Vietnamese coffee enterprises raise all-out struggle to regain home market
Vietnamese coffee enterprises raise all-out struggle to regain home market
Order has been restored on the coffee market with domestic enterprises having regaining the material market which was controlled by foreign enterprises. However, big difficulties are still ahead.
Over 50 percent of the coffee material market was once controlled by foreign enterprises. At that time, pessimistic forecasts were given about the Vietnam’s coffee industry worth three billion dollars. However, Vietnamese coffee enterprises decided that they should not be defeated on the home market.
Struggling to regain the market
In the 2010-2011 crop, Vietnam witnessed the bankruptcy and dissolution of a series of domestic coffee enterprises and the strong growth of foreign enterprises in the “opponent’s market.”
Two years were enough for foreign enterprises to increase their market share from 10 percent to 50 percent. The enterprises attempted to control the material market, pushing domestic enterprises into deadlock.
In the 2010-2011 crop, coffee had been sold out by farmers just by early the second quarter of 2011. However, the storehouses of domestic enterprises were empty, because the majority of coffee had been sold to foreign enterprises. As a result, domestic enterprises lacked materials for processing to fulfill the contracts signed before with foreign partners.
Meanwhile, at that time, domestic enterprises did not receive the support from the local authorities, which believed that farmers had the right to sell coffee materials to those, who pay higher prices.
At that time, foreign enterprises could easily gain the upper hand in the struggle to collect coffee materials. Since foreigners could borrow capital at low interest rates of 2-3 percent (Vietnamese had to pay 20 percent per annum), and they did not have to invest to grow the material areas, they could pay higher to farmers than Vietnamese enterprises.
Nevertheless, according to Nguyen Nam Hai, General Director of Vinacafe, the foreigners’ market share has reduced from 50 percent to 30 percent.
The public debt crisis in Europe is believed to be the main reason which has weakened foreign groups. Meanwhile, domestic enterprises, which have learnt the lesson from the defeat in the last coffee crop, have successfully joined forces to regain the material market share.
The information has been confirmed by Do Ha Nam, Deputy Chair of the Vietnam Coffee and Cocoa Association (Vicofa) Do Ha Nam.
Nam said that after some coffee enterprises incurred heavy losses in the 2010-2011crop, Vietnamese enterprises have regained their strength, becoming the key coffee exporters. Seventy percent of coffee exports in the 2011-2012 belong to domestic enterprises.
Difficulties ahead
However, the good information is still not enough to the Vietnam’s coffee industry. Since the beginning of the year, local newspapers have continually named the coffee enterprises incurring heavy debts of up to trillions of dong.
Vietnam has 150 enterprises exporting coffee products every year. The biggest exporter can export 200,000 tons, while small private businesses only export some hundreds of tons.
BMT, which is considered the “eldest brother” in the coffee industry, has bogged down in big difficulties after three failure crops. In its golden age, in 2008-2009, the company led the top 10 Vietnamese coffee exporters, exporting 150,000 tons of coffee, earning 237 million dollars, holding 14.33 percent of the market share.
However, the price fluctuations in the 2009-2010 crop then made the enterprise suffer. Many other coffee companies in the Central Highlands are facing the same problems: they have to borrow capital at sky high interest rates and cannot pay bank debts.
vietnamnet
