Competition on local coffee market heats up

Hoang Phi

A customer selects coffee products at a supermarket - Photo: Hoang Phi

A customer selects coffee products at a supermarket - Photo: Hoang Phi

According to Kantar Worldpanel Vietnam, coffee consumption growth in urban areas in the six-month period was around 17%, with instant coffee rising by 23% and roasted coffee up 7%.

Coffee posted a 10% growth rate in rural areas with 13% and 4% as the respective rates for instant and roasted coffee.

The survey of Kantar Worldpanel pointed out that instant coffee reached around 57% of households in urban areas with each spending an average of VND30,000 per month. Meanwhile, the respective figures for roasted coffee in urban areas were 35% and VND45,000.

In rural areas, instant coffee products reached around 50% of households with average spending of some VND20,000 per month. Besides, 20% of households in rural areas use roasted coffee with VND20,000 per household per month.

Surveys of Nielsen Vietnam also indicated strong growth in instant coffee in Vietnam.

Last year’s value of instant coffee grew by 34% from the previous year and the growth rate in the year’s first half was 28%.

In terms of volume, the instant coffee consumption in the January-June period increased by 28% year-on-year while the rise of last year was 21%. Besides, instant coffee sales amounted to around US$130 million last year.

Currently, there are some 20 enterprises producing instant coffee. However, the market is dominated by three giants – Nestle, Vinacafe Bien Hoa and Trung Nguyen.

According to statistics of Euromonitor, Vinacafe Bien Hoa took the lead in the instant coffee market in 2011 with market share of 32.6%, followed by Nestle Vietnam with 31.1%. Nevertheless, last year saw Nestle jump to the front to achieve market share of 33%, while second-placed Vinacafe Bien Hoa saw its share drop to 32.5%.

Trung Nguyen took the third position with its market share hovering around 18.2%.

The combined instant coffee market share of these three big names was over 83%, leaving the small fraction for dozens of other brands.

However, in terms of roasted coffee, Trung Nguyen currently holds the biggest market share with around 80%.

Vinacafe Bien Hoa has also moved into this product line, targeting to dominate the Vietnamese coffee market with an 80% market share of instant coffee and a 51% market share of roasted coffee in 2020.

Recently, businessman Pham Dinh Nguyen, who is known for buying the U.S. smallest town Buford, has introduced the new coffee brand – PhinDeli.

According to Do Quoc Tuan, CEO of PhinDeli Joint Stock Company, the growth potential of Vietnam’s coffee market is huge. PhinDeli will find a place in the market by introducing clean products free from harmful chemicals, he said.

The competition among coffee producers is heating up after Nestle opened its plant worth over US$320 million and Vinacafe Bien Hoa also put into operation a 3,200-ton plant in Dong Nai Province lately.

Despite being a coffee grower and a major exporter, Vietnam’s coffee consumption is quite low compared to regional countries.

The coffee demand is forecast to increase thanks to penetration of coffee cultures from western countries, strong investments in coffee plants and huge spending on advertising of competitors.

Eurimonitor forecast that the compound annual growth rate (CARG) of coffee in general in the 2011-2016 period would be 9.1% and that of instant coffee would reach 11%.