Country Profile Vietnam

"Vietnam went from naught to the number two position in world coffee production. Quantities are amazing, quality not so. Together with our partners we help the Vietnamese establish stable and consistent quality."

Coffee in Vietnam

In Vietnam, half a million people earn a living by producing coffee on approximately 550,000 hectares. In the Central Highland provinces, coffee is by far the most important crop. Approximately 95% of the country’s production consists of Robusta, and revenue from coffee exports contribute by about three percent to the Gross Domestic Product (GDP). Its relative contribution to the economy of the major coffee producing provinces though is much higher; in some cases well above 50%.

Vietnamese coffee production is largely in the hands of small-scale producers. Approximately 85% of the country’s production originates from farms with an average of 1.5 ha, and a yield of 2 Mt per year. The remaining 15% of the Vietnamese coffee is produced by larger estates, which are either privately or state owned. A large share of Vietnam’s coffee ends up in Central and Southern Europe, but it also serves regional markets.

Most of the small-scale farmers have either formerly worked as employees in state owned coffee plantations, or in other agricultural or industrial activities. These farmers are now more in charge of their own farms, and can decide how, when and to whom they sell their products.

As a producer, Vietnam’s competitive advantage lies in its sheer size and ability to supply large volumes. Quality-wise, Vietnamese Robusta is perceived different from an Ugandan Robusta or a Laotian high-grown Robusta. The market for the Vietnamese Robusta quality is however large. By producing big volumes, small-scale producers in Vietnam are among the better off coffee producers worldwide.

Challenges

Water scarcity

Environmental concerns currently limit the expansion of the production area. Water, for example, is becoming increasingly scarce in Vietnam’s coffee-producing areas. Deforestation and intensive irrigation are to blame for the depletion of ground water levels in Dak Lak - Vietnam’s most important coffee producing province.

Inconsistent quality

The Vietnamese coffee farmers have successfully recovered from the price crisis in 2001, and most farms have remained profitable due to the large volumes they produce. While a large market exists for the quality of coffee Vietnam produces, its quality should be consistent. This is where Vietnamese farmers still face certain problems. Farmers often harvest during the rainy season, and are used to sun-drying the coffee beans. As they do not have the money to invest in mechanical drying equipment, the moisture levels of the green beans are not always consistent.

Unorganised farmers

Most small-scale farmers are unorganised, and their lack of processing skills and access to equipment remains a bottleneck. To benefit from new market opportunities - such as certification - more organisation and cooperation among farmers is required then is currently the case.

Dependency of middlemen

Many farmers face difficulties in accessing necessary services and formal credits, and are often fully dependent on middlemen to sell their products (often as repayment for loans they received from the middlemen).  As these middlemen collect their coffee from various sources and make their margins on volume, the link between price and quality for an individual producer is weak.

Role of DE Foundation

Since 2001, the DE Foundation, along with a variety of other organisations, has developed and implemented several projects to help Vietnamese coffee farmers improve their production. Over the years, these projects have coalesced into a national coffee sector development programme, with multiple stakeholders from various public and private organisations.

Period 2001-2006

With the aim of improving the coffee cultivating practices of Vietnamese Arabica farmers in the Quang Tri Province, the DE Foundation launched a public-private partnership with Talaco (a former state-owned coffee processing and exporting enterprise), Kraft Foods, and GTZ. This project focused on improving the quality of coffee both by upgrading the processing facilities at Talaco (Kraft supported component) and by improving crop management (here the DE Foundation played a leading role). One of the main successes of this project was the development of Farmer Field Schools (FFS). Educating trainers resulted in the enhancement and creation of training capacity based on solid adult education principles, as opposed to the more traditional classroom-style teaching that was still the norm in Vietnam at that time.

Development of specific tools designed to help farmers to better cultivate, such as the Farmer Field Book (to register the crop management activities), were initiated within this project and are currently used across the globe. Further examples of some of the outputs of this project include various processing and coffee production manuals. The overall results of this project were broad and diverse. A good example is the consistent cost-savings that were obtained at the farm level, which amounted to approximately 400 USD/ha per year. In 2005, an official evaluation by the Vietnamese Ministry of Agriculture and Rural Development (MARD) led to increased cooperation between the DE Foundation and MARD as well as various other governmental bodies, with the aim of reproducing the success from this project in other areas.

2007-2010

In a very short period of time, the production volumes in Vietnam increased extremely. At the same time, processing techniques, transport facilities and storage infrastructure have not developed proportionally. As a result, in Gai Lai Province small-scale Robusta producers face problems with the quality of their crop.

In collaboration with the Coffee Support Network (cooperation between three Dutch NGO’s) and the Department of Agriculture and Rural Development (DARD), the DE Foundation has reached approximately 800 farmers who registered for technical training. During these trainings, Good Agricultural Practices and Best Processing Practices were shared among farmers. By improving their farming skills and gaining insights into how to minimize the use of inputs, the quality of farmers’ coffee has improved. In an attempt to improve the supply of services to farmers, organisation building has also been a feature of this project.

2010 – 2012

Since 2010, the DE Foundation, the Dutch Ministry of Agriculture, the Rabobank Foundation, the Neuman Gruppe Vietnam (a coffee trading and service group) and the Vietnamese Ministry of Agriculture and Rural Development have begun a project that is in line with the National Coffee Sector Programme. One of the key objectives of this project is the development of cooperatives which will help farmers to sell their products independently from middlemen. A first success has already been achieved in Lam Dong Province with the establishment of Lam Vien cooperative. Another objective involves improving product quality, which will help to create a better position in the market.

Ambitions

As in many countries, development of sustainable coffee production in Vietnam is hampered by a lack of access to adequate services that support farmers’ operations. The policy environment is only gradually beginning to shift from a quantity-based to a quality-based outlook, and away from farmers that operate as individuals and thus cannot muster larger investments in, for instance, processing infrastructure. The overall ambition of the DE Foundation in Vietnam is to contribute to a healthy and vibrant coffee sector that consistently delivers sustainably grown coffees of stable quality. To this end, the DE Foundation is helping to build the institutions that farmers need. This is sometimes very practical, for instance when it involves helping to set up a farmer-owned cooperative, while at other times it is more subtle – especially when the work involves cooperating directly with provincial governmental service suppliers who must be encouraged to try new ways of doing things. Ultimately, the objective is to help Vietnam become a leading supplier of sustainable coffee.