Vietnam’s coffee sector faces headwinds in global market

Vietnam’s coffee sector faces headwinds in global market

As the world's second-largest coffee exporter and the leading producer of Robusta coffee, Vietnam is grappling with both domestic and international pressures affecting this industry. RMIT academics Dr Devmali Perera and Dr Majo George elaborate on why.

Vietnam's coffee industry is a vital pillar of the global coffee market and contributes significantly to the local economy.

The country is the largest Robusta coffee producer in the world. Around 97 per cent of its output is Robusta coffee. The remainder includes Arabica coffee and other specialty varieties.

While domestic consumption of coffee in Vietnam is rising, exports generate the main income for Vietnamese coffee producers.

Total coffee exports are estimated to be 25 million 60-kilogram bags by the end of the 2023-2024 period, reflecting a decline of around 10 per cent year on year. However, Vietnam is still the second-largest coffee exporter for Robusta coffee globally, following Brazil.

According to RMIT University Lecturer in Finance Dr Devmali Perera, Vietnam's coffee industry is facing significant challenges and changes as it navigates through a period of heightened market dynamics and environmental pressures.

“The Vietnamese coffee market faces two main challenges this year: declining output and rising prices.

“The increase in prices is driven by heightened demand both locally and globally, especially among Southeast Asian countries, while adverse weather conditions and supply chain disruptions contribute to the decrease in production,” said Dr Perera.

Chart of coffee production in Vietnam from 2019 until now Coffee production in Vietnam from 2019 until now (Source: US Department of Agriculture)

Vietnam's coffee production is increasingly affected by prolonged droughts and rising temperatures, which reduce yields and affect crop quality.

As RMIT Senior Lecturer in Logistics and Supply Chain Management Dr Majo George explained, “This climate-related stress is particularly acute in the Central Highlands, where severe droughts have scorched coffee plantations and exacerbated water scarcity for irrigation.”

Meanwhile, the global supply chain has faced significant disruptions due to container shortages and port congestion, which have delayed shipments and increased costs. These challenges have been worsened by the ongoing geopolitical tensions across the world.

Dr George said, “Such logistical hurdles make it difficult for Vietnamese coffee to reach international markets on time, affecting exporters' ability to meet demand.”

Inefficiencies in the value chain also pose challenges. Many smallholder farmers in Vietnam still rely on traditional farming methods, leading to inconsistent quality and yields. The lack of advanced post-harvest processing and storage facilities can lead to a significant decline in quality.

“New environmental regulations, particularly from the EU regarding pesticide residues, require adjustments in farming practices and increased costs for compliance. This puts additional pressure on smallholder farmers who may struggle to adapt quickly,” Dr George said.

coffee beans and leaves on a coffee tree Many smallholder farmers in Vietnam still rely on traditional farming methods, leading to inconsistent quality and yields. (Photo: Unsplash)

Despite having over 700 thousand hectares of coffee land, the country is struggling with finding suitable land to further increase production due to concerns about deforestation and the pressure to meet climate-related goals.

According to Dr Perera, many coffee farmers in the country have switched to farming durian due to the rising demand for this fruit in China. This shift has further reduced the area available for coffee production. 

In addition, Vietnamese farmers are experiencing increased cost of production mainly due to the rising prices of fertiliser and labour. The rising domestic prices for coffee have been able to partially compensate farmers for this rising cost of production. However, the increased cost of production has made the life of exporters challenging.

“Exporters are now struggling with financial pressures, product shortages, and higher transportation costs, leading to a cautious approach in accepting new orders.

“Growing demand amidst the supply chain constraints creates more price volatility and market uncertainty for coffee,” Dr Perera remarked.

What can be done to support the coffee sector in Vietnam? Read our next article “Brewing strategies to bolster Vietnam's coffee industry” to find out.

Story: Ngoc Hoang

06 August 2024

Share

  • Logistics
Engage

Related news

tariff sign on a stack of coins

How Vietnamese businesses can navigate the newest US tariff reality
Business and management
Icon / Small / Calendar Created with Sketch. 03 Apr 2025

Vietnamese businesses face a major challenge as new US tariffs could reach 46%. RMIT lecturer Dr Scott McDonald says that to stay competitive, firms must rethink markets, supply chains, and strategies fast.

news-thumbnail-enhancing-the-competitiveness-of-vietnamese-products.jpg

Enhancing the competitiveness of Vietnamese products
Business and management
Icon / Small / Calendar Created with Sketch. 25 Feb 2025

Vietnamese products are facing significant challenges, even within the domestic market. Two logistics and supply chain management lecturers from RMIT Vietnam shared their insights on this matter.

Wooden blocks spelling Tariff

Navigating US-China trade war shifts, risks, and gains
Business and management
Icon / Small / Calendar Created with Sketch. 15 Feb 2025

The US-China trade war is driving shifts in global supply chains. Vietnam sees new opportunities in exports and manufacturing, but challenges like rising costs and trade scrutiny pose risks.

Close up of the Hybrid car electric charger station with power supply plugged into an electric car being charged.

The future is bright for electric vehicles despite challenges
Business and management
Icon / Small / Calendar Created with Sketch. 27 Nov 2024

With VinFast officially becoming the number one best-selling car brand in the Vietnamese market in the first 10 months of 2024, what can be said about the potential of the domestic electric vehicle (EV) market?

Load more +