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| A farmer harvests coffee in Gia Lai Province. Sustainable production is key for producers to maximize opportunities offered by the UK – Vietnam Free Trade Agreement (UKVFTA). — VNA/VNS Photo Vũ Sinh |
HÀ NỘI — Sustainable production is becoming increasingly critical for Vietnamese coffee producers aiming to capitalize on the new opportunities presented by the UK – Vietnam Free Trade Agreement (UKVFTA). As consumers in the UK become more environmentally conscious, the ability to demonstrate sustainability and eco-friendly practices will be essential for success in this competitive market.
Historically, coffee has been one of Vietnam’s key export commodities that effectively utilized UKVFTA benefits, leading to significant growth post-agreement. The tariff liberalization introduced by the agreement has allowed Vietnamese coffee to become more competitive in the UK market, adapting to demand and creating space for expansion.
In 2022, Vietnamese coffee exports to the UK skyrocketed to an impressive $90.8 million, marking a 61.1% increase compared to 2021, the first year the deal was effective. This upward trend continues, as the International Trade Council (ITC) reported that in the first five months of 2024 alone, Vietnam emerged as the second-largest coffee supplier to the UK, exporting 15,330 tonnes valued at $51.2 million. Despite facing a 22% decline in export volume during this period, the value of coffee exports rose by 12.2%, showcasing the significant increase in average prices.
The remarkable growth can partly be attributed to the increased pricing of Vietnamese coffee, which saw an average import price surge by 45.4% to $3,378 per tonne. This increase contrasts sharply with declines in average import prices from competitors like Brazil, Germany, and Colombia, highlighting the premium that Vietnamese coffee may command in the market.
Moreover, data from the General Department of Customs indicates that total coffee exports to the UK reached $121.25 million from January to November of 2023, making the UK the fifteenth largest market for Vietnamese coffee this year. This impressive figure significantly contributes to Vietnam’s record coffee export total, which stands at $4.48 billion, a 32.8% increase year-on-year.
“The UKVFTA, through its extensive tariff liberalization, plays a crucial role in boosting Vietnamese products, particularly coffee, in the UK market,” asserts Vũ Việt Thành from the European-American Market Department under the Ministry of Industry and Trade. The agreement has gradually removed tariffs from 85.6% of tariff lines since January 1, 2021, and plans to eliminate 99.2% by January 1, 2027.
Despite these advancements, there’s still considerable potential for Vietnamese coffee to grow in the UK. Traditionally recognized as a tea-drinking nation, the UK is evolving, with a notable shift towards coffee consumption, especially among younger demographics. Current statistics position the UK as the fifth largest coffee consumer market in Europe, a promising landscape for Vietnamese coffee
The ITC forecasts a continued growth trajectory for the UK coffee market, projecting a 10.98% increase by 2025—fueled by the ongoing interest in quality coffee amongst consumers. This demand is driving a shift toward certifications that assure quality, environmental sustainability, and ethical labor practices. As a result, enhancing the overall quality and branding of Vietnamese coffee will be essential to stake a stronger claim in the UK market.
Thái Như Hiệp, Deputy President of the Vietnam Coffee and Cocoa Association, emphasizes that while Vietnam ranks as a leading supplier, its brands are not yet well-established in the UK. Many roasters import Vietnamese beans but market them under their own brands, indicating the need for Vietnamese coffee brands to seek registration and protection within the UK market.
### Focus on Sustainability
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| Coffee manufacturers and exporters should invest in improving the sustainability of the coffee value chain together with focusing on improving product quality to expand exports. — VNA/VNS Photo Tuấn Anh |
To fully harness opportunities from the UKVFTA, the emphasis must be placed on enhancing the sustainability of the coffee value chain. British consumers are increasingly discerning about the environmental impacts related to their purchasing decisions, meticulously examining product labels for information on environmental, social, and governance (ESG) practices. Eco-friendly packaging and responsible sourcing are now significant attractions for consumers.
As such, coffee manufacturers and exporters are advised to invest in sustainability initiatives alongside enhancing product quality to make the most of both the UKVFTA and other international agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Furthermore, both the EU and UK are gearing up for stringent new regulations aimed at preventing deforestation, which may impact how coffee is sourced and marketed.
Even though the UK is no longer part of the EU, compliance with the EU Deforestation Regulation (EUDR) remains essential for Vietnamese coffee stakeholders due to its global implications. The UK’s Environment Act 2021 is paving the way for a system that ensures due diligence for forest-risk commodities, including coffee.
Late 2023 saw the introduction of an initial scope for this due diligence system, focusing on commodities like cocoa, palm oil, and soy, while coffee was not included. Nonetheless, it’s prudent for Vietnamese coffee manufacturers and exporters to prepare for EUDR compliance, set to be enforced by December 31, 2025, as it aims to bolster globally recognized ESG practices in the coffee market, thereby improving traceability and transparency across the supply chain.