Vietnam’s Food Exports: High Output, Low Value
Vietnamese people drink tea on a daily basis, and you’ve probably tasted the slightly bitter Vietnamese green tea, not to mention its watered-down iced version in Saigon’s restaurants. But have you ever heard of a brand of Vietnamese tea?
Even though Vietnam is one of the top 10 tea exporters in the world, branded, industrially produced tea is still a foreign concept.
Thang*, a former employee of Vinatea JSC, the largest tea producer and exporter in Vietnam, talked to us about the market for Vietnamese tea. The company exports to over 50 countries. The biggest markets are Pakistan, Taiwan and Russia.
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“Most of the tea products from Vietnam are exported under our brand, but they are not final products for direct consumption. The high volume exports are black tea in primary forms, used as ingredients for further processing by the importers, to add more value and suit their customers’ taste,” Thang said.
Video source: Vietnamese SMEs Support Program VIETRADE
“We still lack the final-stage technology to produce black tea for consumption, so our products are exported at a low value. We only process green tea and some speciality varieties such as oolong tea for consumer products, but the output is low.” He added: “Green tea and black tea are produced from the same plant, but with different technical processes.”
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With more than 125,000 hectares of tea plants in Northern and Central mountain provinces, such as Thai Nguyen, Son La and Lam Dong, Vietnam produces more tea for export than for domestic consumption.
Thang explained, “In these mountainous provinces, the land is most suitable for growing tea plants, so the plant provides the livelihood for the people there. That’s why we grow more tea than we consume domestically.”
Chasing After High Value
However, high quantity doesn’t equal high value, and the story of Vietnamese tea is also typical of other agricultural products aimed at exports.
Minister of Agriculture and Rural Development, Nguyen Xuan Cuong, told Vietnamnet that even though Vietnam is one of the 15 largest agricultural exporters in the world, 90 percent of export products are in “crude” form, with a low level of processing and low value. These products are often further processed and distributed under foreign brands, bringing the added value to the importers.
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For example, according to the Vietnam Cashew Association, Vietnam has been the number one cashew exporter for the past 12 years, processing more than 50 percent of the world’s output. However, Vietnam only participates in the preliminary processing stage, equal to 18 percent of the value chain. The most profitable stages of salt roasting and distribution, accounting for a total of 60 percent in value, are not the strengths of Vietnamese companies.
Vietnam is also the second-largest coffee exporter of the world, behind Brazil, taking up 10.5 percent of global coffee exports. However, according to the Vietnam Coffee-Cocoa Association (Vicofa), processed, roasted, ground and instant coffee only account for over 10 percent of total export value.
Jonas van Binsbergen, owner of Shalom Coffee in Ho Chi Minh City, who has had many years working with Thai Hoa Group and contributed to making it one of the largest private coffee exporters in Vietnam, said that the company produced and exported for big global brands such as Nestle, Kraft Foods and Lavazza.
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Similarly, though vegetable and fruit exports reached their highest ever peak of US$3.45 billion in 2017, Vietnam mainly exports fresh vegetables and fruits, with few companies investing in processing technology.
Due to the short storage time of fresh products, most vegetable and fruit exports from Vietnam go to China, the largest importer with over 75 percent market share.
Another challenge is in ensuring the quality of export products, especially regarding food safety. Quality assurance in every stage of production and packaging is the first step for Vietnam’s agricultural products to penetrate more discerning markets.
Binsbergen said, “A lot of [previously] state-owned enterprises are active in inspecting export products, such as CafeControl and VinaControl.” Industry groups including Vicofa are also involved in setting standards. On the other hand, inspection on the importing side is not done by the government of the destination country. “Usually the buyers have, and inspect by, their own standard.”
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As Thang put it, “Quality of tea depends on everything from the material to the process. There is a right time to harvest the tea buds and to bring them into processing. We must also follow industry standard and international standard, including criteria for food safety such as pesticide residue and concentration of metal elements.”
This has to be done at the local farms and factories, before delivery to headquarters for packaging and shipping. Thang also shared how each importer has different requirements for packaging. For example, some require five protection wrapping layers or wooden boxes, and for consumer products, some specify exactly how they want the tea bags made.
Without proper investment in processing and packaging technology, as well as development in marketing and branding solutions, Vietnamese agricultural exporters will likely remain in the lower links of the global value chain.
This also applies to the domestic market with an increasing presence of international brands, filling in the gaps for processed food that local producers are leaving open.
*Name has been changed.
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