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Le Dinh Tu from Minudo Farm-Care in Daklak, Vietnam, sustainably grows and processes arabica and robusta beans to make a variety of coffee products, from high-quality instant coffee to cascara tea and premium small-batch Fine Robusta. Photo credit: Diana Jendoubi
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After working with Dr. Manuel Diaz on improved harvesting techniques, farmers in Daklak now leave cherries on the vine longer to ripen. Photo credit: Diana Jendoubi
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A farmer gathering coffee cherries in the Lam Dong region of Vietnam. Photo credit: Simexco
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According to Mordor Intelligence, Vietnam produced 30.5 million bags of robusta in 2021/2022. In 2023, its market size was $472.6 million and is projected to grow to $706.1 million by 2028 with a compound annual growth rate (CAGR) of 8.13%. Graph courtesy of Mordor Intelligence
As one of the most dynamic coffee sectors in the world, Vietnam understands the importance of portfolio diversification. Its players are pragmatic problem solvers whose motto is ‘anything is possible.’ Whether navigating the troubled waters of the European Union’s deforestation regulations, perfecting ‘Fine Robusta,’ or dominating the instant coffee market, Vietnam is tackling all aspects of the coffee value chain and ticking all the boxes.
Meteoric Rise: From 2 to 30 Million Bags of Coffee
Facing a failing collectivist agricultural sector in 1986, the Vietnamese Communist Party enacted a series of economic reforms called Doi Moi (meaning innovation or renovation) and made a 180° pivot. Certain commodities like coffee were opened to foreign investment, and experts from East Germany and other communist countries were brought in to help improve coffee production.
In 1993, Vietnam produced about 2 million bags of coffee. That year, Brazil suffered from debilitating frosts that severely affected their robusta yields, causing prices to skyrocket. Suddenly, coffee farmers in Vietnam began earning much more money and focused on increasing production volumes.
Between 1993 and 2001, Vietnam went from producing 2 million bags of coffee a year to 15 million. According to a report by Revista Envio, the amount of acreage under coffee cultivation expanded from 155,000 hectares in 1995 to 550,000 hectares in 2001.
“Since 1996, an estimated 400,000 people migrated to Daklak [the main coffee growing region] to benefit from the coffee boom,” the report states. “More than 120,000 hectares were burned and cleared to make way for new coffee plantations. The coffee tree was now called the ‘dollar tree.’”
During this time, Vietnam surpassed Colombia as the world’s second-largest coffee producer. However, such a rapid influx of coffee in the market created a massive global oversupply, and prices plummeted.
“Global robusta prices hit the bottom end in 2001/2002,” Le Duc Huy, CEO of Simexco Daklak, told STiR. “The crisis occurred just as we achieved 16 million bags. That’s when Vietnam realized that volume is not a sustainable goal. If we keep producing huge quantities of coffee, we’ll only ever get cheap prices. So we asked ourselves, ‘How can we make this industry more sustainable?’ and then we looked to Europe and the coffee buyers to investigate and learn.”
A Valuable Lesson: the Necessity of Sustainability
It wasn’t just plummeting prices that motivated the coffee sector to consider sustainability. The environmental aftereffects of Vietnam’s ‘coffee boom’ were devastating.
“The destruction of forests, rapid expansion of coffee cultivation, and intensive irrigation practices led to soil erosion and serious water shortages,” reports Revista Envio. “Natural rivers and estuaries ran dry, and underground water levels dropped. When drought struck in 1998, 200 reservoirs dried up, and underground water supplies were over-exploited. During the drought, it was estimated that 90% of families in Daklak did not have access to sufficient water. As water prices rose by 25%, small farming families lost over 70,000 hectares of coffee trees.”
Simexco Daklak, a state-owned company founded in 1993, was one of the first Vietnamese coffee companies to take progressive measures toward sustainability. Simexco purchases green beans directly from the farmers and the Simexco Daklak range exports 1.3 to 2 million bags annually.
Le Duc Huy, CEO of Simexco (middle), surveys the 2024 fall coffee harvest with Tran Phi Hung, Simexco’s director of quality management (left) and Nguyen Tien Dung (right), Simexco’s director of sustainable agriculture development. Photo credit: Simexco
Since 2009, Simexco has prioritized sustainability in green coffee production, adopting 4C certification in 2010, initially benefiting 2,300 farmers. This effort expanded with Rainforest Alliance certification in 2012, Fairtrade in 2014, and the implementation of 30 sustainability projects onwards.
“Before, we were taught only to do business for profit,” explains Huy. “But now we understand that sustainability in the coffee trees impacts the environment, economy, and the social aspect. Currently, we work with 40,000 farmers over 50,000 hectares to build a sustainable landscape to protect the land, the soil, and the air by reducing chemical usage, practicing water conservation, planting shade trees, and introducing crop diversity. Now, the farmers feel proud and respected and are motivated to work together with Simexco for better coffee quality, a better future, and better value for the Vietnamese coffee industry.”
The Rise of Fine Robusta
After cultivation quality improved, Simexco began tackling the next hurdle: taste. In 2016, Le Duc Huy attended the Coffee Quality Institute and became one of Vietnam’s first certified Q robusta graders. India and Indonesia were already known for producing specialty quality robusta, but at that time, Vietnam was only known for commercial coffee.
At the same time, domestic interest in specialty coffee began to increase. Roasters started opening shops and cafes in Ho Chi Minh and Hanoi, and a few people became certified Q arabica graders. But no one thought Vietnamese robusta could be anything other than a commodity.
Le Duc Huy invited Dr. Manuel Diaz, a former CQI trainer and robusta expert who had just developed a Fine Robusta program in Uganda, to Vietnam. Dr. Diaz went to Daklak and worked with the Buon Ma Thuot Coffee Association and Simexco to teach the farmers and producers harvesting and fermentation techniques to improve robusta’s taste and aroma.
Simexco hosted the “Vietnamese Fine Robusta Coffee Tasting” at the 2022 Specialty Coffee Expo in Boston, receiving rave reviews and a high cupping score of 87.83. “The farmers feel very passionate because their hard work has been recognized,” said Huy.
Not one to rest on its laurels, Simexco now focuses on improving domestic roasting and barista capabilities. “Roasting robusta is different than arabica,” explains Huy. “Robusta is very dense and thick. The roaster needs to have good skills in terms of controlling the temperature to develop the flavors, but not burn while reducing the bitterness.”
Simexco brings in roasting experts to lead workshops on enhancing Fine Robusta’s unique flavors and hosts annual robusta roasting competitions. They’ve also started working with baristas to improve presentation skills and foster beverage innovation. With climate change reducing arabica cultivation acreage, Vietnam’s Fine Robusta is poised to play an essential role in the future of specialty coffee.
Processing and Logistics Lead to Instant Coffee Domination
Vietnam learned another valuable lesson from the 2001/2002 coffee crisis–the importance of local value addition, processing, and logistics. In 2001, only 4% of the coffee grown was consumed domestically, the rest was exported. Revista Envio reports that Vietnam only had a few processing plants during the crisis, and all the coffee exported was unprocessed. The few existing processing plants served the domestic market and operated well below capacity.
Once again, the country turned towards Europe and other processing leaders to learn how to improve its circular economy. The government began offering tax incentives, low rents on industrial land, agricultural subsidies, and bartering free trade agreements to attract foreign investment. Several initiatives were passed to improve port logistics and infrastructure, including enhancing deep-water ports to increase cargo handling capacity and digital platforms that streamline customs procedures, reducing clearance times.
In a presentation at the 2024 Asia International Coffee Conference (AICC) in Ho Chi Minh City, Grégoire Meeus, global head of robusta cash trading at Louis Dreyfus Company, attributed part of Vietnam’s success to these initiatives and said, “Vietnam is best in class when it comes to processing and logistics.” Brazil may be the number one coffee-producing country in the world, but in 2024, bottlenecks in its ports prevented 2 million bags of coffee from being exported.
There was a time when smaller South American countries like Ecuador led the world in soluble coffee processing, and much of Vietnam’s robusta was shipped there. However, the country’s eco-industrial developments, stable political environment, and competitive labor costs now entice many foreign companies to open state-of-the-art soluble processing facilities there.
In an email to STiR, Do Ha Phuong (Jason), deputy general director of Intimex Coffee, wrote, “Vietnam is the biggest supplier of robusta, which is mainly used for soluble production. Setting up a factory in Vietnam helps with stock volume and quality control, which lowers the cost of logistics. It’s also close to potential consuming markets, such as China, Korea, Japan, and the Philippines, and Vietnam’s domestic instant coffee market is rising.”
Intimex began processing spray-dried instant coffee in Vietnam in 2019. With the onset of the pandemic, the domestic market for affordable and convenient instant coffee increased rapidly. According to Phuong, 200,000 metric tons (mts) of green beans (primarily Vietnamese robusta and other imported beans) produced around 85,000 mts of pure soluble coffee powder in 2024. A portion of pure soluble powder is exported while the rest goes into making end-products like the popular 3-in-1 and 2-in-1 instant coffees for local consumption and export.
Innovations in soluble coffee processing that make instant coffee drinks more enjoyable also drive demand higher. For example, freeze-drying significantly improves instant coffee’s quality and taste by retaining more of the bean’s original structure.
Ribbon cutting at a Nescafé soluble coffee factory in Vietnam. Photo credit: Nestlé
Nestlé operates six factories in Vietnam and has invested hundreds of millions of dollars in the country. OEM (original equipment manufacturer) and several other companies have made it their key hub for freeze-dried coffee manufacturing, further adding to Vietnam’s appeal. A report from Mordor Intelligence lists instant coffee as Vietnam’s most significant product type. Businesses around the world now source premium freeze-dried coffee from Vietnam for wholesale distribution.
Vietnam Meets EUDR with Aplomb
The Vietnamese government reacted proactively to the announcement of the European Union’s deforestation regulations (EUDR). The Minister of Agriculture organized a meeting between key coffee sector players, including representatives from farmers’ associations and the European Union policy advocates, to fully understand how to meet the new requirements.
“The Minister of Agriculture asked us, ‘how can we solve this problem?’ and urged us not to resist the challenge but look at it as an opportunity,” said Huy. “It’s a chance for Vietnam to become a leader in the global coffee industry. If we understand the regulations and are fast to prepare for them, then it’s good for our supply chain, too.”
With that ‘anything is possible’ mentality, Vietnam is the leading EUDR-compliant coffee-producing country with a highly digitized and traceable coffee sector.
Not Afraid to Pivot
The willingness of Vietnam’s coffee sector to seek advice from outside players, accurately assess situations, and then make concise changes generates success. Understanding the importance of portfolio diversification and the ability to pivot quickly has taken Vietnamese coffee to the top.