Foreign firms brew up coffee dominance

Foreign-invested businesses’ coffee purchases have eaten into local players’ market share.

Dak Lak People’s Committee proposed the Ministry of Industry and Trade allow foreign-invested Man-Buon Ma Thuot Coffee Processing Company (Dakman) to directly purchase coffee from farmers.

It argued the joint venture firm had allied with farmers in developing 3,676 hectares of coffee winning Common Code for the Coffee Community (4C) certification with an annual production of 12,000 tonnes.

The Dakman case is not unique. A number of other foreign invested enterprises (FIEs) have acted the same way in the hope they can legally hike coffee purchased volumes from farmers.

A Ministry of Agriculture and Rural Development (MARD) representative said the ministry would prop up foreign firms’ involvement in Vietnam’s coffee industry, particularly in coffee processing to help enhance Vietnamese coffee export values.

The MARD also will continue to allow businesses from assorted economic sectors to invest in material growing areas and clean coffee production.

However, the Dak Lak province’s proposal encountered a strong response from local coffee firms.

Central Highlands Coffee Investment and Import Export Company director Vu Duc Tien assumed foreign firms could legally purchase coffee from farmers through helping them expanding material growing areas if the proposal was green-lighted.

In light of existing regulations, foreign invested coffee businesses are ineligible to directly purchase coffee from farmers for export but must go through local firms.

In fact, FIEs have directly procured raw coffee from farmers for a number of years, according to the Vietnam Coffee Cocoa Association (Vicofa).

“In the previous years, local coffee exporters held over 80 per cent of Vietnam’s total coffee export volume. The rate sank to around 50 per cent in the past coffee season,” said Vicofa’s deputy chairman Do Ha Nam.

Nam said the agents procuring coffee for foreign firms currently account for a half of total coffee purchasing agents throughout the country, surging 35 per cent against last year.

A number of local coffee exporters failed to source sufficient coffee volumes for their export contracts and incurred penalties during the 2010-2011 coffee season, according to Vicofa.

To circumvent dwindling coffee purchase volumes in 2011-2012 season, Vicofa and the group of 20 Vietnam’s leading coffee exporters are scaling up efforts to hoard three million tonnes of coffee early in the coffee season.

State-owned Agribank and the Military Commercial Joint Stock Bank agreed to set aside VND10 trillion ($483 million) for purchases of 300,000 tonnes of coffee early in the season. - VIR

Tags: Vietnam Coffee, Vietnam coffee prices