, causing consumers to move away from more expensive, high
quality coffee products. Consequently, Arabica could lose market share to Robusta in
the short to mid-term. Therefore, Post forecasts MY20/21 exports to rebound slightly
to 26.9 million bags on the assumption of higher demand for Robusta and improving
prices.
Green Bean Exports
Post revised MY19/20 green bean export estimates down to 23.5 million bags, as
Vietnamese Robusta’s position has become less competitive (Figure 4). Green bean
exports in the first six months of MY19/20 declined by 7 percent from the previous year
to 11.9 million bags. For MY20/21, Post forecasts green bean exports to slightly
rebound to 24.0 million bags.
Figure 4: Green Bean Exports by Month
4.00
3.50
Mi
llio
3.00
n
ba
2.50
gs
(6
2.00
0k
g)
2015/16
1.50
2017/18
1.00
2018/19
2016/17
2019/20
0.50
0.00
October
February March April
DecemberJanuary
November
May
June
July August
September
Source: Trade, Post calculations
Soluble and Roasted Exports
Post forecasts growth in soluble and roasted coffee exports at approximately 5 percent
year-on-year. The instant coffee market is reducing its reliance on bulk exports which
have faced unstable prices in recent years.
official number, due to impacts of COVID-19, and forecasts stagnant growth in
MY20/21.
24
Price
Export Prices
In the past two years, monthly export prices of common ungraded Robusta green been
(FOB HCMC) decreased to a multi-year low, most significantly from January to April
2020 (Figure 5). Industry stated that the depreciation of the Brazilian real made their
coffee comparatively cheaper and affected the global futures market. As the supply of
Robusta in Brazil, Vietnam, and Indonesia might tighten in MY20/21 due to smaller
off-cycle crops and unfavorable weather conditions and Robusta demand might grow,
Robusta prices may rebound in the coming months.
Figure 5: Monthly Average Export Prices of Green Bean Robusta
2,100
2,000
1,900
1,800
US
$/ 1,700
M
T 1,600
1,500
1,400
1,300
1,200
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
MY 2015/16
MY 2016/17
MY 2017/18
MY 2018/19
MY 2019/20
Average
Aug.
Sept.
Source: Trade
Domestic Prices
The decline in domestic prices mirrored that of export prices, which discouraged
Vietnamese farmers from selling (Figure 6). Some sources said that farmers were
expecting farm-gate prices at over 32,000VND/kg, but prices fell to below
30,000VND/kg in April.
25
Figure 6: Local Prices of Robusta Beans
48,000
46,000
44,000
42,000
VN40,000
D/
kg 38,000
36,000
34,000
32,000
30,000
28,000
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
MY 2015/16
MY 2016/17
MY 2017/18
MY 2018/19
MY 2019/20
Average
Jul.
Aug.
Sept.
Source: Trade
3. Evaluate the expansion of Vietnam’s coffee to Eu market
3.1 Outcome
It can be seen that Vietnamese coffee has gradually dominated the world market.
According to statistics, Vietnam's coffee products have been exported to more than 80
countries and territories, accounting for 14.2% of the global coffee bean export market
share (ranked second, after Brazil); In particular, roasted and instant coffee exports
accounted for 9.1% market share (ranked 5th, behind Brazil, Indonesia, Malaysia and
India) ...
Currently, the world's leading coffee exporting countries such as Brazil, Indonesia,
Colombia ... mainly export coffee in the form of green beans, which means only
preliminary processing after harvest. Some countries have roasting and grinding
operations, but only a small proportion of the total coffee exports. Meanwhile, in
Vietnam, since the mid-90s of the last century, post-harvest preliminary processing has
been interested and promoted. As a result, Robusta coffee has a much lower selling
price at Vietnamese ports than the reference price at the London Commodity Exchange,
now gradually narrowed and asymptotic to the world market price.
In particular, over the past time, thanks to preferential tariffs for processed coffee from
Free Trade Agreements that Vietnam has signed, more and more businesses are
26
interested in investing in activities. deep processing, contributing to improve the added
value of coffee products in particular and the export turnover of the whole industry in
general.
3.2 Drawback
In recent years, although Vietnam’s coffee industry has rapidly developed in terms of
both acreage and output, the advantage in the world market largely belongs to foreign
commercial enterprises. effectiveness and strong financial potential. This is a big loss in
the export value of Vietnamese coffee. The main reason is stated that our country's
coffee exports are still mainly in raw form, so there is no brand name. Most of
Vietnam's exported coffee has become raw materials of many countries, used for deep
processing and re-exported for consumption in our country in the form of powdered
coffee, instant coffee, ready-made ... According to analysis of Although the volume of
coffee exports is high but the value is low compared to some countries on the
international market - because about 80% of coffee output is processed and dried in
households with temporary drying yard. . In addition, to mention the outdated
machinery and equipment of the people, plus coffee that does not meet the standards of
maturity, is mixed with many impurities.
The EVFTA and IPA agreements were started. EVFTA opens up great opportunities,
but even the main export products of Vietnam, with many opportunities for tariff
reduction, also face great challenges because the EU is a high quality market.
Seizing opportunities also depends a lot on the capacity of domestic enterprises,
because once the tariff barriers are opened, the more attention will be paid to technical
barriers to strict quality control.
When the "barriers" for quality are set up, it is difficult for Vietnamese coffee to "get
into the fastidious markets". Because "98% of the current export coffee with medium
standards. Therefore, in order to export to these markets, it is necessary to rearrange the
value chain from seeding, cultivation, care, preservation, processing ... to create a high
quality product chain "- Mr. Luong Van Tu - President of VICOFA - emphasized
III. ORIENTATIONS AND SOLUTIONS TO EXPAND VIETNAMESE
COFFEE TO EU TILL 2025
1. Coffee export market forecast
Economists predict the EU-Vietnam Free Trade Agreement (EVFTA) will help increase
Vietnamese coffee’s share in the EU market.
The EVFTA applies zero-percent taxes to Vietnamese coffee exports to the EU. Buon
Ma Thuot Coffee is among the 39 Vietnamese geographical indications protected by the
EU under the trade deal, a major advantage for the Vietnamese coffee sector in the
competition with foreign rivals in the EU market.
27
Dr. Nguyen Trung Kien from the Institute of Policy and Strategy for Agriculture and
Rural Development said the EVFTA would create a major boost for Vietnamese instant
coffee exports to European countries due to tax reduction from 15 percent to zero. The
trade deal will encourage Vietnamese coffee businesses to expand deep processing to
create refined products, thus enhancing the added value of exports and restricting the
impact of declining global coffee bean prices due to oversupply.
To take advantage of EVFTA opportunities, many domestic and foreign companies
have invested in expanding coffee processing. However, Dr. Nguyen Trung Kien said
that despite rapid export growth, processed coffee products still account for a modest
percentage of Vietnam’s exports to the EU, while most Vietnamese export coffee
products are unroasted and non-decaffeinated.
Vietnam Coffee-Cocoa Association (Vicofa) data show that although Vietnamese
coffee products account for more than 8.5 percent of total volume of coffee imported by
the EU, processed coffee accounts for a mere five to seven percent of the total export
volume. This year, the EU is expected to import 49.5 million coffee sacks, an increase
of two million sacks compared to 2019, accounting for nearly 45 percent of total global
coffee imports and offering clear potential for Vietnamese coffee.
2. Orientations
The current orientation of the State and the ministries and branches is to build
Vietnam's coffee industry to develop in a modern, synchronous, sustainable, highly
competitive direction with diversified, quality, high added value, increasing income for
farmers and businesses.
According to the Vietnam Cocoa Coffee Association, with a vision to 2030, the total
coffee growing area of Vietnam will reach 600,000 hectares, with an estimated export
turnover of 5-6 billion USD. In the next stage, the whole coffee industry will diversify
products towards deep processing with the proportion of 30-40% of output and strong
brands. By 2030, the estimated total output value of the coffee industry is 200%
compared to today.
3. Solutions
First, regarding the connection to promote exports, the Ministry of Industry and
Trade has directed and instructed domestic distribution enterprises as well as foreign
invested enterprises to implement stable and long-term association programs to coffee
consumption through overseas distribution systems under the scheme to promote
Vietnamese enterprises to directly participate in overseas distribution networks until
2020, contributing to the introduction of coffee products of Vietnam penetrates more
deeply and directly into foreign markets, such as organizing programs to bring coffee
28
and fruit into Lotte Mart and Emart systems in Vietnam and South Korea, organizing
“Agricultural Weekly Vietnamese products in France ".
Second, in terms of market forecasting, the Ministry of Industry and Trade has been
and will continue to research and synthesize information on the market (demand, type,
specifications, models, supply and demand, prices, books on import and export
management and quality control, food safety and hygiene ...) for coffee products, from
which searching for potential export markets to supply to the Ministry of Agriculture
and Development. rural areas, localities, businesses and people in order to coordinate
production organization, rationally structure products, create a stable source of goods in
quality and quantity, to meet market signals.
Third, in terms of trade promotion and branding, with the state management
function, the Ministry of Industry and Trade always focuses on coordinating with
relevant ministries and branches, especially the Ministry of Agriculture and
Development. in rural areas, enhance the promotion of Vietnamese coffee products in
foreign markets through communication campaigns, propaganda and editing of
information handbooks for export, trade promotion programs. and product introduction
(coffee is in the group of agricultural products prioritized for support from the national
trade promotion program during the past time, the average annual implementation
budget accounts for 6-7% of the total budget for group of agricultural, forestry and
aquatic products; periodically support the organization of Vietnam Coffee Day,
Vietnam Coffee Festival as well as major domestic and international fairs ...).
4. Recommendations
Support farmers and businesses to attract investment, apply science and technology,
improve the quality of human resources; at the same time, to encourage and strengthen
links and cooperation in coffee production and business with the aim of stabilizing
exports, maintaining and expanding markets.
Regarding the production and processing, it is necessary to promote the
restructuring of the coffee industry effectively, build concentrated and specialized
growing areas associated with the development of the processing industry, and the
application of technological advances. promoting the linkage of raw material areas
with deep processing establishments and factories to create a stable source of goods in
terms of quality and quantity, to meet market requirements; to have solutions to
remove difficulties, support farmers and enterprises to attract investment, apply science
and technology, improve the quality of human resources; at the same time, to
encourage and strengthen links and cooperation in coffee production and business with
the aim of stabilizing exports, maintaining and expanding markets.
In terms of branding, first of all, it must be affirmed that, in parallel with
improving product quality, branding must be paid more attention and attention, in
29
which enterprises are responsible for in building their own brand. Enterprises need to
survey the needs of the market in areas including market share - tastes - quality - price,
thereby determining the proportion of processing suitable products (how many% of
primary products) ;% of refined products) for product development orientation,
building promotion, marketing strategy, brand positioning in accordance with its
capacity. The State will support businesses to build and develop brands through
communication campaigns, image promotion; training programs, guidance, capacity
building to design, product format; and how to create and promote the brand.
Regarding trade promotion, Vietnamese coffee exporters need to focus on
recruiting and training staff with foreign language skills and expertise; actively
participate in trade promotion programs and activities directed by the Ministry of
Industry and Trade as well as organized by ministries, branches and associations;
attending international fairs and exhibitions both at home and abroad to introduce
products and find customers; Build a separate research channel and data on export
markets through the support of Vietnam's trade representatives in other countries to
update information and changes in trade developments to promptly adjust. production
and business activities are consistent with market signals.
30
CONCLUSION
Vietnam’s industry is faced with several challenges. Local products are currently
produced and consumed mainly through fragmented value chains. Coffee processing
and exporting enterprises mainly buy green beans through intermediaries, using
obsolete methods based on bean size and the percentage of broken ones to classify the
quality.
Moreover, Vietnam lacks a leading enterprise with strong governance, capital,
technology, and marketing expertise to harness opportunities in the value chain.
Vietnam mainly exports raw coffee. Meanwhile, several businesses have yet to
develop their own brands, so Vietnamese coffee is sold to the global market under
foreign brands. This big disadvantage has reduced competitiveness in the international
market.
Also, the domestic consumption of processed coffee products remains low.
Domestic consumption of coffee currently accounts for only about 10 per cent of
Vietnam’s annual output, which is much lower than that of Brazil.
To take advantage of the new opportunities, Vietnam needs to implement solutions
including developing sustainable production, improving the coffee’s quality, and
reducing inefficient growing areas. We should focus on building certified growing
areas, linking businesses with each other, and building a national brand for Vietnamese
products.
REFERENCES
https://cdn.vietnambiz.vn/2020/1/20/bao-cao-thi-truong-ca-phe-nam20191579526264-15795267222611382133113.pdf
http://www.ico.org/documents/cy2018-19/icc-124-9e-profile-vietnam.pdf
http://www.ico.org/news/coffee-break-series-2e.pdf
http://www.ico.org/documents/cy2017-18/icc-122-6e-emerging-markets-south-andeast-asia.pdf
https://cdn.vietnambiz.vn/2020/1/20/bao-cao-thi-truong-ca-phe-nam20191579526264-15795267222611382133113.pdf
31
http://www.ico.org/coffee_prices.asp
http://www.ico.org/Market-Report-19-20-e.asp
http://www.ico.org/documents/cy2014-15/icc-105-17-a2e-rules-indicator-pricesfinal.pdf
http://www.ico.org/documents/cy2016-17/icc-105-17-a3e-rules-indicator-pricesfinal.pdf
https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?file
Name=Coffee%20Annual_Hanoi_Vietnam_05-15-2020
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