Dream of Vietnam's coffee king
"I always dream of building a well- known coffee trademark so that my country can export a large volume of
processed coffee, not just green coffee beans," Vietnam' s coffee king Dang Le Nguyen Vu told Xinhua.
Seven years ago, Dang Le Nguyen Vu, director of Trung Nguyen Coffee Co Ltd, was nobody but a medical student
whose parents are poor workers. Nurtured by the aspiration to make a fortune for himself and his country by
selling processed coffee, Vu, in 1996, opened a coffee roasting facility in Dac Lac -- the kingdom of coffee in
Vietnam - with a total workforce of only four, including himself and three of his friends.
Having practically no money and experience, Vu struggled to make his business survive while still having to attend
classes. By the time he got a Bachelor's Degree in medicine he had already succeeded in collecting over 30
formulae for roasting, grinding and brewing coffee. Time went by, and so did the money Vu invest in his small
production base. His parents had to sell their own house to contribute capital to the base because their son
wanted to develop it into a bigger one.
"I put all my life in coffee processing industry instead of working as a doctor because a poor doctor has no money
to help patients who need treatment. More importantly, Vietnam needs a famous processed coffee brand for the
whole world to enjoy and admire," Vu said. His dream of establishing a household coffee brand name in Vietnam
has now come true, given by the fact that the once half- dead facility has developed into a Ho Chi Minh
City-based company with 600 employees. The firm currently has 400 Trung Nguyen-style cafes in the country's all
61 cities and provinces.
He attributed the rapid development mainly to product quality and Trung Nguyen's respect to partners and
consumers. "Our mission is to create a leading trademark by bringing creation inspiration and pride of gastronomy
bearing the national cultural identity to coffee and tea lovers," he said. Vu has assigned himself and all of his
employees to fulfill eight fundamental tasks, namely creation inspiration, trademark development and protection,
Trung Nguyen style construction, consumer-oriented approach, product improvement, win-win relations with
partners, manpower development, and community construction.
Among numerous coffee producers, both state and private, in the country, Trung Nguyen Coffee Co Ltd is taking
the lead, mainly because it is the first local enterprise to apply franchising model both domestically and overseas.
The model, still uncommon in Vietnam, has been applied in a flexible way by Vu. His company supplies its own
products, ways of brewing coffee, decoration design and services style to cafe owners who, in return, pay the
firm a small royalty to use Trung Nguyen name first, and then part of their revenues. In spite of reaping huge
success in local coffee market, Vu does not want to stand still. His new dream, being a major player in the world
coffee market, has appeared.
After having established a chain of cafes embedded with the national cultural identity in Vietnam's all localities by
2001, Trung Nguyen started applying the franchising model in foreign countries, such as Japan, Singapore,
Thailand and Cambodia. It also has many distributors and agents in the United States, Japan, Thailand, Singapore,
Cambodia, Australia, Canada, France, Germany and the Czech Republic among others. The company also planned
to set up large Trung Nguyen-style cafes in China following the smooth operation of Chinese-invested cafes in the
province of Yunnan in late 2000, Vu's assistant, Le Non, revealed.
In the first eight months of this year, Trung Nguyen shipped six tons of coffee to China's Hong Kong, five tons to
China's Taiwan and three tons to Chinese mainland. Besides, 16 tons of coffee entered the mainland via border
trade. "Although China is a tea-drinking country, its population, especially youths, are much interested in coffee,
especially Trung Nguyen branded one which is considered a worthy gift by many. Most Chinese consumers like
filtered coffee," Non said.
To serve different tastes of local and foreign consumers, Trung Nguyen has turned out nearly 30 kinds of coffee
products falling into four categories: filtered coffee, instant coffee, coffee bag and espresso. In addition to
coffee, the firm has recently introduced eight kinds of tea for local sales and export to Japan, Russia and the
Middle East. To cope with fiercer competition both at home and abroad, Trung Nguyen has focused on renovating
technology and upgrading its cafes in major cities to serve the high-end market. "Our coffee and tea processing
equipment are regarded as the most modern ones in the region," Vu boasted. With a special business approach,
advanced facilities and strong manpower, Vu hopes Trung Nguyen will be successful in the world coffee market
like it has been in the local one.
Xinhua News - September 12, 2003
Vietnam: Coffee profit not worth beans
HO CHI MINH CITY & DAK LAK PROVINCE - Vietnam's 80 million people consume only about 5 percent of the country's total
coffee output, but one would never guess that if they were inside a Highlands cafe in Ho Chi Minh City or Hanoi. With high-quality
coffee served in a relaxing atmosphere, the coffee chain is Vietnam's version of Starbucks - and it's brewing up big business among
the country's middle and upper classes. But the other 95 percent of Vietnam's coffee is exported, and with world coffee prices falling
to a 30-year low last year, Vietnam's coffee farmers have been facing lean times.
"I can't make money anymore selling coffee," said 57-year-old farmer Dao Dinh Phuc, who has five hectares of farmland in the
country's biggest coffee-producing province of Dak Lak. He said it costs about VND10,000 (about 67 US cents) for him to produce a
kilogram of coffee - about the same price as what he can sell it for. "I can't make any profit." His tiny shack without electricity and
running water on a remote hillside in the Central Highlands of Vietnam is a stark contrast from a Highlands cafe in the city that sells
a regular cup of coffee for the same price as what he sells his kilo for.
In response to Vietnam's coffee problem, the country has been changing its production strategy. The world's No 2 coffee exporter is
now focusing on improving quality and increasing value while reducing output.
"The over-supply of coffee in the world has brought many difficulties to Vietnam's coffee industry and [especially] growers," said
Doan Trieu Nhan, chairman of the Vietnam Coffee and Cocoa Association (Vicofa), in an e-mail interview. So the country's industry
is making a strategic adjustment, he said. Under the plan, the area under coffee production is to be reduced and farmers are
encouraged to switch from the low-grade Robusta bean to the higher quality Arabica bean as well as to diversify to other crops such
as rubber, cashew nuts, pepper and fruit trees. Vicofa said the area under coffee production in the country has been reduced by
100,000 hectares over the past three years to a total of 470,000 hectares now.
Vietnam has been blamed for over-supplying the world's coffee market with its rapid expansion of production in the 1990s and
contributing to the coffee price slump by selling its coffee at the world's lowest prices. After government encouragement in the early
'90s to expand coffee production, the crop became Vietnam's second-highest export earner after rice by 1995. By 1999, Vietnam
was the third-largest coffee exporter in the world after Brazil and Colombia but world coffee prices were on a downward trend.
Vietnam has since surpassed Colombia to become the world's No 2 exporter of coffee and the world's No 1 exporter of Robusta -
just as the world's coffee industry has slid into a serious crisis. In the 1980s, world coffee prices averaged about US$2.64 a kilo.
Today, they average about $1.10.
In 1994, Dak Lak coffee farmer Sui Thom cashed in on the coffee market and bought a Honda motorcycle with his earnings. Now he
doesn't have enough money to repair it. Last year, he lost about $400 growing coffee. This year, he has stopped growing the
money-losing crop and is banking on corn and cashew nuts among other crops to make just enough money to survive on. On his
remote hillside farm, Phuc has also slashed his coffee crop, although just by half. He too is counting on corn and cashew nuts
among other crops such as cotton and pepper to offset his coffee losses.
According to Vietnam's Ministry of Agriculture and Rural Development (MARD), the total coffee output for the 2002-03 crop year that
ends at the end of September is 550,000 tons. This is down from a record 900,000 tons in 2000-01. According to MARD, the export
target for 2003 is 635,000 tons, compared with 713,000 tons last year, which includes coffee stored from previous years. In the first
eight months of this year, Vietnam shipped 459,000 tons of coffee, a drop of 6.1 percent from the same period last year, according
to MARD. Vietnam's main export market for coffee is the United States, which buys about 90,000 tons from the country per year at
a total cost of about $41 million.
The production costs of Robusta coffee in Vietnam averages about VND10,000 a kilo, while the current market price is just over
VND9,000 a kilo. Total losses this year are expected to be about $18 million for local coffee growers and producers.
But as Vietnam's coffee farmers are facing lean times, coffee houses such as Highlands are thriving in the domestic market. In a
country where Starbucks has not yet entered the retail sector - despite having more than 1,000 stores outside of North America -
Highlands is brewing up Ho Chi Minh City and Hanoi with nine outlets and two more to open by the end of next month. With
oversized lounge chairs, Western music, lighting and mirrors designed to make the customer feel as relaxed and comfortable as
possible, and people filling up the cafes at all times of the day to drink some of the best coffee in Vietnam, one would never guess
that there is a coffee problem in the country. For now, only the farmers are missing out on the profits.
By Nelson Rand - Asia Times - September 11, 2003
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