상품DB/베트남 커피 시장동향(2013.5)

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베트남 커피 시장동향(2013.5)

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2015-09-03

국가

베트남

작성자

허운해(하노이무역관)

품목

기타

품목코드

090190

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Date :2013.05.31

Prepared by :Ms Le Thi Thuy Duong (Ltt.duong@kotra-hanoi.org.vn)

1. THE DEVELOPMENT OF VIETNAMESE COFFEE INDUSTRY

 1.1. Overview of Vietnam coffee industry

         Thanks to its fertile soil and favorable climate, Vietnam can be considered one of the most suitable lands for growing coffee. The coffee tree was first entered Vietnam in 1857 planted in Ninh Binh and Quang Binh Province. Then in 20th century, it also planted in Nghe An province.  Since 1920 and favored by nature, the Western Highland of Vietnam, is an ideal place for growing Robusta coffee as it has basaltic red soil with high natural fertility and thick soil layers. Nowadays, Western Highland of Vietnam is the major coffee region. Besides, many other provinces in Northern area such as Son La, Dien Bien with the altitude from 600-800m are also the perfect places for Arabica coffee. In addition to the distinctive features of topography, the substantial differences between the temperatures of day and night in the Western Highland area also enable coffee trees to grow rapidly. Taking the most advantage of the mentioned-above nature favors, Vietnam has zeroed in on growing coffee, becoming the world’s second largest coffee producers only after Brazil. It can be proved by the expansion in coffee area, the augmentation in yield and production from 2003 to 2008, presented in the following table.

	Unit        Year	2008	2009	2010	2011	2012 estimate
Area	1,000 ha	525.1	527	548.2	550	600
Yield	Tons/ha	1.99	2.16	2.09	2.18	2.44
Production (beans)	1,000 tons	996.3	1,080	1,170	1,560	1,650

Source: Ministry of Agriculture and Rural Development

        It is clear from the table that in 2008, the coffee growing area was 525,000 ha, producing 996,000 tons of coffee beans. In the three following years, from 2009 to 2011, the coffee area was expanded to 527,000 ha, 548,200 and 550,000 ha, respectively. Regarding the yield, in 2009, the yield is 2.16 tons/ha, an increase of 8.5% compared to 2008. Similarly, from 2008 to 2011, the production also grew by 31%. Additionally, in the coffee crop 2011/2012, the world’s total coffee production was 134.3 million bag (60kg/bag) of which Vietnam’s production accounted for 16.7%, ranking after Brazil.

        With annual huge amount of coffee production, Vietnam is ranked the second of the world top leading coffee exporting country with the share of about 17-18%. More concretely, 94-95% of Vietnamese coffee is exported. In 2009, local consumption covered 5.9% of total production., in 2012, it is 6.7%. In other words, only 5-6% is for domestic consumption. The main reasons for this trend are the marketing strategy  from franchising coffee chains like Highland Coffee, Gloria Jeans, The Coffee Bean, Tea Leaf, Illy for local community. The major importing countries include Belgium, Germany, Italy, Japan, Spain, and the United States

                  MARKET SHARE OF MAIN IMPORTING COUNTRIES (2007-2010)

                                                        (Unit: 1,000 tons for Volume and 1,000 USD for Value)

Country	2006/2007		2007/2008		2008/2009		2009/2010* Oct. to March
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Germany	249	408.995	174	373.024	165	292.418	81	116.008
United States of America	193	291.914	158	317.572	157	243.084	74	116.455
Spain	100	159.715	100	221.092	88	154.426	34	46.077
Italy	79	130.174	80	171.176	83	163.948	34	47.265
Belgium	20	33.562	61	144.529	44	87.251	25	34.428
Japan	35	57.532	44	99.789	50	86.768	25	38.935
Korea	40	59.849	44	90.875	39	72.551	15	20.977
France	44	72.589	37	79.558	37	66.545	7	9.633
Algeria	24	43.948	28	69.386	29	56.667	12	16.900
Britain	40	55.922	29	53.587	25	45.698	19	24.640
Russia	26	43.711	23	51.237	20	38.221	15	19.620
Malaysia	26	42.490	21	45.778	20	34.754	9	12.787
China	16	24.227	14	28.730	16	29.457	9	12.496
Indonesia	45	68.370	3	6.371	4	5.569	19	25.725
Philippines	17	27.590	10	19.996	13	19.660	9	11.198
Switzerland	10	16.857	10	23.149	9	18.047	18	23.245
Total	964	1.537.445	836	1.795.849	799	1.415.064	405	576.389

Sources: Global Trade Atlas; * Vicofa and General Statistic Office of Vietnam

        Vietnam also imports coffee from many countries with a small quantities of green coffee, as well as roasted and instant coffees.

        According to trade data from Vicofa, the General Customs Office, and Global Trade Atlas (GTA), total green bean coffee imports for the first half of MY 2011/2012 were 94.5 thousand 60 kg-bags, or 5.7 TMT-GBE, a 24 percent decrease from the same period of the previous marketing year, mainly from Thailand, Laos, Cote d’Ivoire, Uganda, and Indonesia. The total value reached $14 million. According to GTA, Vietnam imported small quantities of roasted and instant coffee products during the first six months of MY 2011/2012. Vietnam imported roasted coffee products mainly from Italy and Thailand with a value of $216 thousand, a decrease of 40 percent from the same period of the previous year, while Vietnam's instant coffee imports were mainly from Thailand, Indonesia, and Malaysia, with a value of $16 million, an increase of 60 percent over the same period the year before.

        Despite the world’s leading coffee producers, the amount of coffee consumed in Vietnam is relatively small. According to International Coffee Organization, coffee-consumed rate per head in Vietnam is 0.83 kg, lower than Brazil at 5.72kg per capita, EU 4.83 kg per capita, USA 4.13 kg per capita. This small amount of coffee consumption makes Vietnam only rank the 19th among the coffee producers meanwhile Brazil still occupies the first position.

        The Ministry of Agriculture and Rural Development said Vietnam exported nearly 1.7 million tons of coffee valued at US$3.74 billion in 2012. Coffee industry creates jobs for more than 1 million workers and is the source of income for over 560,000 households. Coffee growers receive 95 per cent of total value of coffee bean exported. That is really a positive signal for Vietnam Coffee Industry.

 1.2. Strengths and weaknesses of Vietnam coffee

        Vietnam is the largest Robusta coffee production in the world. According to the statistics released by Ministry of Agriculture and Rural Development, the area for growing Robusta accounts for the largest proportion of 92.87%, followed by the area for Arabica coffee.

        Moreover, in the crop 2008/2009, the world’s Robusta coffee production is 49.3 million tons of which Vietnamese Robusta accounts for up to 35%. Hence, it can be concluded that Robusta coffee with strong flavor is Vietnam’s strength.

Vietnam Coffee Growing area and Production from  2005 to 2012

Sources: General Statistic Office, MARD and USDA estimation

        However, the quality of Vietnamese coffee is low because of the following reasons. First, the quality weakness lies in the harvesting process as the growers harvest both green and ripe coffee. Second, it is due to the lack of high quality varieties. Moreover, the lack of drying facilities that increases black beans and processing facilities is another factor influencing on the coffee quality. The report released by Vietnam Institute of Policy and Strategy for Agriculture and Rural Development, about 65% of Vietnam coffee is type II with 5% black and broken beans and the moisture of 13%. Finally, there is low percentage of coffee production following certified system.

  Vietnam Coffee production based on type (Unit: thousand bag of 60 kg)

Sources: USDA

2. COFFEE FRANCHISING IN VIETNAM

        Vietnam coffee franchising is now at the embryonic stages. Since its first case of the coffee franchising in Vietnam which is the brand of Coffee Bean & Tea Leaf by the American company named CBTL Franchising, LLC on May, 2008, according to the list of current franchise systems in Vietnam released by Ministry of Industry and Trade, up till now, there have totaled five foreign coffee franchising companies with the brands of The Coffee Bean and Tea Leaf (USA), Gloria Jeans (Australia), Hard Rock Cafe (USA), Molinari (Italy), Illy Café(Italy), two Vietnamese companies licensed to franchise abroad which are Vu Giang Limited Company with the coffee store chains named Café Bobby Brewers and Trung Nguyen Corporation with Trung Nguyen Coffee store chains.

         There are many outstanding features of the current situation of coffee franchising in Vietnam. Regarding to the group of foreign coffee franchisors, these companies all bring Arabica coffee to Vietnam which has the better taste than Robusta coffee. Furthermore, their target customers mainly concentrate on foreigners, and high-income Vietnamese people. In other words, there are not any foreign coffee companies tapping into the coffee-beverage segment for middle-income Vietnamese people. Pertaining to the group of Vietnamese coffee franchisors, two coffee franchising examples of Trung Nguyen Coffee and Highlands Coffee are fairly successful proved by the rising store number over the years. Apart from the significant achievement, Vietnamese coffee franchising system still exposes some shortcomings related to the management of brand image proved by Trung Nguyen Coffee’s case that will be mentioned in the next part.

        However, it is undeniable that Vietnam is a promising market to implement franchising in general and coffee franchising in particular. Since it first becomes a model in Vietnam, franchising industry has made a giant leap. Besides, as already mentioned in the previous part, Vietnam is the world’s biggest Robusta coffee producer. More crucially, Vietnamese Robusta is eval‎uated to be very delicious. Hence, if Vietnamese enterprises’drying facilities and processing facilities are improved that enhances the quality of Vietnam’s Robusta, these enterprises can build the famous Robusta, paving the way for the proliferation of Vietnamese coffee brand name in the world. For foreign coffee franchisors, there is still untapped coffee segment for middle-income Vietnamese people, which is very promising.

 2.1  Local coffee franchisors

  2.1.1  Bobby Brewers Coffee by Vu Giang Limited Company

Six Bobby Brewers Coffee stores have been opened in Ho Chi Minh City since 2005.

Many characteristics of Bobby Brewers Coffee are presented as follows.

 - Location: Shopping Center, Office Building, Apartment Block or School.

 - Main products: specialty coffee, ice-cream, beverages, food, cake, breads.

 - Bobby Brewers’ franchising fee: In Vietnam Bobby Brewers Coffee seeks to appoint Regional Master Franchisors in Hanoi and all other major population centers. Regional Master Franchises are for 20 years and range in price from US$50,000 for the Master Franchise of Hanoi to US$10,000 for Dalat."

 - The Bobby Brewers Coffee Franchise term is for five years. This can be extended for another five years simply by paying 50% of the Franchise Fee for a Bobby Brewers Coffee Kiosk at the end of the original Franchise Fee Agreement Term.

  2.1.2 Trung Nguyen Coffee by Trung Nguyen Corporation

        Trung Nguyen Coffee is the first Vietnamese company that has applied the model of franchising in Vietnam since 1996. Concerning Trung Nguyen’s franchise system, according to Mr. Dang Le Nguyen Vu, in 2001, his company invested US$ 3 million to be consulted in the franchising field. The result is that up till now, there have summed 1,000 franchised Trung Nguyen Coffee stores nationwide and other 8 franchised stores abroad including the United States, Japan, Singapore, Thailand, China, Cambodia, Poland, and Ukraine.

        As regards materials, Trung Nguyen picks four world’s tastiest coffee zones: Robusta coffee grains, the most famous in Vietnam, rated the most delicious in the world with strong taste and flavor; Ethiopia coffee, the origin of coffee; Arabica grains from Jamaica; and Brazil coffee. Trung Nguyen has made them into most special coffee products.

        The combination of state-of-the-art technology with Oriental secrets is unique in Trung Nguyen because the company receives environment-friendly hi-tech from world-leading groups. The Oriental secret is the blending of rare medicinal herbals, special sources of energy from gemstone and special ingredients.
 

  - Here are the rights and responsibilities of Trung Nguyen’s franchisees.

        When participating in the Trung Nguyen franchise system, the franchisees will be given some rights in their business activities:

Use Trung Nguyen franchise to expedite business activities in a unique location based on the franchise prestige.

Exploit the tangible and intangible profit from the prestige of Trung Nguyen to:

Quickly draw customers.

Reduce risks in business.

Save time and cost of shop advertisement so as to focus on the business activities.

Be sponsored some stuffs directly relating to the product.

Be discounted when buying products by Trung Nguyen.

Be favored on the price from the prestigious suppliers of equipment, materials and services…that have contracts with Trung Nguyen.   

Provide necessary trainings for shop operation, including:

Methods of  brewing coffee and tea

Guidance to choose appropriate music for each kind of shop.

Provide shops with suitable business model consulting. Support the initial business planning.

Provide shops with business solutions for more effective operation.

Consult shop on design, interior decoration in accordance with Trung Nguyen style. Introduce good construction companies and, suppliers.

  - At the same time, to ensure the advantageous cooperation procedures with Trung Nguyen, the franchisees are responsible for implementing the following regulations:

A - The wholesaler itself property implements necessary procedures to obtain business permission.

B - Operate the shop’s activities by themselves.

C - Fully participate in Trung Nguyen training courses before and after opening the shop.

D - Commit to carrying out business in accordance with the orientation of Trung Nguyen Company.

E - Follow the design of Trung Nguyen style.

F - Pay fees as regulated.

         Franchise fee is non-refundable one that a wholesaler has to pay Trung Nguyen to have right of using Trung Nguyen trade name to implement the business as regulated.

        Operational fee, which a wholesaler has to pay Trung Nguyen monthly based on rate of monthly total turnover from all kinds of drinks sold by the wholesaler, is non-refundable. This fee together with annual marketing budget of the company will be used for general advertisement activities aiming at drawing attention to the series of Trung Nguyen coffee shops such as promotion, training courses, and new product supports to the wholesalers….

        Deposit: Trung Nguyen will reimburse the deposit in case both sides carry out the contract liquidation.

G - Not to disclose any information related to Trung Nguyen to a third party, except for serving the necessary purpose of contract implementation, or due to the request of law and authorities.

        Trung Nguyen is the pioneer in the coffee franchising field in Vietnam with the largest number of franchised stores so far. However, the management of 1,000 franchised stores nationwide is also a headache issue as Trung Nguyen has been franchising inconsistently. Regarding the selection of location, Trung Nguyen Coffee stores can be found at any places, from pavement to high-class buildings that may confuse customers about the ranking of Trung Nguyen brand name as well as its main target customers. Besides, the price and its service are also different among Trung Nguyen Coffee shops. For instance, with the same type of a cup of coffee, the price is different in Trung Nguyen stores in which the tables and chairs are not the same kind.

 2.2  Foreign coffee franchisors

    2.2.1 Gloria Jean’s (Australia)

        In 2007, the first Gloria Jean’s Coffees store in Vietnam was invested and its franchise right was purchased by Viet Lifestyle Joint Stock Company. Under the terms of the franchise agreement, Viet Lifestyle JSC is allowed to authorize other companies to operate Gloria Jean's Coffee franchises in Vietnam. Up till now, Viet Lifestyle JSC has opened three shops and 5 franchised shops.

        Concerning its target customers, in Vietnam, Gloria Jean’s Coffee does not focus on people who have 40-50 year experience of drinking coffee. Instead, Gloria Jean’s Coffee has been trying to occupy the young people segment as this coffee model is modern which is suitable for the youth. In addition, previously, up to 70% going to Gloria Jeans’Coffee was foreigners. However, currently, the number of Vietnamese people is increasing.

         Coffee made at Gloria Jean’s Coffees stores also follows some certain standards. For instance, time to make 30ml espresso coffee is 23s to 27s. Coffee made more or less than 23s to 27s is not allowed to serve customers. Besides, according to Ms. Tran Khanh Vy, the managing director of Viet Lifestyle JSC, although Gloria Jeans use high-grade Arabica coffee, the coffee is not made to be given away.

         2.2.2  Illy Coffee (Italy)

        In mid 2007, IMEX PAN PACIFIC CO. LTD (IPP) became exclusive distributor of Illy coffee in Viet Nam. Mr. Le Kien Quang, the director of brand name Illy, shared the reasons for his selection to be the exclusive distributor that is the Illy coffee meets the demand for high and middle-class Arabica bean. Moreover, the process of production, roasting and mixing, to business and marketing strategies are good.

        Their main target customers are foreigners and high-income Vietnamese people. Up till now, IPP has opened five Espressamante Illy venues.

        Concerning the conditions to be Illy’s franchisees, the franchisees only needs to provide suitable locations. IMEX PAN PACIFIC Co., Ltd ’s specialists, staffs will deliver the given location to be a stylist coffee bar of “Espressamente illy” with sophistication and elegant. IPP will also support training for staffs and do marketing and PR for franchisees in early operating period. In addition, the cost for an Espressamente Illy bar from 200,000 to 500,000 USD.

    2.2.3  Hard Rock Coffee (USA)

        Late 2009, VIT signed a franchising agreement with U.K.-based Hard Rock International to develop four Hard Rock Cafévenues in Vietnam. The first Hard Rock Coffee store was opened on December, 2009 by Viet Thai International (VTI), the owner of the popular coffee shop chain Highlands Coffee. The first Hard Rock Coffee is situated within the Kumho Asiana Plaza complex in Ho Chi Minh City, which is also comprised of a luxury shopping mall, Intercontinental Hotel, Office Tower and Serviced Apartments. Also, according to Mr. David Thai, the director of VIT, it is scheduled that the other Hard Rock Café will be opened in Hanoi, Da Nang, and Hai Phong by 2012.

        The expansion of Hard Rock Café franchise in Vietnam is aimed at tapping the potential of a growing economy and an expanding young population which is the target customers of the chain, according to David Thai general director of Viet Thai International Joint Stock Company.

        Shown by its name, Hard Rock Café is decorated by the Rock n Roll style with quite a few souvenirs of famous artists such as scarf of Jimi Hendrix, Paul Stanley’s guitar, etc. Additionally, the venue includes 205 seats and the standing space for 400 guests, a live music corner, a bar and a Rock Shop selling souvenirs.

        The price for products in Hard Rock Caféranges from VND 100,000 to VND 250,000 (US$ 5 – US$ 13). This price excludes VAT. As the current price is fairly high, in the near future, the company’s business strategy will change to be suitable for its target consumers.

    2.3.4  Many other coffee brands

        Entering Vietnam since the late 2008, Coffee Bean & Tea Leaf franchised by Viet CaféTrading Co., Ltd has opened four stores in total in Ho Chi Minh City. The prices of products in the Coffee Bean & Tea Leaf ranges from VND 40,000 to VND 80,000 (US$ 2.5 to US$ 4) .

        The Chau Ngoc Viet Joint Stock Company bought the franchise rights to Cafe Molinari (Italy) in Vietnam. The first Cafe Molinari was opened in Petro Vietnam Tower on Le Duan Road in Ho Chi Minh City. Molinari has 25 different coffee blends to provide its customers with a full range of delicious coffees, including several, which are caffeine-free. Besides, another outstanding feature of Molinari Café is the use of 100% Arabica bean.

        Its target customers are officials and families. It can be proved by the space design, which includes the outdoor space, which is also the entertainment area for children.

   2.2.5 Starbucks Coffee

        The Starbucks business model has attracted much success and attention.  While many potential investors would relish the idea pursuing a Starbucks franchise opportunity, the company does not franchise their stores and has no plans to franchise in the foreseeable future. In North America, the majority of Starbucks stores are company-operated. The Starbucks Corporation does participate in the sales of license agreements to qualified businesses or individuals.  The Starbucks license agreement allows a smaller company to sell Starbucks products and conduct its own operations.  However, this smaller operation remains solely owned by the Starbucks Corporation. Another way to pursue a Starbucks franchise opportunity is through the route of a joint venture scheme.  A joint venture scheme allows a company to align itself with the Starbucks Corporation in a hopefully mutually beneficial business relationship. To sum up, Starbucks’ presence in Vietnam would be under the three following business forms: (1) joint venture, (2) own-operations and (3) licensing.

        The US giant coffee brand name has not entered Vietnam market because of two main reasons. On the one hand, relating to location, Starbucks especially prioritizes near-the-airport locations and places in the central cities that have already occupied by its competitors. On the other hand, unlike tea, coffee has not become the daily popular beverage in Vietnam. In other words, Vietnamese drinking habit is also another barrier to Starbucks’penetration into Vietnam.

3. Registration for foreign commercial franchise in Vietnam

 3.1  Competent authorities

        Ministry of Industrial and Trade has competence to register foreign commercial franchising activities, includes these following cases:

Franchising from overseas to Vietnam (including franchising from across boundaries of export processing zone, non-tariff areas or separated customs areas to Vietnam);

Franchising from Vietnam to overseas (including franchising from Vietnam to across boundaries of export processing zone, non-tariff areas or separated customs areas).

 3.2  Procedure for registering domestic commercial franchise

  3.2.1  Application Dossier

        Application Dossier for registering commercial franchise includes the following documents:

An application for commercial franchising registration (made according to a set form MD-1 in Appendix II Circular 09/2006/TT-BTM);

A written description of commercial franchise (made according to a set form in Appendix III Circular 09/2006/TT-BTM);

A notarized copy of the business registration certificate or investment certificate, in case of commercial franchises from Vietnam to overseas; a copy of the foreign trader’s business registration certificate or paper of equivalent validity, certified by a competent agency of the place where the foreign trader is set up, in case of commercial franchises from overseas into Vietnam;

A notarized copy of the industrial property right protection title in Vietnam or a foreign country, in case of licensing industrial property subject matters for which protection titles have been granted;

Papers proving the approval of the primary franchisor’s permission of franchise in case the trader registering franchising is the secondary franchisor

  3.2.2 Procedure for registering foreign commercial franchise

        After preparing Application Dossier with all above-mentioned documents, traders intend to franchise have obligations to submit Application Dossier for registering commercial franchise to Ministry of Industry and Trade.

Registration procedure is described in this diagram