As one of the top 4 coffee exporters in Vietnam, Mr. Phan Minh Thong, CEO of Phuc Sinh JSC, has shared his latest insights on coffee prices. According to him, when coffee prices rise, all parties involved experience challenges, and we are also looking for ways to bring the prices down.
Coffee prices will remain high for the next 5 years
Currently, coffee prices have dropped by 20% in just one week, which has shocked many people. However, Mr. Thong predicts that coffee prices will stabilize in the future but will remain at this high level for at least the next five years. This is due to the limited supply of coffee beans. Meanwhile, Brazil, the world’s leading coffee producer, is facing climate change, with temperatures reaching 55-58%. As a result, global coffee prices are generally high.
Looking back at the first quarter of 2024, coffee prices continuously increased due to concerns about supply shortages. While in November 2023, coffee was priced at 59,000 – 60,000 VND/kg, it rose to 62,000 – 69,000 VND/kg in December 2023. By January 2024, prices had surged to 82,000 VND/kg, reaching 86,000 VND/kg in early March, and currently standing at 94,500 VND/kg.
At that time, the price of Vietnamese Robusta coffee was the highest in the world, even surpassing India. As a result, Vietnam’s major customers turned to India for their coffee needs. One might think that with the high prices, Vietnamese coffee traders were reaping huge profits. However, according to Mr. Thong, the demand for coffee beans was high, but the supply was meager. Because of the high prices, farmers withheld their produce from the market, leaving traders with insufficient stock to meet the demands of processing companies, who, in turn, suffered losses from buying high and selling low.
A paradox arose as Vietnamese coffee prices reached their peak, and the companies in the industry suffered record losses.
Mr. Nguyen Ngoc Luan, the founder of the Meet More agricultural coffee brand in Hoc Mon District, Ho Chi Minh City, also shared that his company is continuously negotiating with suppliers to adjust prices. According to him, coffee prices have doubled compared to the same period last year, putting many processing companies in a difficult position. While the input cost is now 85,000-95,000 VND/kg, companies cannot increase their selling prices due to previously signed contracts with prices fixed at around 50,000-60,000 VND/kg.
Figure: Coffee price fluctuations up to April 2024.
After 6 years of “taking coals to Newcastle,” the Arabica coffee product line was finally accepted by the US market and quickly sold out.
Phuc Sinh, on the other hand, has been focusing on developing coffee products, especially those made from Arabica beans, as well as the K COFFEE chain. Recently, Phuc Sinh launched a new product, Honey & Natural Special Coffee, which is made from the finest Arabica beans sourced from the northwestern region of Vietnam.
Mr. Thong also took this product to the US, where it quickly sold out.
In reality, Phuc Sinh has been “taking coals to Newcastle” for six years, and it is only now that their Honey and Natural Specialty coffee beans have been accepted and ordered in large quantities by international customers at excellent prices.
Specifically, Phuc Sinh presented their Honey and Natural Specialty coffee at the Chicago Specialty Coffee Event, where it was well-received by customers. The product was sold at $14/250gr and sold out within the first two days. After the event, the company received numerous orders from international customers. However, at present, Phuc Sinh only has a few hundred kilograms of Honey and Natural Specialty coffee left for the domestic market.
Figure: Honey & Natural Special Coffee sells out.
K COFFEE chain experiences a 57% increase in Gen Z customers after a “pink makeover.”
Regarding the K COFFEE chain, at the end of March, the K COFFEE brand officially completed its new visual identity for its stores. According to Mr. Thong, often referred to as the “King of Pepper” (owner of the K COFFEE chain), this was not a rebranding strategy but a change to stay ahead of the curve and create an impression on Gen Z customers.
“Change is a risky move, but it is necessary for all brands to stand out and differentiate themselves in a constantly evolving market,” emphasized Mr. Thong.
This is also known as the first step in a significant expansion plan for K COFFEE. In a previous sharing session, Mr. Thong mentioned his plans to collaborate with a partner to expand the K COFFEE chain to 100 stores, a significant increase from its current size.
In 2024, K COFFEE officially partnered with an investor to execute its expansion strategy. As per the plan, K COFFEE will soon receive funding from its partner to develop the chain into the only brand in Vietnam offering a comprehensive range of tea and coffee products, from A to Z. This means controlling the entire process, from sourcing raw materials to processing and serving the final cup of coffee to customers.
Figure: With the strategic partner, K COFFEE aims to expand to 100 stores.
With its new partner, K COFFEE aims to become the only company in Vietnam that manages the entire process, from sourcing and roasting to serving the final product. The company will also be the only chain with sustainability certification on its products and a system to trace the origin of its produce.
Furthermore, K COFFEE plans to create an immersive experience for its customers, allowing them to visit the gardens in Son La, taste coffee on-site, and understand the coffee production process. They will also be able to roast and brew their coffee.
“Since the beginning of the year, K COFFEE’s sales have increased by 25%. The new, vibrant look has been well-received by customers, especially the younger generation. Notably, we’ve seen a sudden increase of about 57% in customers aged 18-25,” added Mr. Thong.
Mr. Thong is known as the “King of Pepper.” In recent years, Phuc Sinh has also focused on exporting coffee to foreign markets, mainly in Europe.
According to Mr. Thong, Phuc Sinh’s annual export turnover reaches $300 million (equivalent to 7,062 billion VND), with coffee accounting for the largest proportion at 60%, followed by pepper at 30%, and tea at 10%.
