Vietnam's "Coffee King"
sips tea as he appraises the crowded tables at a Swiss branch of Starbucks.
Dang Le Nguyen Vu may not rate
the coffee, preferring the brand from Vietnam's top processor which he heads,
earning him the regal epithet.
But the U.S. chain is in his
sights as a marketing model for Vietnam, the world's second largest coffee
grower, to multiply income by putting its brew and not just its beans on the
map.
"Our ambition is to become a
global brand," the chairman of privately owned Trung Nguyen told Reuters.
"They are great at
implanting a story in consumers' minds but if we look into the core elements of
Starbucks, what they are doing is terrible. They are not selling coffee, they
are selling coffee-flavoured water with sugar in it," he said.
Trung Nguyen also runs Vietnam's
biggest chain of coffee houses, and Vu has his pitch ready for the Western
market.
"American consumers don't
need another product. They need another story," he said, adding that his
company aimed to improve the lives of people in Vietnam's coffee-growing
highland region, a link he sees lacking in larger rivals.
"They sing great songs about
sustainable development but at the end of the day, the return on investment is
what they care about. They don't grow coffee, do they? We do."
Trung Nguyen says all its beans
come from smaller farms certified for sustainable growing practices, with
growers receiving guaranteed prices. Vu was in Lucerne to tout what he calls
"r e sponsible creativity for harmony and sustainability".
Grasshopper versus elephant
Vietnam is the world's top
exporter of cheaper robusta beans - mainly used for making instant coffee - and
the second biggest exporter of coffee overall after Brazil, which is the world
leader in exporting pricier arabica beans.
However, like many nations that
produce soft commodities coffee, cocoa and sugar, Vietnam only earns a fraction
of the income ultimately generated by its crops once they are processed,
packaged and marketed abroad.
"Vietnam currently exports
90 percent of beans raw. These beans carry no brands. That needs to be
changed," said Vu.
He said Vietnam should be able to
earn $20 billion from coffee within the next 15 years, up from less than $3
billion now, if it boosts agricultural productivity and does more to add value
to its coffee by roasting, blending and packaging beans.
Trung Nguyen hopes to quadruple
revenues to $1 billion by 2015 from $250 million in 2011 as Vu seeks to take on
big global brands like Nestle's Nescafe and Starbucks.
"We are like a grasshopper
fighting against a giant elephant. In terms of technology, marketing, Nestle is
way ahead of us," Vu said.
"Our strategy is to be
smarter and more focused," he said, noting that his G7 brand is the
country's top selling instant coffee ahead of Nescafe and local rival Vinacafe.
"For the consumer, Vietnam
was closed for a long, long time so they would always prefer the foreign brand
versus the local brand so for G7 to win this race it took extra effort from
us."
Trung Nguyen already exports to
60 countries, but plans a big new push into the United States next year, hoping
to eventually reverse the split in its sales of 70 percent for the domestic
market and 30 percent for export.
Trung Nguyen also expects to
benefit from the fast-growing popularity of coffee in the traditional tea-drinking
countries of Asia. Vu hopes to lift Vietnamese coffee consumption from a
current 1 kilogram per head per year to the 5 kgs of Brazil.
"We are running our
factories at up to 110 percent of capacity and still we cannot provide enough
to the Chinese market," said Vu, who says he drinks 10 cups a day himself.
"If crude oil is the energy
of the industrial economy then coffee is the energy of the knowledge-based
economy."
Nestle noted recently the huge
potential of the Chinese market with only three cups per person currently drunk
per year compared with 168 cups in Hong Kong and 99 in Taiwan.
Reuters
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