Some of Asia’s biggest coffee-producing nations are finding it more challenging to satisfy the caffeine cravings in their home markets.
From the streets of Ho Chi Minh City to the cafes of Jakarta, consumers are rapidly developing a taste for coffee, and that’s transforming Asian producers into large buyers. While Vietnam and Indonesia still rank as major shippers, they are increasingly sourcing coffee from agriculture powerhouse Brazil to meet the consumption boom.
“It’s pretty remarkable how people love their coffee,” consultant Judy Ganes said, referring to Indonesia’s thriving cafe culture. Innovative drinks such as a coffee-avocado mix have enticed new consumers — part of a growing movement across Asia as increases in disposable income foster coffee consumption, she added.
Both Indonesia and Vietnam, big growers of the bitter robusta variety favored to make espresso and instant drinks, prefer to export their coffee production while importing for domestic consumption — their own beans are more expensive than Brazil’s. Coffee’s cool factor at home is a good indication that the imports will continue, especially after extreme weather and insufficient yields over the past years have weighed on global production.
The world’s largest coffee trader, Neumann Kaffee Gruppe, is betting on the shift, opening an import office in Indonesia as it expects demand there will eventually be higher than what the nation’s crops will be able to handle.
Indonesian coffee consumption grew about 4% annually over the past decade, according to the local exporters association. That’s higher than the 2.2% growth in global demand expected this year by the International Coffee Organization, following a period of ups and downs during the pandemic era.
Shipments from Brazil to Indonesia, the world’s fourth-largest producer, more than doubled last year, according to Cecafé. “The potential for growth is still very large, especially because consumption per capita is lower than in other parts of the world,” said Márcio Ferreira, chairman of the exporters group.
As coffee-drinking habits flourish, Indonesia’s bean production has mostly stalled. Demand may exceed output 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 is seeking to help farmers manage their estates, looking to boost yields above the current level of 1.1 metric tons per hectare. In comparison, areas that produce a similar coffee variety in Brazil have yields of about 2.5 tons per hectare, according to crop agency Conab.
Meanwhile, shipments from Brazil to Vietnam are also surging — jumping more than sixfold in the 12 months ended in January, Cecafé reported.
Imports from the South American country are serving Vietnam’s instant coffee industry, 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 make roasted coffee as well, said Tran Thi Lan Anh, deputy director of second-largest exporter Vinh Hiep Co.
Weather is helping bring more imports to the region. The El Niño phenomenon has brought extreme dryness to Southeast Asia this season, reducing production in Vietnam and Indonesia and causing a spike in local prices. Vietnam coffee is currently trading at more than a $30 premium to Brazilian beans, making South American purchases even more attractive.
“It’s tough to get beans these days” despite the higher prices, Anh said, suggesting 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 prior to last year’s price surge led some farmers to switch to other crops. The country’s share of the global market has gradually shrunk over the last decade — it’s now at the smallest since 2008, risk management firm Hedgepoint Global Markets estimates.
Some recovery is expected in both Vietnam and Indonesia’s coffee supply, as higher prices will bring higher revenue to farmers, spurring them to invest in expanding and improving their crops.
Still, long-term challenges will persist, said Carlos Costa, Hedgepoint head of sales. “The amount of small, family properties makes it more difficult to see gains of scale,” he said. “The big alternative to come onto the market should be Brazil.”