Intimex JSC, Vietnam’s largest supplier of Robusta coffee beans, took an unexpected turn when it decided to focus on instant coffee production with a separate factory in the southern province of Binh Duong.
“We don’t want to miss the opportunity to jump into the instant coffee market. It brings more profit and less risk,” shared Do Ha Nam, general director of Intimex.
Intimex’s change of course has been the starting pistol for a new race in the Vietnamese coffee industry. Instead of focusing on exporting coffee beans, local businesses have now started looking for ways to increase profits by processing coffee and building a brand for it.
In the context of the pandemic, the demand for processed coffee in Vietnam’s export markets such as the EU is also increasing, which has given the industry the opportunity to broaden its footprint abroad with its abundant supplies of Robusta coffee. The coffee type is the main raw material for instant coffee and, together with Arabica, can be grown easily on Vietnam’s coffee plantations.
As the world’s second-largest coffee exporter with an output of up to 1.7 million tonnes in 2020, coffee beans have been Vietnam’s main export product for many years. Experts say that to improve the quality along the value chain and render export sustainable, coffee enterprises are required to invest in deep processing technology to produce high-quality coffee with high commercial value, instead of exporting raw products.
In mid-May, Luong Van Tu, then-chairman of the Vietnam Coffee-Cocoa Association, said that the association is now calling on businesses to invest in roasting and instant coffee technology. In the next decade, the investment in such technology will help increase the proportion of processed coffee exports to 20 per cent.
Processed coffee accounts for an increasingly high proportion of Vietnam’s total coffee exports, from 14.4 per cent in the first quarter of 2020 to 17.13 per cent for Q1/2021, according to the General Department of Vietnam Customs.
Race for dominance
Like the fierce competition between coffee and beverage brands in expanding the number of stores, the Vietnamese coffee industry is seeing brands racing to expand instant coffee production.
The strongest participation within the segment comes from the biggest names such as Vinacafé, Trung Nguyen Legend, Nestlé, and new players such as NutiFood and Intimex.
As one of the first enterprises to produce instant coffee in Vietnam, Vinacafé currently holds 40 per cent of the domestic market share, and it is also a pioneer in bringing locally-made instant coffee products abroad. Its branded products are now available in China, the United States, Canada, and more.
In 2020, Vinacafé’s instant coffee export output reached more than 2,200 tonnes with a value of more than $8 million. Although the pandemic affected coffee exports, a representative of Masan Consumer, the owner of Vinacafé, said that they will expand the presence of the brand to new export markets in addition to maintaining key markets.
Despite joining the instant coffee race later, Trung Nguyen Legend with its G7 coffee achieves impressive results as the product is present in more than 80 countries and territories. In some markets, such as South Korea, G7 ranked in the top 5 most popular and purchased online coffee brands in 2020. It is also the most popular Asian instant coffee brand, with the second-largest market share in the Chinese online coffee market.
Another name that does not come from Vietnam but has made important contributions to bringing Vietnamese coffee to the world is Nestlé.
As the group is supplying nearly one-third of the Asia-Pacific’s instant coffee market, each year Nestlé buys 20-25 per cent of Vietnam’s coffee output for deep processing and export under its Nescafé brand.
Nestlé Vietnam managing director Binu Jacob said that all Nescafé products are fully made from Vietnamese Robusta beans and are exported to 25 markets worldwide.
The instant coffee export market has also been attractive to previously unknown players in the field, such as NutiFood, Vinamilk, and the leading green coffee bean exporter Intimex.
In 2019, NutiFood made the first steps on its journey to bring instant coffee to the world by teaming up with legendary golfer Greg Norman to open a coffee chain called Greg Norman NutiCafe in the US and several Asian countries.
Smaller player’s niche market
Contrary to the bustle of the instant coffee processing industry, the export market for roasted coffee is a favourite playground for smaller manufacturers looking to conquer the niche market with a line of specialty coffee products, such as Phuc Sinh, The Coffee House, The Married Beans, and Shin Coffee.
Leading this game is Phuc Sinh – a 20-year-old enterprise operating in the export of deep-processed coffee with 70-80 per cent processed coffee export. According to Phan Minh Thong, general director of Phuc Sinh Corporation, the company’s average annual revenue from roasted coffee exports is about $360 million.
Smaller producers like The Married Beans and The Coffee House also want to find opportunities to export their roasted and ground coffee products by focusing on exploiting niche markets. Moreover, these chains are increasing their prestige and popularity by developing retail store chains in the domestic market, thus silently adding strength to their brand by supporting coffee farmers in sustainable development and creating high-quality speciality coffee products for the international market.
Duy Ho, CEO of The Married Beans, said that although serving a niche market with a share of only about 2-3 per cent, his company’s Arabica products from Dalat are considered luxury by fastidious customers looking for exquisite taste. Each year, it exports 150-200 tonnes of coffee to Japan, the EU, South Korea, and the US with revenues of about $1.6 million. Although the company’s roasted and ground coffee products account for only 30 per cent of the total export volume, they bring about $1 million of that revenue.
“As soon as the pandemic is under control, The Married Beans will actively participate in international coffee exhibitions and fairs to seek more export opportunities, including cooperating in processing and coffee shops with other brands and the introduction of The Married Beans’ roasted products to e-commerce in the Middle East,” Ho shared.