UKVFTA Agreement opens up opportunities for Vietnam's coffee industry

British consumers traditionally drink more instant coffee than European countries. The UKVFTA agreement is opening up opportunities for Vietnam's coffee industry to enter more smoothly than the UK market.

According to data from the International Trade Center (ITC), in 2021, total coffee imports from the world market into the UK will reach 203.38 thousand tons, worth $945.56 million. Also in 2021, the average import price of coffee into the UK reached $4,649/ton, up 7.5% compared to 2020.

According to Statista, the UK coffee market revenue is estimated to reach $8.81 billion by 2022. The market is expected to grow 10.98% annually (CAGR 2022-2025). Thus, the UK market's revenue is currently about 1/10 of the US market ($85.16 billion). Revenue per capita is 128.70 USD in 2022. By 2025, 83% of spending and 29% of coffee consumption in the UK market will be for non-family consumption activities (e.g. at cafes, hotels, bars and restaurants).

British consumers traditionally drink more instant coffee than European countries. However, the reality also shows that sales of ground coffee and specialty coffee are increasing. Especially, coffee certified for quality or certified for environment, labor... is very important for British consumers.

Statistics show that the EU is still the largest coffee supplier to the UK market, while Asia (including Vietnam) only supplies about 90 million tons/year. However, it should be noted that coffee from Vietnam and some other suppliers has also been purchased, packaged, and exported by international roasters to the UK market with their own labels, including: many EU roasters. 

Vietnamese coffee is also a commodity with great potential in the UK market. In addition to the supply-demand factor, the UKVFTA Agreement opens up an opportunity for Vietnam's coffee industry to enter more smoothly than the UK market; thereby, contributing to improving coffee value and stabilizing exports in difficult conditions of the COVID-19 epidemic. 

According to statistics from the General Department of Customs, in the first 7 months of 2022, Vietnam's coffee exports reached 1.13 million tons, worth 2.56 billion USD, up 17.3% in volume and up 43.6 % in value over the same period in 2021. The average export price of Vietnam's coffee reached $2,261/ton, up 22.5% over the same period in 2021.

Coffee exports to most markets increased, except for exports to the United States, the Philippines, and Algeria which decreased. In which, coffee exports to Belgium and the UK grew by 3 digits; exports to Spain, Russia, and the UK grew by double digits.

The growth rate of agricultural trade in general and coffee in particular is expected to be positive for 2022 when the UK economy recovers with the efforts of Vietnamese businesses, the support and guidance of national trade promotion programs.

The Ministry of Industry and Trade said that Vietnamese businesses need to quickly take advantage of the opportunities brought by UKVFTA. Because according to UKVFTA's commitment, after 6 years since UKVFTA takes effect, the UK will eliminate import tax on 99.2% of tariff lines, equivalent to 99.7% of Vietnam's export turnover.

Currently, green coffee from Vietnam is mostly low quality Robusta, the competition on cheap prices is no longer appropriate. To meet the needs and tastes of the British, the Ministry of Industry and Trade also recommends that businesses invest in the production of high-quality Arabica coffee from smaller-scale growing areas, with better governance, better management accessibility and sustainable development. 

Product packaging needs to be attractive, clearly because UK consumers are very interested in the information on the product packaging to determine if the product contains allergenic ingredients, preparation method, sustainability criteria. 

Besides, Vietnamese coffee enterprises should offer to sell smaller batches but have more uniform quality, apply modern processing technology to increase product quality.

Source: Trung Anh/ thuongtruong.com.vn