Vietnam’s market for instant coffee has been divided clearly: Vinacafe 50.4%, Nescafe 33.2%, others 16.4%

The instant coffee market seems to have reached its saturation point with a total output of over 2,200 tonnes/year, however many companies still continue to invest in this field, making competition fiercer.

Bui Xuan Thao, Director of Bien Hoa Coffee Joint Stock Company, a member of Vietnam Coffee Corporation (Vinacafe), said: “Vietnam’s coffee sector is going the wrong way. What we need now is to change the thinking of Vietnamese coffee producers. We need to produce pure roasted and ground coffee to have an opportunity to export this product. It is suitable to domestic consumption trends and finances and competitiveness in Vietnam”.

The coffee market is now divided into two clear areas: roasted and ground coffee and instant coffee. While ground coffee has lost its prestige in export because of additives that are not good for health and are unsuitable to foreign customers’ taste, instant coffee has gained a foothold in local and foreign markets. Instant coffee is divided into two groups: pure instant coffee (accounting for 14%) and 3-in-one instant coffee (86%).

Apart from Vinacafe and Nescafe, who account for 83.6% of the market, the Vietnam Dairy Products Company (Vinamilk) has decided to join the market with Moment coffee. Trung Nguyen, a strong trademark in the pure coffee market, has heated up the instant coffee market by introducing G7 coffee, with total investment of $10mil for a 200 tonne/year production line. Many other companies have also introduced around 20 new instant coffee trademarks, making the market more colourful.

As more and more products appear, competition has become stronger. For the past year, numerous sale promotional campaigns have been launched by instant coffee producers. Trung Nguyen caused a sensation after advertising G7 by comparing its product with Nescafe. Trung Nguyen staff went to the street with Nestle and G7 samples receiving positive consumer response in comparison to Nescafe. In turn, for the past several months, Nescafe has launched three new 3-in-one products and changed its advertising focus.

Meanwhile, Vinacafe introduced another instant coffee variety, a four-in-one product with coffee, sugar, milk and ginseng and has launched a new advertising programme on TV. Previously it had a sale promotional campaign, under which customers made calls to Vinacafe directory to receive bonuses. Within one month, 100,000 phone calls and messages were taken, contributing to strengthening its leading position.

“Competition in the Vietnamese coffee market is growing. With a remarkable market share and over 30 years of experience, Vinacafe is not worried about the home market. Our big target is exporting to the US and China,” said Thao. Vinacafe is investing in a $20mil instant coffee factory, with a yearly capacity of 3,000 tonnes, which will begin running in 2006.

Is this a problem when businesses continue to invest in this area while investment in ground coffee is neglected?

(Source: TBKTVN)