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food / travel

The Perks Of Vietnam's Coffee Industry

Coffeebean collector in Da Lat
Coffeebean collector in Da Lat
Marie-Josée Cougard

DA LAT — It’s 30°C (or 86°F) on the high plateaus of Lam Dong in the southern central part of Vietnam. Hanoi is two-and-a-half hours away by car, and the damp heat envelops the coffee trees, their supple branches fanning out and loaded with green coffee cherries.

As the second-largest global coffee producer, Vietnam lags far behind Brazil but exports nearly as much. The industry brings in $3 billion annually. In fact, American corporation Mondelez (formerly Kraft) has just inaugurated the first training facility for planters in preparation for the growth of coffee demand in Asia. The booming sector is a strategic focus for the group.

Consolidating supplies

The coffee market has moved in recent years, and even if Brazil is still by far the largest world producer, agro-alimentary groups know that Asia is the place where consumption is going to grow. For the past 10 years it has been growing at a rate of 4% a year, whereas in mature countries that number is just 1.1%, according to the International Coffee Organization (ICO).

So the challenge today for heavyweights like Mondelez or Nestlé is to consolidate supplies in Vietnam so that they are in a position to deal with the growing demand in Asia. “Coffee consumption is growing non-stop, mostly in Thailand, Korea, India and Indonesia,” says Victor Gfeller, director of the Mondelez coffee division for Europe and developing countries.

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Coffee plantation in Vietnam - Photo: Ian Armstrong

“There’s very little in China at the moment,” says Hubert Weber, vice president of Mondelez’s world coffee division. “However, in Shanghai, as many cups of coffee are drunk a year as in Europe, while coffee is not consumed at all in rural China.” The operative assumption is that it’s just a matter of time before coffee becomes popular all over China.

Here in Lam Dong, the sleepy countryside’s softly rolling hills are planted with coffee, tea and mulberry trees for silk worms. The coffee harvest is still a long way off. It won’t start before the month of November, and then planters will have two months to pick the ripe beans — by hand, because many don’t have the necessary means to buy machines, and with the hypothetical help of neighbors, who are, however, too busy themselves to help out.

Once the harvest has dried, it will be sold to middlemen who play a key role in the long chain of coffee production. This is where most of the industry criticism is directed, as middlemen are suspected of exploiting the growers. They sell fertilizer to coffee planters — on credit. This gives them the leverage to set the harvest price that they then pass on to traders like Louis Dreyfus and Ecom, who export the coffee to Nestlé and Mondelez-Kraft factories. These two companies are the biggest buyers of Vietnamese coffee.

Speculation and tricks

Growers are pretty happy these days. They’ve had two good years, and have been able to replenish their coffers at least partially since coffee prices collapsed last year. Values fell from $300 a pound in 2011 to $130 in 2012. Coffee, in fact, is a raw material very attractive to speculators. “One day they’re millionaires, and the next day they have nothing,” says Trinh Xuân Thâu, a middleman from the area. But he says he doesn’t play what’s known as the “paper coffee” game — with coffee that’s been resold before it’s been bought — because it's much too dangerous for his taste.

All sorts of dubious practices are rampant in the coffee business. Stéphane Mahieu, director of the Ecom factory in Lam Dong, is especially disapproving of the middlemen, some of whom he describes as “drowning in debt and on the verge of bankruptcy.” They have no compunction about augmenting the sacks of coffee beans that they deliver to the factory with additives. In the mildest cases, these might include broken, black or undersized beans. But sometimes they use metal bolts to weigh the sacks down so they can charge more.

The factory cleans the beans, sorts them into lots, and puts them in the sacks in which they will be exported. Coffee is never roasted at this stage because it wouldn’t last. The beans are sent green to the factories (Nestlé and Mondelez), where roasting takes place. At the factory, says Mahieu, dust is another serious issue. “Yesterday we got rid of 70 tons of dust on a truck weighing 30,000 tons.”

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Ukrainian forces are digging new fortifications and preparing battle plans along the entire frontline as spring, and a probable new Russian advance, nears.

But this may be the last spring for occupying Russian forces.

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Skinitysky added that Ukraine believes Russia is planning a new offensive in the spring or early summer. The Institute for the Study of War thinks that such an offensive is more likely to come from the occupied territories of Luhansk and Donetsk than from Belarus, as some have feared.

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