Vietnam’s Coffee Market, an Attractive Environment for new Investments

Are you interested in investing in Vietnam's agriculture sector? Read this article to see what the country's coffee industry has to offer.

Having a well-established coffee culture, today Vietnam is host to several companies that not only trade coffee domestically but have also made their mark in foreign markets. As per the forecasts made by Mordor Intelligence for the period between 2022-2027, the Vietnam Coffee Market is projected to witness a compound annual growth rate of 8.07%. There is a high annual growth even in sales of Vietnamese instant coffee which marks the beginning of a bright future for the coffee market in the country. Coffee culture is very deep-rooted in Vietnam and the beverage is consumed in every household in this country. Here is a broad distribution of domestic coffee consumption:

Types of Coffee ProductsDomestic Coffee Consumption 
Roast and Ground coffee products74.8%
Instant coffee products10.2%
Source: Mordor Intelligence

The market’s growth is bound to speed up as there is a high demand for consumer products and food service industry from local and international players. 

Investing in Vietnam? See our Incorporation Services for Foreign Businesses

The coffee market in Vietnam is extremely diverse. Based on product type, the it can be classified based upon the following:

  • Ground Coffee
  • Whole Bean 
  • Instant Coffee

On the basis of modes of distribution, the market is categorized into 

  • On-trade 
  • Off-trade
    • Specialty stores
    • Supermarket/Hypermarket, 
    • Online retailing and Others 

The latest market trends indicate a rise in the consumption of instant coffee because of the busy schedules and endless working hours. As Vietnamese society adapts to the more modern lifestyles, there is less time especially for the millennials to prepare coffee in the traditional manner.  Also, the convenience in instant coffee’s packaging have resulted in consumers switching to instant coffee mixes rather than sticking with fresh ground coffee. In comparison with other Asian Countries over the last decade, Vietnam has shown a steady per capita rise in expenditure on coffee amongst the millennials according to the International Coffee Organization. 

The Vietnam Coffee market is highly competitive due to the growing presence of many national and international companies. The vast distribution network provides additional ease of operation to companies like Nestle and Starbucks amongst many others. Rapidly changing consumer demands and preferences consistently persuade these companies to reinvent themselves in order to grow in such competitive market conditions. 

Vietnam: the second largest coffee exporter 

In the world, after Brazil, Vietnam is the second-largest exporter as well as producer of coffee, wherein robusta coffee forms around 95% of its annual output of 30.1 million (60kg bags). According to the Import-Export Department (under the Ministry of Industry and Trade), in the first two months of 2022 coffee exports of the country reached 293,000 tons, clocking a revenue of USD 674 million, up by 3.4% in volume and 35.6% in value in comparison to the same period of 2021.

As the Vietnamese population continues to rise at a rate of about one million people a year, the country’s coffee industry is expected to grow in leaps and bounds. This is helped along the way by the increasing quality of Vietnamese coffee.  The Vietnam Coffee and Cocoa Association (Vicofa) plans to double the value of Vietnam’s coffee exports to USD 6 billion by 2030.

Thanks to the Europe-Vietnam Free Trade Agreement (EVFTA), Vietnam’s Ministry of Agriculture and Rural Development aims to bolster its projects on exporting agricultural products to the EU, including coffee. Simultaneously, it will also have a strategy in place to introduce Vietnamese agricultural products into Europe’s large distribution networks. As per announcements made in a press release, the Vietnamese state intends to help enterprises in developing and building coffee brands by initiating campaigns on communication, training programmes on improving design ability and image promotion.

RELATED: Top F&B Startups in Vietnam Shaking up the Industry

As of now, Vietnam possesses 11 coffee blending facilities, 160 facilities for roasting coffee and 8 instant-coffee processing facilities. Vietnamese coffee brands continue to gain traction on the global platform as in 2021 the country’s largest coffee exporter, TNI King Coffee, declared to open 100 coffee shops in the US by 2022. Additionally, another Vietnamese coffee chain that has opened its first US store in Garden Grove, California is Phuc Long Coffee & Tea.

Coffee Industry in Vietnam: Understanding Culture and Changing Trends

Initiated by the French in the 19th century, coffee drinking has been cultivated as an innate habit among many Vietnamese today. 

There is a democratic diversity that is a defining feature of the indigenous coffee culture, quite contrary to the hierarchy observed in its American counterpart.

Coffee is a staple element of the local diet wherein darker, nutty robusta happens to be a predominant flavor. Vietnam is the number one producer of robusta beans in the world and developments are also being made as far as arabica is concerned. With the changing lifestyle, instant coffee is all the rage today, as told by Forbes

Traditional Vietnamese Coffee

According to a recent report, the instant coffee market in Vietnam is projected to expand at a compound annual growth rate of 12.91% to USD 703.8 million by 2027, from USD 300.8 million in 2020. In order to serve its growing high-end coffee retail chains, it also imports some amount of coffee beans, roasted as well as green and instant coffee from Indonesia, Laos, Brazil, and the United States. Moreover, with the presence of international food chains and retail stores like Starbucks along with the changing lifestyle of the local population, instant coffee is in high demand in the country. 

Demand for better quality coffee

As coffee culture continues to thrive in Vietnam, farmers, as well as retailers, are finding new ways to boost product reputation and improve quality. The country has a long history of bulk production of coffee and it’s still striving to build its reputation for quality coffee. According to VSCA, there is a whole new generation of Vietnamese coffee roasters and cafe entrepreneurs who are intent on delivering better quality coffee. They pay attention to terroir and discuss cultivation methods with farmers. Furthermore, they believe in adopting best practices when it comes to processing techniques. 

Changing landscape of the coffee industry in Vietnam 

As discussed earlier, the EU-Vietnam Free Trade Agreement (EVFTA) has a significant role to play in ramping up Vietnam’s export of instant coffee extracts, essences, and concentrates to the EU as tariffs have reduced from 15% to zero. Thus, it provides more resilience to the industry from external factors such as price fluctuations. The multinational as well as local companies are making huge investments in building large-scale deep processing systems. With the increase in demand for instant coffee, Vietnam’s instant coffee products are gaining global traction.

RELATED: See our complete coverage of the EU-Vietnam Free Trade Agreement

Vietnam has entered several FTAs, implying that the industry will continue to benefit from preferential tariff reductions. Moreover, the government is committed to transform this sector into a competitive and sustainable one, with a focus to enhance the value of the coffee industry. In fact, The Ministry of Agriculture and Rural Development has implemented solutions for replanting and sustainable development.  

Prospects of Coffee Exports from Vietnam

The Vietnam Coffee and Cocoa Association has aimed at doubling the coffee export turnover of USD 5-6 billion by 2030. In order to achieve this target, it is believed that the domestic coffee industry should increase the proportion of processed coffee products from less than 10% at present to about 25%, or even more.

However, doing this poses great challenges due to the substandard level of technology, complex factory operations, and lack of awareness among farmers. In 2022, the price of coffee is projected to remain inflated all over the world. The COVID-19 pandemic has obstructed the global distribution of coffee, especially the key players of the market such as Colombia and other South American countries.

As the coffee industry prepares to produce processed coffee products, coffee processing also needs to be scaled up to attract more investors and further help the industry in sustainable development. 

About Us

Cekindo is a leading provider of global market entry services in South East Asia. We are part of InCorp group, a regional leader in corporate solutions, that encompasses 7 countries in Asia, headquartered in Singapore. With over 500 legal experts serving over 12,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup and advice based on local requirements to make your business perfectly fit into the market with healthy growth.

Contact Our Consultant

Vojtech Zehnalek

Verified by:​

Vojtech Zehnalek, MSc.

Vojtech Zehnalek is designated the Business Expansion Manager and specialises in providing complex advisory to foreign companies expanding to Indonesia. He graduated from Economics and International Trade from the University of Economics in Prague, the Czech Republic, and he also earned a Business Degree at the Vlerick Business School in Belgium.