Vietnamese Coffee – The Dynamics of the Sudden Surge

In the closing month of 2023, the Vietnamese coffee industry experienced a seismic shift in its pricing landscape, witnessing an unprecedented surge in domestic coffee prices. This abrupt escalation, reaching its pinnacle in 11 months, unfolded as a result of a multifaceted interplay of global and local factors.

Global Catalysts for the Surge

▬ Post-COVID-19 Economic Recovery: The global economic revival following the aftermath of the COVID-19 pandemic contributed significantly to a surge in worldwide coffee consumption. As economies rebounded, the demand for coffee surged, exerting upward pressure on prices.

▬ Population and Income Growth: Parallel to the economic recovery, the simultaneous growth in global population and income levels further fueled the demand for high-quality and specialty coffees. Consumers were increasingly seeking premium coffee experiences, placing additional strain on the available supply.

▬ Shift Towards Sustainable Consumption: A noteworthy factor influencing the surge was the global shift towards sustainable consumption patterns. Consumers were increasingly inclined towards ethically sourced and environmentally friendly coffee, aligning with the growing global emphasis on sustainability.

Local Constraints on Supply

▬ Diminished Coffee Production: The domestic supply of coffee in Vietnam faced constraints owing to a substantial reduction in coffee production in recent years. Unfavorable weather conditions, disease outbreaks, and disruptions in the supply chain collectively led to a decline in the overall coffee yield.

▬ Export Restrictions by Major Producers: Key coffee-producing nations, prominently Brazil and Colombia, imposed restrictions on coffee exports to ensure an adequate domestic supply. This protective measure, while crucial for their own markets, added to the scarcity of coffee in the global market, intensifying the price surge.

In essence, the sudden surge in domestic coffee prices in Vietnam during December 2023 can be attributed to the confluence of heightened global demand fueled by economic recovery and changing consumer preferences, coupled with localized challenges constraining the supply side. This intricate interplay underscores the intricate dynamics shaping the Vietnamese coffee industry and its susceptibility to both global and domestic influences.

Hoang Minh
KAIFarm Team®