Coffee has the greatest potential for value growth in Vietnam

The new Euromonitor International report: Coffee in Vietnam offers a comprehensive guide to the size and shape of the market at a national level.

It provides the latest retail sales data (2001-2006), allowing you to identify the sectors driving growth.

Sales of hot drinks reached VND3,770 billion ($0.234 billion) in 2007, an increase of 11% compared to 2006. Tea is the most valuable, with a share of some 53% of total value.

Coffee accounts for 30%, while other hot drinks – primarily flavoured powder drinks – accounts for less than 18%.

In terms of actual value increment, tea saw the most significant gains in 2007, rising by VND173 billion, although both coffee and other hot drinks also saw impressive gains (VND120 billion and VND73 billion respectively).

Vietnam is a country that has a suitable climate for cultivating and producing coffee and tea.

Vietnam has become the second largest coffee and the seventh largest tea exporting country in the world. However, consumption of coffee and tea in Vietnam is tiny compared with production.

Domestic producers concentrate on exporting rather than expanding the domestic-market.

Vietnamese coffee producers have recently invested heavily in building more production facilities and increasing the output of coffee, especially instant coffee, which they intend to sell abroad.

Domestic coffee manufacturers such as Vinacafe – Vietnam National Coffee Corp and Trung Nguyen Coffee Co Ltd dominate coffee and the reason for this is easy to understand.

Vietnamese Coffee players were the first to trade domestically and can undercut any foreign imports. This story is different for tea.

Vietnam is also a big tea producer and exporter, but foreign tea player's such as Unilever Vietnam, MJF Group and Qualitea Ceylon (PVT) Ltd have won over domestic producers.

Domestic production was always intended to be exported. Foreign players have marketed their goods at domestic Vietnamese consumers whilst domestic producers have ignored them.

Hot drinks is expected to grow by a CAGR of 7% in constant value terms, and 6% in volume terms.

Coffee and other hot drinks have the greatest potential for dynamic value growth, with forecast CAGRs of 8% each in constant value terms. However, price competition in tea will limit overall growth in average unit prices.

In coffee, fresh coffee will remain the most valuable, with sales expected to increase by as much as VND414 billion by 2011, overshadowing instant coffee, despite the latter's higher prospective growth rate.

In tea, black standard tea and speciality tea will dictate overall growth, and remain the most valuable categories, despite emergent niche growth for green tea and fruit/herbal tea.