The Paradox of Coffee and Pepper Exports

Vietnam is a frontrunner in the global export market for Robusta coffee and black pepper. However, the market share is currently dominated by numerous foreign businesses.

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Compared to the same period last year, black pepper prices have increased by 30% and coffee prices have increased by over 100%. This has attracted many domestic and foreign businesses to participate in the purchase, processing, and export of these two agricultural products due to their high profitability.

Foreign businesses take advantage

In terms of black pepper, Vietnam has been the world’s leading producer and exporter for the past 20 years. However, according to a recent announcement by the Vietnam Pepper Association (VPSA), the leading exporters of black pepper in the first 2 months of 2024 are all foreign companies. Specifically, the top exporter is Nedspice Vietnam (Netherlands) with 3,555 tons, a 44% increase compared to the same period last year; followed by Olam Vietnam (India) with 3,229 tons, a 32% increase. Meanwhile, the two leading Vietnamese companies in the rankings have seen a decrease in export volume. Specifically, Tran Chau Company achieved 2,265 tons, a 33.4% decrease; Phuc Sinh Company achieved 1,744 tons, a 31.5% decrease.

Bên trong nhà máy tiêu nghiền của Công ty Phúc Sinh .Ảnh: AN NA

Black pepper exporters with the highest volume are Olam Vietnam and Nedspice Vietnam, while Tran Chau and Phuc Sinh Companies rank third and fourth, respectively. Previously, Tran Chau and Phuc Sinh often held the top positions in terms of black pepper exports in Vietnam. Mr. Phan Minh Thong, the founder of Phuc Sinh Company, is known as the “king of black pepper” for this reason.

In the processed coffee segment, foreign direct investment (FDI) businesses also dominate the export market. According to the Vietnam Coffee-Cocoa Association (Vicofa), in the first 5 months of the coffee crop 2023 – 2024 (from October 2023 to February 2024), the top 10 exporters of roasted and ground coffee and instant coffee are mostly FDI companies. Among them, Nestle Vietnam (Switzerland) takes the lead with about 57.5 million USD, and other names include Outspan Vietnam (India), Cà phê Ngon (India), Trung Nguyen Group (Vietnam), Iguacu Vietnam (Japan), URC Vietnam (Philippines), Tata Coffee Vietnam (India), Instanta Vietnam (Europe), Sucafina Vietnam (multinational), and International Select Foods Company (CP Vietnam). Thus, in this list, there is only one Vietnamese brand, Trung Nguyen Group.

In previous crop years, such as the 2022 – 2023 crop year, FDI companies accounted for about 33.1% of green coffee exports (raw materials) and 71.7% of roasted and ground coffee and instant coffee exports. In the 2021 – 2022 crop year, these ratios were 31.7% and 66%, respectively.

In an interview with the reporter from Nguoi lao dong newspaper, Mr. Nguyen Nam Hai, Chairman of Vicofa, stated that FDI companies are also Vicofa members and they have advantages in terms of capital, technology, and market. “Recently, the export market share of FDI companies has been increasing. One reason is that the increase in coffee prices has exposed the capital weaknesses of Vietnamese companies. With the same amount of capital, Vietnamese companies can only purchase about half of the coffee compared to last year,” explained Mr. Hai.

Not easy to change

Explaining why foreign companies dominate the processed coffee export market, Mr. Nguyen Ngoc Luan, CEO of Global Commerce Trading Company (Meet More Coffee brand), mentioned that investing in a soluble coffee processing plant is very expensive, especially the coffee extract extraction line, which requires an initial capital of about 1,000 billion VND. This is a significant barrier for Vietnamese companies. Meanwhile, foreign corporations with hundreds of years of experience have strong capital with low costs, and they have technology and global brands, giving them a dominant advantage. “The soluble coffee segment in the world is growing very well with a growth rate of 30% per year due to its convenience and nutritional value; it has great potential in the future,” evaluated Mr. Luan.

As for roasted and ground coffee, Mr. Luan mentioned that the difficulty for Vietnamese companies lies in not being able to capture the consumer taste of the international market, which is quite different from the Vietnamese roasted and ground coffee taste. Therefore, the export volume to other countries is still low. However, according to Prof. Bui Chi Buu, former director of the Southern Agricultural Science Institute, Vietnam is the source of coffee and black pepper raw materials for the whole world, so it is inevitable that foreign agricultural and food corporations come to Vietnam for procurement. “Vietnamese companies have capital resources that are not equal to FDI companies, but they are very flexible and have efficient business operations. Many Vietnamese companies even buy coffee and black pepper from Brazil, Indonesia, etc., for processing and export, bringing good profits even though they do not lead in terms of export volume,” commented Prof. Buu.

Prof. Bui Chi Buu believes that foreign investment in Vietnamese agriculture, especially coffee and black pepper, brings many benefits and helps develop and increase competitiveness in these industries. Overall, attracting FDI into agriculture brings many advantages and needs to attract more of this capital flow. “In many agricultural value chains, Vietnamese farmers and companies still have a high proportion,” compared Prof. Buu.

Vietnamese companies lead in the export of green coffee

According to Vicofa, in the first 5 months of the 2023 – 2024 coffee crop, Vietnamese companies still take the lead in terms of the export volume of green coffee (coffee raw materials). Specifically, the top exporter is Vinh Hiep Co. Ltd. with 81,025 tons. This is a company whose owner is Mr. Thai Nhu Hiep, the founder of L’amant Café brand. The following companies are Intimex Group, Tuan Loc Commodities, Simexco Daklak, Intimex My Phuoc, Phuc Sinh, and more.

In the 2022 – 2023 crop year, Intimex HCMC, Vinh Hiep, Simexco Daklak, and Intimex My Phuoc were the top 4 Vietnamese companies in terms of coffee export volume. Among them, Intimex Group is a company whose Chairman of the Board of Directors is Mr. Do Ha Nam. Mr. Nam is currently the Vice Chairman of Vicofa.

SOURCEcafef
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