Some of Asia’s largest coffee producers are finding it increasingly difficult to satisfy caffeine cravings in their home markets.
From the streets of Ho Chi Minh City to the cafes of Jakarta, consumers are quickly developing a taste for coffee, and that’s making Asian producers big buyers. While Vietnam and Indonesia remain among the main shippers, they are increasingly sourcing coffee from the leading agricultural country, Brazil, to meet the consumption boom.
“It’s pretty remarkable how people love their coffee,” said Judy Ganes, a consultant, referring to Indonesia’s thriving coffee culture. Innovative drinks such as a coffee-avocado blend have attracted new consumers – part of a growing movement across Asia as rising disposable incomes encourage coffee consumption, she added.
Both Indonesia and Vietnam, major producers of the bitter Robusta variety favored for making espresso and instant drinks, prefer to export their coffee production while importing for domestic consumption – their own beans are more expensive than Brazilian ones. Coffee’s domestic chill factor is a good indication that imports will continue, especially after extreme weather and inadequate yields weighed on global production in recent years.
The world’s largest coffee retailer, Neumann Coffee Grouprelies on the shift and opens one Import office in Indonesia, as demand there is expected to ultimately be higher than the country’s crops can handle.
According to the local exporters association, Indonesian coffee consumption has increased by about 4% annually over the past decade. That’s more than the 2.2% growth in global demand expected by the WHO this year International Coffee Organizationafter a period of ups and downs during the pandemic.
Accordingly, deliveries from Brazil to Indonesia, the world’s fourth largest producer, more than doubled last year Cecafe. “The growth potential is still very high, especially because per capita consumption is lower than in other parts of the world,” said Márcio Ferreira, chairman of the exporters group.
While coffee drinking habits are flourishing, Indonesia’s bean production has largely come to a standstill. Demand could exceed production within the next five to eight years if the same pace continues, said Moelyono Soesilo, head of downstream coffee industry at the Association of Indonesian Coffee Exporters and Industries.
The group aims to help farmers manage their lands and increase yields above the current level of 1.1 tonnes per hectare. By comparison, areas growing a similar variety of coffee in Brazil have yields of about 2.5 tons per hectare, according to the crop authority Conab.
Meanwhile, shipments from Brazil to Vietnam are also surging – increasing more than sixfold in the 12 months to January, Cecafé reported.
Imports from the South American country serve Vietnam’s instant coffee industry, he said Trinh Duc Minh, head of the Buon Ma Thuot Coffee Association in Dak Lak Province. Some companies have imported beans to honor signed contracts and also produce roasted coffee, said Tran Thi Lan Anh, deputy director of the second-largest exporter Vinh Hiep Co.
The weather helps bring more imports into the region. The El Niño phenomenon has caused extreme drought in Southeast Asia this season, reducing production in Vietnam and Indonesia and causing local prices to rise. Coffee from Vietnam is currently trading at a premium of more than $30 to Brazilian beans, making South American purchases even more attractive.
“Nowadays, despite higher prices, it is difficult to get beans,” Anh said, suggesting that there are probably not many beans left in farmers’ hands.
While Vietnam is the world’s largest supplier of Robusta, extreme weather and years of low profits before last year’s price rise led some farmers to switch other cultures. The country’s share of the global market has gradually shrunk over the past decade – it is now at its lowest level since 2008, the risk management firm said Global Hedgepoint Markets Estimates.
Coffee supply in both Vietnam and Indonesia is expected to see some recovery as higher prices bring increased income to farmers and encourage them to invest in expanding and improving their crops.
Still, there will still be long-term challenges, he said Carlos Costa, Hedgepoint Sales Manager. “The amount of small family real estate makes it harder to see economies of scale,” he said. “The big alternative that comes to market should be Brazil.”