Trung Nguyen’s Chairman on resolving the coffee paradox

“Virtually no competition” is an enviable position for a company to be in. In Vietnam, which has seen a gradual increase in competition since the mid-1980s shift to a market economy, a dominating position is particularly enviable. The country has an attractive consumer base of over 90 million people and, since the turn of the millennium, has posted some of the strongest economic growth rates in the world. Yet “virtually no competition” is how Chairman Dang Le Nguyen Vu describes Trung Nguyen’s market share of the roast and ground market in Vietnam. A fully privately-owned, family-run business, Trung Nguyen was established in 1996 by a group of medical students. Today, Trung Nguyen is synonymous with Vietnamese coffee, serving 9 billion cups over 15 years to the country’s coffee loving population, and exporting to over 53 countries and territories worldwide. Vu tells GCR that the establishment of Trung Nguyen was as much about promoting Vietnamese-grown coffee to the nation and the world, as it was a business venture. “When the company was established, Vietnam was the second largest coffee exporter in the world, and not many people knew that. We seemed to be lost somewhere, with the middlemen so focused on raw materials,” he says. “It was Trung Nguyen’s ambition to spread the word of Vietnamese coffee to the world.” In addition to what the company has already accomplished in the last 15 years, he says it has only really established the base of what he envisions. In a world where coffee growing countries’ prosperity rests in the hands of companies and markets in Western nations where coffee isn’t grown, Vu shares with GCR a vision to take back control.
“In the coffee industry there is this paradox… where the trade is controlled by countries that don’t grow coffee – companies like Starbucks and Nestlé,” he says. “I think we have to change this imbalance. Coffee growing countries should have their own voice in the world.” Trung Nguyen emerged in Vietnam before a foreign coffee chain could carve out a share of the Vietnamese market. The country officially entered the World Trade Organisation in 2007, and only recently started to see the introduction of foreign companies. By getting in early, Trung Nguyen has grown today as not only the strongest player on the market, but as an important facet in the cultural identity of Vietnamese life. “In our opinion, we don’t only sell quality coffee. We are dealing in the desires and the dreams of Vietnamese people,” he says. “We need to contribute to the great design of the national image. I think that through the creativity that coffee offers, we can contribute to the culture of the nation.” Around 3 million cups of Trung Nguyen coffee are consumed daily, mainly in the Vietnamese drip fashion, served over condensed milk and sometimes with ice to suit the warm climate. The company also has a third of the instant coffee market, which Vu says is shared more or less equally between Trung Nguyen, Nestlé’s Nescafé, and Vinacafe. Coffee chains such as Highlands Coffee, and others are contributing the rise of Western-style coffee chains. Trung Nguyen, however, has maintained its dominant position in Vietnamese-style roast and ground coffee. Vu says that as a domestically-owned company, Trung Nguyen holds a competitive advantage with a solid infrastructure, brand recognition and affordability. “To keep our position, we have to continue to operate in our own distinguished way,” he says. “Most importantly, we need to get the message out there that we’re here to play with the major international players in the market.” In bringing Vietnamese-style coffee to the world, Vu says he sees the company as holding a huge responsibility to the sustainability of the country’s coffee industry. His reference to sustainability refers largely to economic potential. “We want to foster the coffee industry in Vietnam. We plan for a national coffee industry that 15 years from now will be worth US$20 billion,” he says. A report by the Vietnam Coffee and Cocoa Association at the end of 2011, estimated that coffee exports were around US$2.4 billion. The figure was a 58 per cent increase over a year prior, mainly on the back of doubling export prices. Vu’s predictions are naturally not dependant on ever-increasing export prices. With those prices controlled by foreign markets, Vu’s vision is to increase value at every level of the production chain, including the quality of coffee and production yields. “We need to increase the value of the whole chain, with a focus on increasing the farmers’ livelihoods,” he says.  Improving the quality of living among farmers seems to be a trend coffee industry leaders the world over are taking on board, as seen by the rise of certification programs and other initiatives following the coffee price crisis that climaxed in 2002. Vu’s position from a coffee producing country, however, takes a difference stance on the best way to improve the quality of farmers’ lives. “We have the ambition to foster creativity for the sustainable development of coffee in the world,” he says. “Coffee growing countries can’t depend on stock markets in London and New York. We need our own voice. We need close cooperation among coffee growing countries and to set up our own financial institutions.” Vu’s vision starts with each coffee growing country having a similar company like Trung Nguyen as a strong domestic brand. “It’s this kind of business that you need to contribute to the strategic plan of each country, to be better involved in the supply chain – from the beginning, right until the end,” he says.  In terms of environmental sustainability, Trung Nguyen is adopting models from foreign companies to invest in the farmers. The company purchases its coffee from ethnic minority farmers that live in the country’s Central Highlands, where Vietnam’s coffee is mostly grown. To help improve production, the company imports technology from Israel that helps bring water straight to the coffee plant’s roots. The company also works with a company from Norway to import its fertiliser. “We don’t own any coffee plantations, but we’re investing in the farmers,” he says. “In bringing these things to them, it helps them lift their quality so that they can sell their coffee at a higher price.” Vu says that the main trait that sets Trung Nguyen apart from international coffee traders is its domestic position, lending the company a more vested interest in lifting the country’s coffee industry. “Other traders come in just to purchase the coffee and leave. We’ve invested in the farmers from the start, giving them technology and sending in expertise,” he says. “At the end of the day, we’re buying at a higher price to ensure we help lift their quality of life.” In addition to improving conditions on the production side, Vu says that promoting domestic coffee consumption is an important step in lifting the position of coffee producing countries, whereas the consumer base won’t be so heavily weighted outside the coffee belt. In Vietnam, Vu says his greatest challenge in meeting his goals are similar to anyone trying to bring new ideas and perspectives into an established society. In Vietnam, he says that new perspectives can often conflict with old ideologies that can naturally lead to conflicts with policy-makers: “We see ourselves as avant-garde, and as such we face those challenges.” In addition to policy issues, Vietnam’s coffee growing industry faces the challenges arising from climate change. With its long coastline, Vietnam is among the top five countries most affected by rising sea levels. Increasingly violent weather in the still developing country has seen e
ntire villages wiped out, a regular annual death toll from natural disasters and faltering crops from irregular weather patterns. Fortunately, Vu says that because coffee grows in highland areas the crop is less affected than other agricultural products. When talking of future ambitions, Vu isn’t shy about discussing his vision not only for Trung Nguyen, but for the changes he would like for the global coffee industry. “My coffee dream is to help lead the world coffee industry into a new era,” he says. “We need to connect and develop the coffee spirit and culture in producing countries… We need to create a consuming culture that involves creativity that helps bring people together from producing countries to a common point. This is how you create a sustainable industry.”