Vietnamese Coffee Market: A Deep Dive into Its Consumers, Challenges, and Prospects
Vietnam’s coffee industry holds promising opportunities for domestic and foreign firms in both manufacturing and retail. Nevertheless, navigating the Vietnamese coffee market can be demanding, especially when competing with hundreds of local and foreign coffee brands already present in the Vietnam market. With this context in mind, we offer essential insights for newcomers entering the market.
Vietnam is the second largest coffee exporter in the world and was ranked first in coffee cultivation yield with 2.4 tons/hectare in the International Coffee Organization’s Annual Review 2021/2022. Those yields were made up of Robusta, Arabica, Cherri, Moka, and Culi beans, which are among the most popular coffee beans farmed in Vietnam.
The following year, coffee production in 2022/23 reached 29.75 million bags, of which Robusta accounted for more than 95 percent. Vietnam contributes more than half of the global Robusta supply.
The U.S. Department of Agriculture (USDA) also noted that Vietnam’s coffee export output reached 16.97 million bags in the first half of 2023, with Germany, the United States, and Italy receiving the most. It’s understandable as coffee is a key industrial crop and farmed over 710,000 hectares in Vietnam.
Furthermore, the growing demand for specialty coffee and the expansion of many coffee chains is driving Arabica coffee imports into Vietnam. Most of the green coffee imported into Vietnam comes from Indonesia, Brazil, Peru, and Germany, while processed coffee products are imported from Brazil, Thailand, Indonesia, Australia, and Belgium.
Key players in the Vietnam coffee market
The Vietnamese coffee market is a tough arena for both local and foreign brands. A Mordor Intelligence assessment lists five leading brands in the Vietnam coffee market. These are noted below.
Nestlé is a well-known brand in the Vietnamese fast-moving consumer goods (FMCG) industry. The company has leading instant coffee products under the brand name ‘Nescafé’, which had the highest brand recognition of instant coffee products in Vietnam in 2018. Currently, Nestlé has six plants in Vietnam with roughly 2,300 employees.
Bien Hoa Vinacafé Joint Stock Company
Bien Hoa Vinacafé is the leading coffee manufacturing company in Vietnam with two signature coffee instant products: Vinacafé and Wake-up. The company has exported its coffee products to more than 20 countries, including major markets in ASEAN and Europe.
Starbucks Coffee Company
Starbucks is the world’s biggest coffee retailer with more than 30,000 retail stores located in 75 countries. In Vietnam, the company owns 87 stores, which are mainly concentrated in Hanoi and Ho Chi Minh City. According to the CEO of Starbucks Vietnam, the company plans to continue to expand its network in Vietnam and is expected to reach 100 stores this year 2023.
Len’s Coffee LLC
Len’s Coffee is a family-run coffee-exporting company. The company exports different varieties of coffee to the U.S. from Vietnam, including Arabica, Robusta, Excelsa, and Liberica. Len’s Coffee works with four famous local coffee brands in Vietnam: Trung Nguyen Coffee, Highlands Coffee, Truong Lam Coffee, and Bach Coffee.
Phuc Long Trading Production Company Limited
Phuc Long Trading Production Company is a pioneer in the Vietnam coffee and tea industry. The company had a total of 132 stores in 2022 and aims to be the largest coffee and tea chain in Vietnam. In addition to offering food and beverage services at stores, Phuc Long also sells packaged coffee and tea products. The company has plans to expand into the global market in 2024.
Challenges of foreign investors in the Vietnam coffee market
Different customer preferences
Vietnamese like the strong and bitter taste of Robusta coffee beans. For Vietnamese consumers, a delicious cup of coffee must be rich in natural flavor, have the right amount of bitterness, and have the soft aroma of wood. However, most foreign coffee brands use Arabica beans that feature a milder taste and are less bitter with the aroma of nuts and fruit.
Furthermore, coffee in Vietnam is not a ‘quick drink’ to get a buzz like it often is in Western cultures. Vietnamese people go for coffee for leisure—they like to sit and sip and think. These differences in coffee culture can make foreign brands less attractive than local brands.
Vietnamese are price-sensitive
Vietnam is one of the most price-sensitive regions in Southeast Asia. According to the Food and Beverage Business Market Report 2022 released by iPOS, most Vietnamese consumers are willing to pay US$1.70 to US$2.97 for coffee, which is about the mid-range for beverage brands like Highlands Coffee, Phuc Long, and The Coffee House. Only a few consumers are willing to pay for beverages over US$2.97. This can make it difficult to penetrate the market for more expensive, foreign coffee chains.
Mellower Coffee, a well-known Chinese brand with over 50 locations worldwide, announced its permanent closure in Vietnam after three years of operation, unable to penetrate Vietnam’s coffee market. Other international brands, such as Gloria Jean’s, New York Dessert Coffee, and The Coffee Bean & Tea Leaf, have also suffered the same fate. It seems that it is hard for Vietnamese consumers to commit long-term to a cafe brand that charges an average price of US$4.25 for one cup of coffee.
Foreign brands entering the Vietnam coffee market will experience tough competition from local brands and other foreign brands from coffee-store chains to sidewalk cafes. With roughly 338,600 restaurants and cafes as of the end of 2022, Vietnam is not short of delicious and reasonably priced cafes. In fact, in 2022, Trung Nguyen Coffee was the most recognizable coffee chain among Vietnamese consumers, per a Statista survey.
High business operation cost
According to the Vietnamese Real Estate Report 2022, the rental price in commercial shopping centers last year was roughly US$100 per m2 per month in Hanoi and US$130 per m2 per month in Ho Chi Minh City. Coupled with Vietnam’s price-sensitive consumers, this can see foreign brands forced to scale back or even withdraw from the Vietnamese market.
Prospects for foreign firms
Changing consumer preference
According to the Food and Beverage Business Market Report 2022, Vietnamese people aged 23 to 30 are the most likely to buy a beverage, more often. Vietnam’s younger consumers are more open to foreign products, including Arabica beans, and are not averse to seeing coffee culture in Vietnam evolve.
Rising demand for instant coffee
Busy lifestyles and longer working hours are making the instant coffee market in Vietnam increasingly vibrant and competitive. Many big players in Vietnam’s coffee market have expanded into instant coffee. In 2021, the Louis Dreyfus Company (LDC) and private-label coffee company Instanta signed a joint venture agreement to build an instant coffee factory in Vietnam. A year later, Nestlé and Starbucks launched a new instant coffee product covering the signature flavors of Starbucks coffee: Dark Roast, Caffè Mocha, Caffè Latte, and Caramel Latte. According to Statista, the demand for instant coffee in Vietnam will grow 5.5 percent in 2024.
Coffee consumption is expected to increase
According to the USDA, Vietnamese coffee consumption is expected to grow by 5 to 10 percent this year. This will likely see manufacturers expanding their range of products and expanding their existing facilities to meet the rapidly growing demand in the domestic market.
Coffee manufacturing and processing facilities
With abundant natural resources, a growing skilled workforce, and a low-cost labor force, Vietnam is an attractive destination for foreign enterprises in the coffee processing sector. Nestlé, a leading company in the F&B sector, purchases 20 to 25 percent of Vietnamese coffee each year for processing and then both domestic consumption and export.
Foreign enterprises may also benefit from supportive government policies. For example, according to Decree No. 57/2018/ND-CP, the Vietnamese government will support up to 60 percent of the investment budget, capped at US$625,000, for enterprises investing in Vietnam’s agriculture sector. Projects linking enterprises and farmers in production and agriculture could also be subsidized under Decree No. 98/2018/ND-CP.
Online coffee stores
Vietnamese consumers are avid patrons of online retail channels. This is evident in Datareportal’s Digital 2022: Vietnam report, which found rising internet penetration and growing demand for online beverage stores in Vietnam. Looking at 2025, Vietnam’s e-commerce value is expected to reach US$39 billion ranking the country second in Southeast Asia in respect of e-commerce growth. However, online retail has not been able to completely displace traditional channels. Businesses may need a good business model combining both online and offline channels to expand and develop sustainably in Vietnam.
The Vietnamese coffee market may be an attractive option for international investors; however, they should make sure they understand the market well in advance and be prepared to cater to local tastes. This means looking at the types of coffee Vietnamese consumers enjoy, the way they enjoy their coffee, and learning from the experiences of foreign coffee brands that have decided to exit the market.
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