How to Improve Competitiveness of Vietnam Coffee?

According to the Vietnam Coffee and Cocoa Association, if the coffee industry has good capital investment to improve the added value of Vietnam’s coffee, it is completely feasible to obtain the export turnover of more than US$2 billion a year. At present, Vietnam has 500,000 hectares of coffee, only ranked behind Brazil in terms of exported coffee quantity. Vietnam’s coffee has been introduced to nearly 80 countries and territories with the output of around 1 million tonnes a year (in 2007, the amount of coffee exported from Vietnam exceeded 1 million tonnes). The coffee exporting market is judged to be basically stable. Germany continues to be the number-one customer of Vietnam’s coffee, followed by the United States, Spain, and Italy. Only in the first 11 months of 2008, coffee export was roughly 854,000 tonnes, worth US$1.8 billion.

 

Large quantity but low qualityAlthough the value of coffee export turnover has risen much more than it was in previous years, coffee price in Vietnam remains lower than that in other countries. There are many reasons for this issue: product quality is lower, the technology used in harvest and preservation and investment in processing to improve added value are modest, no brand is built for the products in the international market, selling technique remains weak, and coffee exporters have not succeeded in cooperation. As from the data gathered by the Steering Committee of the International Coffee Organisation (ICO), Vietnam’s coffee accounts for up to 88 per cent of the total amount of discarded coffee.

 

In May, 2008, the ICO’s evaluation of performance of the coffee quality improvement programme in 2007 clearly stated that Vietnam failed to show a serious attitude towards complying with standard product quality, especially in number of errors and moisture. Mr Doan Trieu Nhan, ex-Chairman of Vietnam Coffee and Cocoa Association, said the Robusta coffee exported from Vietnam had high quality, even better than the same type of coffee in many other countries, but most exporting companies still adopt the old standard package 4193:93 in doing business with importers. Specifically, that package includes the size of bean, rate of impurity, rate of black, decayed, brown, and broken seed based on the percentage of quantity. The benefit from adopting this old standard is simplicity and low cost. However, this classification remains too spare, unable to fully evaluate the product quality*. This is the reason leading to the continuing harvest of unripe coffee bean and unimproved quality of Vietnam’s coffee.

 

Being disadvantageous as a result of complianceTo build up a real brand for Vietnam’s coffee in the world market and earn increasingly higher export value, Vietnam definitely needs to invest a lot in production, harvest, preservation, processing and brand development. Nevertheless, some experts argued that the most urgent thing was to adopt the standard TCVN 4193-2005 soon. This is a standard built in 1996 based on experiences of many countries in the world. This standard uses error-based classification to match the ICO’s classification. In 2005, Vietnam already publicised this standard, yet the adoption was limited as it was optional.

 

Before this situation, the Ministry of Trade (formerly) issued Notice No. 2987/BTM-XNK on May, 24, 2007 on conclusions by former Vice Minister Luong Van Tu at the Seminar on adopting the standard TCVN 4193-2005 for Vietnam’s exported coffee. Accordingly, coffee quality will be checked in conformity to the quality standard before customs clearance. The validity date starts on October, 1, 2007. This Ministry’s leaders also suggested the Ministry of Science and Technologies to issue a decision of adoption and itinerary of adopting the standard TCVN 4193-2005.

 

In agreement with the above viewpoint, the Bureau of Cultivation (Ministry of Agriculture and Rural Development - MARD) said that it was obligatory to check quality of exported coffee in conformity with the standard TCVN 4194-2005 early. This standard should be upgraded to be technical standard set for Vietnam’s exported coffee. The Bureau of Cultivation also suggested the itinerary for applying the standard TCVN 4193-2005.

 

However, at the Seminar “Improving Quality and Itinerary of Adopting the National Standard TCVN 4193-2005 in Producing Exported Coffee” held by the MARD at the end of 2007, there were many controversies around adopting this standard. Therefore, the standard is only used as a reference. While waiting for it to be officially applied, Vietnam’s coffee continues to bear disadvantage of “as you brew it, so you must drink”.