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Good morning, Vietnam; with production increasing by 50%, Vietnam's coffee industry soars into the international scene.

With production increasing by 50%, Vietnam's coffee industry soars into the international scene.

The Vietnamese coffee industry stands poised for a major presence on the international coffee scene. With production up sharply, quality improving, and exports soaring, Vietnamese coffee is gaining a favorable reputation with international coffee traders.

Vietnam had high hopes upon entering the ICO in 1989, but immediately had its expectations lowered when the Agreement collapsed soon thereafter. "(The collapse) has had an adverse influence on the annual income of Vietnam's coffee trade," said Doan Trieu Nhan, chairman of VICOFA, the Vietnam Coffee and Cocoa Producers and Exporters Association.

Based on the London market, the price of Vietnamese coffee is lower, at "around US$ 120-140" per metric ton. "But," Nhan adds, "despite low world prices, coffee cultivation is still profitable in Vietnam. Production costs are low and productively is rather high."

VICOFA, founded in 1989, includes the entire spectrum of the Vietnamese coffee industry's most important growers, processors, brokers, and exporters of coffee and cocoa in Vietnam. Under the direction of VICOFA, the various member companies interact with each other to share information about price movement, quantities availability, demand, stocks, investments, joint-venture possibilities, and the best way to ship the product.

And organization is the best way to go for Vietnam's soaring coffee industry. Production for crop year 1990-91 went up around 15% to 98,400 metric tons. For the current year, projections are 145,000 metric tons - up an eye-catching 50%.

Although coffee has been cultivated in Vietnam for more than 100 years, it wasn't until the 1980's that the Vietnamese authorities began to realize coffee's true potential.

"Since 1980, the government has been paying great attention to intensifying the Robusta production and expanding the Arabica area in the north," said Nhan. The area planted to coffee is increasing, and by the year 2000, it is expected that Vietnam will have about 200,000 ha under coffee cultivation - 135,000 ha of Robusta and 65,000 ha Arabica.

"This is the ideal ratio of Robusta versus Arabica, which we believe will increase the overall value of coffee exports from Vietnam," said Nhan.

In a recent study carried out this year by the National Coffee Research Board of Vietnam based in Daklak Province, current total coffee area was 140,000 ha, of which Robusta coffee took the majority share of 135,000 ha, and Arabica coffee took the remaining 5,000 ha. Output of the 1992/1993 crop was about 1.5-2 million bags based upon a 60 kg per bag capacity.

The Robusta coffee growing areas are concentrated in the highlands of Daklak, Gialai, Kontum, Lamdong, and Dongnai provinces, whereas Arabica coffee has found very suitable soil and terrain in the northern provinces of Lanson, Coaban, Haobinh, Sonla, Laichan, Nghean, and Quangtri. Coffee beans produced are Arabica A1 and A2, Robusta R1 and R2, and Chari C1 and C2.

Once coffee was produced solely on the huge state farms, but not any more. As Vietnam continues to dismantle the stranglehold of a centrally planned economy, the land has been given back to the farmers - a common occurrences among formerly communist/socialist countries.

"Today, 70% of the coffee is produced on private farms and the remainder is on state farms," said Le Trong An, deputy general director, VINACAFE, the Vietnam National Coffee Export and Import Corporation. A staggering 300,000 farms grow coffee in Vietnam, mostly on smallholding plots averaging around 0.3-1.0 ha.

VINACAFE, through its many branches is responsible for the largest portion of the coffee business, from growing to processing to research and development to manufacturing to exporting. VINACAFE, the dominant member of VICOFA, exports around 20,000 metric tons annually of coffee beans and coffee products.

Under VINACAFE's extensive coffee organization are: 35 state farms; 2 coffee showroom centers (one in Hanoi and one in Ho Chi Minh City), a coffee research institute (called EAKMAT); a coffee quality control center in Nha Trang (called CAFECONTROL); two modern processing plants in Ho Chi Minh City and Daklak; a coffee soluble in Bien Hoa City with a capacity of 100 metric tons a year; and six coffee export companies in Hanoi, Nha Trang, Daklak, and Ho Chi Minh City.

"Thanks to good quality, (Vietnam's) coffee is well accepted in about 25 foreign countries," Nhan, who is also general director of VINACAFE. He said the main traditional customers are Singapore, Germany, Austria, France, Italy, Algeria, and countries in Eastern Europe.

Total exports from Vietnam in 1993 are expected to leap up over 60% to about 130,000 metric tons. In past years, exports have shown healthy increases as follows: 1990, 60,000 metric tons; 1991, 74,000 metric tons; and 1992, 80,000 metric tons. About 10% of Vietnam's production is consumed locally.

"We project the total to reach around 180,000 sector of the Vietnamese national economy, and is being targeted for improvement. Nhan said Vietnam exported about 1.35 million bags just by the end of February 1993. "From now to the year 2000, coffee plantations will be expanded to 200,000 ha with a forecast production of about 3.35 million bag," he said.

The increasing yearly output of coffee, especially Robusta, attracts a number of foreign traders to Vietnam. Among the 80,000 metric tons of the commodity exported this year, a large quantity was shipped to Singapore.

Under the VINACAFE umbrella are several coffee companies. This includes the Bien Hoa coffee plant for instant coffee and roasted coffee for both domestic and export. VINACAFE also has coffee quality inspection by a government standard center for controlling quality - CAFE-CONTROL, which is legally allowed to issue export certificates upon inspection of suitable quality. The Coffee Research Institute, EAKMAT, has continued studies on the product on the most modern scientific processes for improvement of quality and productivity of various coffees.

Nhan, at a workshop on coffee exports last summer in Nha Trang, raised the following question to some participants representing major foreign companies. "Why do you usually carry Vietnamese coffee to Singapore, but not directly to Europe, Japan, or to another end-consuming countries?" He is beginning to fear that Vietnam was not getting the proper credit for producing quality coffee.

He explains that there are about 100 local companies which can export coffee beans. Among them, there are companies which specialize in machinery, sea products, etc. among them.

"The divergence in exporting organizations has caused an inconsistency in coffee quality of which world traders are afraid," said Nhan.

Some officials of foreign trading houses have openly said that Vietnam's coffee beans had to be reprocessed at their bases in Singapore before they could be distributed to end-consumers.

It is also well known that some small coffee buyers buy thousands of bags in order to reprocess and change the coffee's original identity at their mill to another for higher selling price. The remaining quantity of lower quality coffee was marked "Product of Vietnam."

"So our products have lost their reputation over a period to time," said Nhan ruefully. And he said his directors know that now he must build up Vietnam's coffee reputation.

Nonetheless, coffee exports earned US$ 92.5 million in 1991, about 10% of Vietnam's total export volume's value, according to statistics complied by the Vietnamese Chamber of Commerce and Industry.

During the 1980's, a number of joint ventures in coffee cultivation were completed with Vietnam's then-traditional trading partners, including the former USSR, and countries in Eastern Europe such as Eastern Germany, Bulgaria, Czechoslovakia, and Poland. Today, the Viet Duc Coffee Combined Processing Plant in Daklak province is the only ongoing joint venture remaining. Viet Due stands for "Vietnam-Germany" and was originally a joint-venture between East Germany and Vietnam.

"The main interest in joint ventures and co-investments is to help with Vietnam's desire to develop more Arabica areas in the north," said Dr. Nguyen Cong Khank, vice general director, VINACAFE. .

Dr. Phan Quoc Sung, director of the coffee Research institute, who has sent to the Netherlands a number of samples Vietnamese coffee, including Arabica coffee beans from Lam Dong province and Robusta from Daklak province for cup tasting, reports very good results.

According to the exports there, Arabica coffee beans originating in Lam Dong Province can compete with Kenya's, and the Robustas originating in Daklak Province can compete with Costa Rica's - which are among the best quality in the world.

"The quality of Vietnamese coffee beans is naturally high," said Dr. Sung. "The problem is to provide technical guidance from planting to harvesting to bean collection to processing. Frankly speaking after many years, we have agreed to expand cultivation areas and to apply intensive farming methods for higher production. And this we have done. But coffee processing play an important role in adding value to coffee exports."

He thinks that the time is now to seriously look into this area. "Moreover, the existence of too many coffee exporters causes the quality of Vietnam's coffee beans to be multicolored, consequently ruining the reputation of highly valued commodity."

"We foresee major changes in the next few years, most for the good, such as better structure to the industry and improved quality."
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Author:John, Glenn A.
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1993
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