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REPORT
ASSESSMENT OF FAIR TRADE DEVELOPMENT
POTENTIALS IN TEA, COFFEE, COCOA, SPICE AND
HANDICRAFT INDUSTRIES IN VIET NAM
Developed by:
Project Promoting Fair Trade in Viet Nam
Ha Noi, June 2015
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PREFACE
The report Assessment of Fair Trade Development Potentials in Tea, Coffee, Cocoa,
Spice and Handicraft Industries in Vietnam is a part of the Promoting Fair Trade in
Vietnam Project. The project is funded by European Union, conducted by Vietnam Rural
Industries Research and Development Institute, and co-implemented by Vietnam Tea
Association, Vietnam Coffee and Cocoa Association, and Vietnam Handicraft Exporters
Association (Vietcraft).
The report uses information mainly from Vietnam Rural Industries Research and
Development Institute, Vietnam Tea Association, Vietnam Coffee and Cocoa Association,
Vietnam Handicraft Exporters Association, General Statistics Office, Ministry of Industry and
Trade, as well as data from interviews with enterprises, consumers and experts in the
industries.
The project would like to sincerely thank the team of experts involved in designing the study,
collecting information and building reports, including: Ms. Nguyen Bao Thoa (Vietnam Rural
Industries Research and Development Institute), Ms. Nguyen Thi Hong Minh (National
Economics University), Ms. Dang Thuy Duong (Promoting Fair Trade in Vietnam Project),
Mr. Hoang Dinh Nhu and VITAS’s leaders (Vietnam Tea Association), Mr. Phan Huu De and
Do Xuan Hien (Vietnam Coffee and Cocoa Association), Mr. Le Ba Ngoc (Vietnam
Handicraft Exporters Association). The project would also like to thank the experts from
Ministry of Industry and Trade, the Data Analysis Department and experts from Vietnam
Rural Industries Research and Development Institute. Last but not least, the project would like
to thank all the interview recipients from private sectors as well as relevant authorities who
enthusiastically participated in answering our questionnaire.
Opinion and statements in the report belong to Promoting Fair Trade in Vietnam Project and
the experts involved, and do not necessarily reflect the views of the European Union.
Promoting Fair Trade in Vietnam Project and the research team take full responsibility for the
accuracy of the figures and data used in this report.
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TABLE OF CONTENT
PREFACE ................................................................................................................................. 1
PART 1: INTRODUCTION .................................................................................................... 5
A. Research background .......................................................................................................... 5
B. Research objectives .............................................................................................................. 6
C. Methodology ......................................................................................................................... 6
PART 2: THE CURRENT SITUATION AND POTENTIALS OF DEVELOPING FAIR
TRADE IN TEA, COFFEE, COCOA, SPICE AND HANDICRAFT INDUSTRIES ....... 8
1. Tea .......................................................................................................................................... 8
1.1. Current situation of production ...................................................................................... 8
1.2. Current situation of export ............................................................................................. 9
1.3. Current situation of certification for businesses in the industry .................................. 11
1.4. SWOT analysis(Strengths, Weaknesses, Opportunities, Threats) for the tea industry of
Vietnam ..................................................................................................................................... 13
1.5. Current situation, the need and possibility of Fair Trade certified businesses of tea
industry in Vietnam ................................................................................................................... 15
2. Coffee ................................................................................................................................... 16
2.1. Current situation of production ......................................................................................... 16
2.2. Current situation of export ................................................................................................ 19
2.3. Current situation of certification for businesses in the industry ....................................... 22
2.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for the coffee industry in
Vietnam ..................................................................................................................................... 24
1.5. Current situation, need and possibility of Fair Trade certified businesses in coffee
industry in Vietnam ................................................................................................................... 26
3. Cocoa ................................................................................................................................... 28
3.1. Current situation of production ......................................................................................... 28
3.2. Current situation of export ................................................................................................ 29
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3.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for the cocoa industry in
Vietnam .................................................................................................................................... 30
3.5. Current situation, the need and possibility of Fair Trade certified businesses in cocoa
industry in Vietnam .................................................................................................................. 31
4. Spices ................................................................................................................................... 32
4.1. Current situation of production ........................................................................................ 32
4.2. Current situation of export ................................................................................................ 35
4.3. Current situation of certification for businesses in the industry ....................................... 36
4.5. Current situation, the need and possibility of Fair Trade certified businesses of the spice
industry in Vietnam .................................................................................................................. 38
5. Handicrafts ......................................................................................................................... 40
5.1. Classes of handicraft products and export value .............................................................. 40
5.2. Current situation of export ................................................................................................ 45
5.3. Current situation of certification for businesses in the industry ....................................... 47
5.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for Vietnam handicraft
industry..................................................................................................................................... 48
5.5. Current situation, the need and possibility of Fair Trade certified businesses in
handicraft industry in Vietnam ................................................................................................ 49
PART 3: CONCLUSIONS AND RECOMMENDATIONS FOR FAIR TRADE
DEVELOPMENT POLICIES IN TEA, COFFEE, COCOA, SPICE AND
HANDICRAFT INDUSTRIES IN VIETNAM ................................................................... 50
1. For manufacturers ............................................................................................................. 53
2. For organizations issuing fair trade certificates.............................................................. 54
3. For the Government........................................................................................................... 55
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PART 1: INTRODUCTION
A. Research background
In the era of industrialization, urbanization and climate change, farmers in Vietnam,
especially those living in remote areas, have been facing major problems such as
unemployment, low capacity and limited access to markets, especially international markets.
Creating jobs and incomes for poor farmers in mountainous and rural areas has become one of
the top concerns for the Government in Vietnam. This priority has been included in multiple
policies, from the development of infrastructure and restructuring of production, to vocational
training, regional subsidy, etc. Nevertheless, it is still very difficult for the farmers to sell their
products. Many farmers do not have any other incomes rather than those from farming, and
they often suffer from disadvantages in doing business, and have no other solution than to sell
their products to a number of local traders.
Tea, coffee, cocoa, spices, and handicrafts are important export items of Vietnam. Vietnam is
the second largest exporter of coffee and pepper, and the fifth of tea. Vietnamese wooden
products ranked sixth and silk products ranked tenth among international exporters in 2013.
Despite the mentioned challenges, there are various opportunities for those five products to
increase market shares via innovation, improvement and fair trade certification so as to
achieve responsible models for production and consumption.
Fair Trade is an international movement to establish and develop global trading system based
on the principles of equality in production and business and respect for sustainable living
environment. Fair Trade has already been accepted worldwide for nearly 70 years since the
"Ten Thousand Villages" movement in 1946. Along with traditional trade, the application of
these principles in fair trade business is becoming a today's international trend, and
particularly attracts the attention of small and medium enterprises in agricultural and
handicraft sectors, for customers / consumers nowadays become more and more concerned
about the origin of goods and condition of the manufacture. The concept is, however, still
relatively new and not yet widely recognized in Vietnam. Fair Trade comes to Vietnam
mainly through foreign NGOs, international organizations and more recently, through
domestic NGOs. Moreover, fair trade practices in business are still sporadic, disjointed, and
lack the link among fair trade enterprises, among sellers and buyers, and especially lack of
comprehensive national policy for fair trade development. Sponsored by the European Union,
Promoting Fair Trade in Vietnam Project within the framework of EU-MUTRAP project
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conducts a study on the current situation and potentials of fair trade development in tea,
coffee, cocoa, spice and handicraft industries in Vietnam.
B. Research objectives
This study was conducted to analyze the situation and assess fair trade potentials for
tea, coffee, cocoa, spices and handicrafts of Vietnam and to identify issues as well as
opportunities and challenges in developing fair trade in Vietnam.
After achieving the goal to learn and provide the above information, this report aims to
raise awareness for the community of Vietnamese small and medium enterprises and
manufacturers, the fair trade consumers including European customers, research institutions,
and fair trade policy makers in tea, coffee, cocoa, spice, and handicraft industries in Vietnam
in general.
The report provides information as a foundation to build and enhance capacity in fair
trade for small and medium enterprises, conducted by Promoting Fair Trade in Vietnam
Project.
Furthermore, the report points out the space needed to be resolved in fair trade policy,
as well as provides input as a basis for policy makers in Vietnam.
C. Methodology
The report evaluating fair trade development potentials in tea, coffee, cocoa, spice and
handicraft industries is conducted through both desk research and field research, based on
qualitative and quantitative analyses. Qualitative analysis includes studying existing reports
and the information collected from in-depth interviews with experts in the field, as well as
companies and associations. This information supplements the quantitative analysis results
and provides insights about manufacturers and enterprises in the five researched industries.
The research began with the collection, synthesis and analysis of secondary data to get an
overview of the current situation of the industries and the current situation of fair trade
development in these industries. Collected data included industry reports, advisory reports,
studies, and statistics in the five listed products.
And then, the research team conducted surveys for 300 small and medium enterprises and
manufacturers, 100 consumers and 100 experts from researching organizations, universities,
policy makers, etc. The survey was conducted via email and phone interviews to assess the
current situation and fair trade development potentials in the fields of tea, coffee, cocoa,
spices, and handicrafts in Vietnam for the European and Vietnam markets; capacity,
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perception, and expectation as well as difficulties faced by small and medium-sized
enterprises / manufacturers to develop fair trade business; the views of researching
institutions, universities, and fair trade policy makers in Vietnam.
During the researching process to develop the report, along with the participation of experts,
researchers, government agencies, enterprises and beneficial citizens from the project, many
dialogues and conferences were held with the participation of stakeholders in the value chain
of the five product categories. Researching methods involved ensuring integration of benefits
and the perspective of all the parties to the proposed policy.
The following part of the report will provide information about the current situation and fair
trade development potentials in the five industries of tea, coffee, cocoa, spices and handicrafts
in Vietnam.
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PART 2: THE CURRENT SITUATION AND POTENTIALS OF DEVELOPING FAIR
TRADE IN TEA, COFFEE, COCOA, SPICE AND HANDICRAFT INDUSTRIES
1. Tea
Tea isconsidered a plant with great socio-economic value in Vietnam since it can reduce
poverty, enrich ethnic minorities in remote regions, green barren land, and protect the
environment. The tea plant is also a key factor in the economic, cultural and social
development strategy for the midland provinces and mountainous areas; contribute to the
income generation of about 3 million people who cultivate, process and distribute tea with
around 500 thousand households in the industry.
1.1. Current situation of production
As of 2013, there are nearly 130 thousand hectares of tea cultivation in Vietnam, yield 7.5
tons per hectare, output reach 900 thousand tons of fresh buds, 200 tons of dried tea, total
value of domestic sales are over 3,000 billion VND.
Vietnam has 35 provinces for tea cultivation, of which 10 provinces each has a cultivation
area of 4.000 hectares or more: Lam Dong, Thai Nguyen, Ha Giang, Phu Tho, Yen Bai, Nghe
An, Tuyen Quang, Son La, Lao Cai, Lai Chau. 10 provinces which yields more than 15
thousand tons annually each are: Lam Dong, Thai Nguyen, Phu Tho, Yen Bai, Ha Giang,
Nghe An, Tuyen Quang, Son La, Lai Chau, Lao Cai.
Tea processing industry in Vietnam in recent years has seen rapid development; many
manufacturing facilities were equipped with modern production line and equipment, capable
of producing various kinds of high quality tea. Tea packaging industry has also developed,
produced many well-designed types of package made of cardboard, wood, plastic, glass,
porcelain… As of now, there are about 500 manufacturing and processing facilities with total
capacity of over 500 thousand tons of dried tea each year. Due to low input however, most
firms choose to invest in improving product quality instead of expanding production capacity.
Among surveyed enterprises, manufacturing enterprises account for 1.43%, trading
enterprises account for 5.71%, exporters account for 11.43%, manufacturing and export
enterprises account for 1.43%, trading and export enterprises account for 25.71%,
manufacturing, trading and export enterprises account for 41.43%.
Tea products are becoming increasingly diverse, from just the two main types: OTD black tea
for export and green tea for the domestic market, it has expanded into various types of tea to
meet all kinds of demands worldwide. Black tea account for 60% ( with 60% OTD black tea
and 40% CTC black tea), green tea account for 40% including fried tea, straighten green tea,
OTD green tea and special types of tea like Oolong, Pho Nhi, scented tea, herbal tea.
Tea producing is currently concentrated mostly in mountainous areas, Northern midlands,
over 60% in Ha Giang, Yen Bai, Son La, Lao Cai, Lai Chau, Dien Bien, Tuyen Quang, Thai
Nguyen, Phu Tho, over 23% in South West highlands (Lam Dong, Gia Lai), near 10% in area
4 (Nghe An, Ha Tinh).
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Vietnam tea industry has attracted many investors from Russia, Japan, Iraq, Belgium,
Taiwan…, 100% investment or joint venture with Vietnamese enterprise to construct tea
fields, manufacturing factory with advanced technology, producing special kinds of tea to
meet the demands of foreign consumers.
1.2. Current situation of export
Tea export output of Vietnam ranked 5th in the world, after Kenya, China, Sri Lanka, India
with total export value of 230 million USD in 2013. Vietnamese tea products have been
exported to 120 markets on different continents, including 35 traditional markets. The main
markets for Vietnamese tea currently are Taiwan (China), Pakistan, Afghanistan, China,
Russia, USA, Indonesia, Malaysia, Singapore...
As analyzed above, presently, Vietnam has various types of tea to meet all kinds of demands
worldwide; however, Vietnamese tea products are still facing many export difficulties. Most
must be exported as preliminary processed products in large package with no brand, which
leads to very low prices, thus unfavorable for Vietnamese enterprises. This situation stems
from three reasons. First, Vietnamese enterprises have not established famous brand names,
thus unable to export final products in small packages distributed straight to consumers.
Second, most enterprises are of small scale, low capital, limited in marketing and foreign
trade contract negotiation skills. Third, many markets are still imposing high tariffs on
imported tea, which creates a mean for the buyer to force the seller share the burden by
lowering price.
Table 1: Results of main export quotafrom2009 – 2013
Year Volume (tons) Value (USD) Average unit price
(USD/ton)
2009 129,000 172,400,000 1,336
2010 130,000 186,000,000 1,431
2011 122,000 190,000,000 1,557
2012 145,000 218,000,000 1,503
2013 141,000 226,000,000 1,603
Table 2: Comparison of EU markets importing Vietnamese tea
No. Country Year 2009 Year 2013 Increase/decrease
Volume Value Volume Value Volume Value
Total 31,777 39,541 20,667 32,999 -11,110 -6,542
1 Russia 21,752 26,900 11,500 18,900 -10,252 -8,000
2 Germany 2,500 3,500 2,600 4,600 100 1,100
3 Poland 1,910 2,150 4,000 5,400 2,090 3,250
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No. Country Year 2009 Year 2013 Increase/decrease
Volume Value Volume Value Volume Value
4 Britain 1,890 2,400 270 436 -1,620 -1,964
5 Ukraine 1,890 2,400 1,400 2,300 -490 -100
6 Netherlands 1,400 1,560 470 690 -930 -870
7 Italia 203 211 91 142 -112 -69
8 France 120 184 88 122 -32 -62
9 Finland 99 211 115 214 16 3
10 Spain 13 25 133 195 120 170
Table 3: Main markets importing Vietnamese tea
Asia Europe America
Revenue
(million USD)
173 33 13.2
Volume
(thousand
tons)
105 21 11
Main products Green tea, black tea,
Oolong tea
OTD black tea, green
tea
OTD black tea, green tea
Market
features
Many types of
Vietnamese tea like
green tea, Oolong tea,
can meet high
consumption demand.
Demands mostly
black tea, demand for
green tea is increasing
but still of low
volume.
Similar to European
market.
Favorable
conditions for
importing
Imports many types of
tea that can be produced
using Vietnamese
ingredients.
Clear policy, fair
competition.
Similar to European
market. Price of green tea
exported to US from
Vietnam is much lower
compared to other
exporters.
Unfavorable
conditions
for importing
3 in 4 leading countries
in tea production are
located in Asia.
Vietnam lacks the
competitive advantage
to dominate the
regional tea market.
Strictly investigate the
amount of toxic
chemical residues.
This amount must not
exceed the permitted
level.
Similar to European
market.
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Asia Europe America
Potential for
market
development
High demand, volume,
price, and value
increase consistently
every year, average unit
price is higher than
other markets;
Vietnamese high
quality Oolong tea in
particular is exported in
large volume to this
market.
Difficult to expand the
market, diversify the
products and increase
the volume. Compared
to Asian market: about
20% the volume,
average unit price is
comparable. Key
markets like Russia,
Britain plummeted,
however high-quality
tea has achieved
international
certification like
organic…, initially
built the prestige of
Vietnamese tea in the
EU market.
Similar to Europe
market. Compared to the
Asian market: about 10%
the volume, the average
unit price is much lower.
1.3. Current situation of certification for businesses in the industry
In the entire tea industry at present, there are very few enterprises with international or even
domestic certification. 3 enterprises with Organic certificate, 2 enterprises with Rainforest, 1
enterprise with UTZ, 2 enterprises with Fair Trade, 1 enterprise with Global Gap, 145 with
VietGap, including households, cooperatives...
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Table 4: Certifications of the tea industry
Certification
type
Number of
enterprises
certified
Benefits given
to enterprise
Request and
responsibility
to be certified
Attitude of
enterprise
Assessment of
the possibility of
being certified
1. Organic
certificatio
n
3 enterprises
Vina Suzuki,
Hung
CuongLLC,
Bac Ha
Investment
and
Development
One member
LLC.
Higher price
than other
certified tea.
Organize
linkage with
farmers better.
Good
reputation in
the market and
towards the
local
authorities.
Higher
purchase
price from
the people.
Support
training in
controlling
organic
farming.
Responsible
for the
management
of organic
resources and
helping
people
increase the
area.
Majority of
veteran
enterprises pay
low attention.
Only the one
who has
potential for
organic
farming is
interested in,
such as
enterprises in
mountainous
areas, difficult
to access.
Very difficult
due to strict
requirements of
location, soil,
water, air.
Only enterprise
in remote areas
can partially
meet the
requirement,
however the
people there are
of the ethnic
minorities so the
ability to acquire
knowledge is
limited, organic
pesticides are
unreliable.
2.
Rainforest
Alliance
certification
2 enterprises
Phu Ben tea
company, My
Lam joint
stock
company
Able to sell to
large foreign
tea companies
like Unilever;
better prices;
have
credibility
towards
international
customers;
improve
environmental
responsibility
Purchase
from people
at higher
price; change
the mindsets
towards
VSATTP;
maintain
ecological
balance in tea
cultivating
areas;
responsibility
to the people.
Moderately
interested
since
enterprises
need to buy
R.A tea from
large clients.
Many are
reluctant to
participate due
to having no tea
fields to change
the agricultural
practices,
environmental
issues; require
massive
investment in
factories and
warehouses.
3. UTZ
certification
1 enterprise
Tan Huong
cooperatives
Better selling
prices;
guaranteed
quality and
hygiene
Internal
management
system
among
household
groups;
pesticide
management;
Large
manufacturing
firms are less
concerned;
small domestic
producers are
interested; Few
international
Similar to GAP,
easier to receive
certification;
The link
between
producers and
pesticide
management is
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Certification
type
Number of
enterprises
certified
Benefits given
to enterprise
Request and
responsibility
to be certified
Attitude of
enterprise
Assessment of
the possibility of
being certified
other
manufacturer
health and
shipments
traceability
regulations
companies
commit to this
standard
the most
important factor.
4.VIETGAP
certification
145 units,
farmers
groups,
cooperatives
in Yen Bai:
69, Lam
Dong: 26,
Phu Tho: 17,
Thai Nguyen:
17, Ha
Giang: 08,
Hanoi: 04,
Gia Lai, Lang
Son, Son La,
Tuyen Quang
1 for each
province.
Can improve
the quality of
tea due to
proper
cultivation;
ensure
VSATTP
standard.
Purchase
ingredients at
higher price,
train farmers.
Less interested
since there is
no market,
does not
increase the
price.
Easier to
achieve
compared to
other
certification;
however, there
still are
problems with
the management
of pesticides.
5. Global
Gap
certification
01 enterprise
Private
enterprise
Phuong Nam.
Similar to
VietGap
Similar to
VietGap
Similar to
VietGap
More difficult
than VietGap
and less
effective
6. Fair
Trade
certification
Bac Ha
Investment
and
Development
One member
LLC; Shan
tea Co-
operative
Yen Bai
Approach and
sell to large
network,
enhance
products value.
Comply with
the rules and
principles of
the
certification.
Difficult to
implement,
enterprises are
less concerned.
Few enterprises
are interested.
1.4. SWOT analysis(Strengths, Weaknesses, Opportunities, Threats) for the tea industry
of Vietnam
Strengths
Tea is a traditional and popular drink in Vietnam.
The position of tea plant was confirmed in the areas with tea cultivation tradition, and
reaffirmed in some areas that had had the period of switching to other crops.
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Vietnam’s tea cultivating regions are located in the midland and mountainous areas, under the
tropical monsoon climate, the soil are suitable for tea plants.
Material areas are located near factories; the majority of which are assigned to farmers.
Tea production that does not depend on imports but on domestic land, labor, equipment and
ingredients is increasing.
The amount of advanced production lines, equipment and technology is increasing. Many
manufacturing facilities are capable of producing all kinds of premium, high quality tea.
Many types of tea are available including 40 new varieties with high quality and high yield,
special taste and favored by customers.
Various products serving the diverse demand around the world in which black tea account for
60% ( with 60% being OTD black tea and 40% CTC black tea), green tea make up 40%
(including fried tea, straighten green tea, OTD green tea and special tea like Oolong, Pho Nhi,
scented tea, herbal tea).
Weakness
The high quality and high yield type of tea has not accounted for 50% of cultivated
land. Low yield, averaged at 7.5 tons of fresh bud per hectare in 2013.
Most Vietnamese tea must be exported as preliminary processed products in large
package with no brand, which leads to very low prices.
Vietnamese tea is mostly exported to easy markets, few products meet the standards of
markets that require high quality like EU’s.
Tea farmers do not adhere to the procedure properly, this is shown through every phase
of the process, from branches cutting, fertilizing, pesticide spraying, harvesting and storing,
fresh buds transporting… which leads to low quality of fresh buds.
Investment in tea agriculture is inadequate, especially investment in ingredients areas,
construction of irrigation systems and inland transportation.
The ability to supply raw ingredients only equal to half of the manufacturing capacity,
leads to competition in buying ingredients, reducing ingredients quality.
The thrive of manually manufacturing and cottage industry is the main reason for: a
fragmented, outdated tea industry; the uncertain quality of semi-final and final tea product;
the closure and unprofitability of many large and modern factories; inability or difficulty in
attracting domestic and foreign investors; the inspection and handling of food safety and
hygiene not being regularly and thoroughly conducted, leads to toxic substances abusing in
fertilization.
Tea-farming households possess 80% tea cultivation areas, difficult to focus on
applying modern technology and cultivation methods; small, fragmented and less dedicated to
a single profession; lack of production organization and value chain management; production
is spontaneous, trend following; low investment in intensive farming; lack professional skills;
low quality products and low food safety.
Tea enterprises: a) Group of manufacturing enterprises with stable ingredients supply:
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lack skilled workers; lack investment capital to change the types of tea and advanced
equipment; low mechanization level; unstable tea productivity; low labor productivity; lack
selling skills. b) Group of manufacturing enterprises with unstable ingredients supply (more
than 60%): low product quality; unable to control product volume and food safety; low-level
technology and equipment; workforce’s health and skill level are not guaranteed; unstable
profit, high risk when making large investment; possibility of market shrinking rapidly. c)
Group of refining and distributing enterprises: unstable and inhomogeneous source of supply;
unable to prove the product’s origin; prone to being pressured to reduce price by customers.
The adhesion between manufacturers and sellers is weak.
The living standards of tea farmers are slowly improved. The health of tea consumers is
not ensured.
Opportunities
Asian markets have high consumption demand, import many types of tea that can be produced
using Vietnamese ingredients.
Economic: It has been proven that even though enterprises have not yet obtained all the
factors needed for sustainable development, they will have a profitable business even in a
market with unfavorable movements if they possess a stable ingredients supply.
Social: Investors of tea enterprises mostly desire a long-term business, have affection for the
industry, the business, share the profit with the whole system that contributed to the profit and
contribute to the society.
Environmental: Tea production causes little environmental pollution and easy to recover, not
as expensive as many other industries.
Enterprises are gradually realizing the benefits of obtaining international certification.
Threats
Three in four leading countries in tea production are located in Asia. Vietnam lacks the
competitive advantage to dominate the regional tea market.
Markets with high requirements strictly investigate the amount of toxic chemical residues;
this amount must not exceed the permitted level.
Many other beverages capable of substituting tea are thriving. The percentage of tea drinker is
dropping sharply.
Tea enterprises are currently not interested in producing under certification. Meanwhile, Fair
Trade is still very new in Vietnam.
1.5. Current situation, the need and possibility of Fair Trade certified businesses of tea
industry in Vietnam
Currently the country has only 02 enterprises with Fair Trade certification: Bac Ha Investment
and Development One member LLC and Shan tea cooperatives in Yen Bai. Enterprises have
very limited awareness with 90% surveyed enterprises in the industry do not know about this
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certification. It is clear that achieving certification in general, or Fair Trade certification in
particular has not been paid much attention to by enterprises in the tea industry.
Although most enterprises would want to and will participate in the Fair Trade certification if
possible, they currently do not know about this certification, so participating is very difficult.
The main reason to participate in Fair Trade certification of enterprises is obtaining markets,
sell at higher prices and create long-term, durable business connections. However, they have
not paid attention to raising products quality; meet the requirements of Fair Trade
certification, at the same time they do not want to invest much so the possibility to obtain the
Fair Trade certification is low. Evaluating the level of interest by enterprise size showed that
large and medium sized enterprises with big export shipments are not really interested since
there are not many potential markets for Fair Trade certified products; medium and small
sized enterprises with small export shipments are quite interested and have the highest
possibility of obtaining the certification; domestic business enterprises are not interested.
Upon evaluation of enterprises about the Fair Trade market of the tea industry in
Vietnam,80% enterprises surveyed assumed the domestic market is still limited; while the
worldwide evaluation of the same topic showed that 12% thought the domestic market is
limited, 70% rated it to be moderately limited. Regarding customers demand of Fair Trade tea
products, big shipments buyer have almost no demand, small shipments buyer and European
customers have higher demand, Asian and American customers have none.
In the next 3-5 years, the tea industry in Vietnam is expected to have 3-4 enterprises with Fair
Trade certification; all of them are small and medium sized enterprises, in which the North
will have two enterprises, one for the central and one for the South. Potential areas to receive
the certification are Ha Giang, Nghe An, Lam Dong, Thai Nguyen, Hanoi.
2. Coffee
Vietnam is a new country in the world coffee industry but the strong growth in recent years
has made Vietnam one of the most important nation in the region as well as the world. As of
now, Vietnam has over 620 thousand hectares of coffee growing area (mostly Robusta coffee)
in which more than 570 thousand hectares are being harvested.
2.1. Current situation of production
Coffee is a strategic agricultural industry of Vietnam with the 2nd largest export volume in
the world, contributes 10% to agricultural GDP, 5% to total export value, provides more than
1 million jobs and generates 50% of that for the Western Highlands population with over 570
thousands hectares of harvestable coffee area, yields 1.4 to 1.6 million tons annually.
According to statistics, there are over 550 thousands of households participating directly in
coffee producing. In addition, coffee industry also attracts idle labors from neighboring
provinces to the Western Highlands during the harvest season.
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Table5: Coffee area, productivity, yieldsfrom 2002 to 2012
Year Cultivating area
(hectares)
Harvestable area
(hectares)
Averaged
productivity
(tons/hectares)
Yields (tons)
2002 522,200 492,400 1.42 699,700
2003 509,937 480,478 1.57 755,113
2004 503,241 491,858 1.70 834,566
2005 497,400 483,600 1.56 752,100
2006 488,700 485,000 1.86 900,000
2007 509,300 488,900 1.87 915,800
2008 530,900 500,200 2.11 1,055,800
2009 538,500 507,200 2.08 1,057,500
2010 537,065 514,400 2.15 1,105,700
2011 550,000 529,800 2.16 1,144,134
2012 622,167 574,314 22.5 1,292,389
In Vietnam, coffee is grown mainly in the Central Highlands: Dak Lak, Dak Nong, Lam
Dong, Gia Lai, Kon Tum, accounting for 85% of the total area and coffee production. In
addition, coffee is grown in the Southern region like Vung Tau, Binh Phuoc, Dong Nai, Nghe
An and Central region like Quang Tri, the Northwest region like Son La, Dien Bien, Lai
Chau.
Vietnamese coffee is mainly Robusta with over 90% of the total coffee cultivation area
mostly grown in Western Highlands. Additionally, Arabica coffee is also developed with
around 40.000 hectares (in 2012) and yields around 70.000 tons of coffee beans, concentrated
mainly in some parts of Western Highlands, especially in Lam Dong, Northern midlands and
mountainous areas (Son La, Lai Chau, Dien Bien) the Central Coast (Quang Tri).
At present, there are more than 100 enterprises trading, exporting and importing coffee,
concentrated mostly in Ho Chi Minh City and Western Highlands. Among surveyed
enterprises, producing enterprises only make up 2.78%, trading enterprises account for 6.94%,
export enterprises36.11%, producing and export enterprises2.78%, trading and export
enterprises 34.72%, trading and producing enterprises 5.56%, producing, trading and export
enterprises 9.72%. In addition, trading, export-oriented producing enterprises with high
quality coffee account for 1.39%.
At present the coffee bean yields has met the coffee demand of Vietnam. This contributes to
improving the quality of Vietnamese coffee. The majority of farmers have built storage,
drying ground. Wet processing techniques are also used by some farmers in family-sized
production.
18
According to survey results, the percentage of enterprises evaluating their production capacity
lower than the current market demand was 18.06%. Meanwhile there were 52.78% of
respondents said their production capacity is higher than the market demand. Only 29.17% of
enterprises surveyed rated their production capacity equal to demand in the market. Regarding
the possibility of expanding production capacity, 73.61% of enterprises surveyed did not
intend to expand, only 26.39% wanted to expand.
Instant coffee, 2 in 1 coffee, 3 in 1 coffee processing factories also reached 168.400 tons
annually, in which factories of large capacity are: Vinacafe Bien Hoa, Trung Nguyen, Nestle,
Café Ngon.
Table 6: Detailed capacity of the processing factories
No. Enterprises Product type
Designed
capacity
(tons/year)
2013
(tons/year)
2015
(tons/year)
1 Vinacafe Bien Hoa 3 in 1 coffee 30,000 15,000 30,000
Instant coffee 3,200 1,600 3,200
2 Nestle Vietnam 3 in 1 coffee 32,000 15,000 32,000
Instant coffee 4,200 2,100 4,200
Decaffeinated
roasted coffee beans
20,000 10,000 20,000
3 Trung Nguyen
Joint stock
Corporation
3 in 1 coffee 30,000 16,000 32,000
4 Coffee Ngon
Vietnam
Instant coffee 32,000 16,000 32,000
5 Olam Vietnam Instant coffee 8,000 6,000 8,000
6 Coffee An Thai Instant coffee 4,000 3,000 4,000
7 Dak Ha export
company
3 in 1 coffee 1,000 1,000
8 Me Trang Instant 3 in 1, 2 in 1
coffee
2,000 1,500 2,000
In recent years, coffee growing area in Vietnam was not controlled thus expanded very fast,
reached 620 thousand hectares in which 570 thousand hectares are harvestable. Total area of
above 20 years coffee trees with low productivity has reached over 86 thousand hectares.
There are more than 40 thousand hectares of under 20 years but showed signs of
degeneration, low productivity and quality does not meet the demand. In the next 5 to 10
years the area of coffee need to be replanted are 140 to 160 thousand hectares. Ministry of
Agriculture and Rural Development has issued a decision to hold the coffee area at 600
thousand hectares. Coffee productivity is decreasing and there are large differences between
regions.
Coffee growing techniques in recent years is considered unsustainable and weak with 90% of
the area applying traditional cultivation methods, lack of shade trees and forest belt trees,
19
chemical fertilizers and pesticides abuse, causing surface water contamination. 40% of the
area is over irrigated causing depletion of underground water. Farmers do not have access to
capital in order to renew technology. Infrastructure in coffee producing areas has not been
completed (transportation, electricity for production, irrigation systems, drying ground and
storage).
Domestic consumption accounts for less than 10% of the industry output, domestic processing
does not use up all the invested capability. Besides Trung Nguyen and Vinacafe, other
products have not established a noticeable brand in the international market due to small size,
low processing capability, lack market developing strategy and skill.
2.2. Current situation of export
Currently, Vietnam export around 93-95% of the total coffee yields, mostly coffee beans. In
2013, Vietnam exported to over 80 countries and territories worldwide, including the 10
largest markets: Germany, USA, Spain, Italy, Japan, Belgium, United Kingdom, Russia,
China and France.
Table 7: Volume, export turnover and price of coffee from 2011 – 2013
Year Volume Turnover (USD) Price (USD/tons)
2011 1,257,246 2,752,417,390 2,189
2012 1,732,156 3,672,809,718 2,120
2013 1,301,877 2,721,389,362 2,090
Source: General Department of Customs
According to the General Department of Customs, in 2013the country had exported over 1.3
million tons, earned over 2.7 billion USD, down 24.8% in volume and 25.9% in turnover
compared to the record year of 2012 with over 1.7 million tons and turnover of 3.6 billion
USD.
20
Image 1: Market shares of 10 major importers of Vietnamese coffee in 2013
Vietnamese coffee is exported to over 80 countries and territories worldwide. In addition to
the large markets such as Europe, the United States, there are other potential markets from
Europe such as Russia, from Asia such as Japan, China and South Korea.
In 2013 alone, EU countries imported about 528.097 tons of coffee from Vietnam with the
value of over 1 billion USD, accounted for 41% in volume and 39% in value. The leader of
this market is Germany with 184,957 tons, turnover of 364,692,818 USD, followed by Spain,
Italy, Belgium, UK and France…
Table8: List of 30 leading markets importing coffee from Vietnam
No. Country Quantity (tons) Turnover (USD)
1 Egypt 2,708 5,415,356
2 India 30,974 60,554,749
3 Algeria 28,989 57,295,693
4 UK 40,831 86,441,323
5 Poland 10,296 21,744,025
6 Belgium 45,380 94,161,865
7 Portugal 10,605 21,923,455
8 Canada 5,815 11,999,564
9 Denmark 1,499 3,030,124
10 Germany 184,957 364,692,818
11 Netherlands 13,632 29,664,846
21
No. Country Quantity (tons) Turnover (USD)
12 South Korea 33,909 70,462,334
13 USA 142,091 302,014,527
14 Greek 4,856 9,626,650
15 Indonesia 11,839 25,395,271
16 Italia 83,543 166,235,630
17 Israel 11,983 25,887,447
18 Malaysia 18,325 40,047,108
19 Mexico 33,689 68,174,898
20 South Africa 6,375 11,833,046
21 Russia 39,229 93,313,392
22 Japan 78,121 167,606,715
23 Australia 13,469 28,415,940
24 France 35,413 72,031,549
25 Philippines 31,308 71,895,301
26 Singapore 939 2,660,896
27 Spain 97,085 191,082,587
28 Thailand 9,649 20,339,983
29 Switzerland 699 1,536,638
30 China 37,097 96,172,945
Total 1,065,305 2,221,656,675
The EU accounted for 41% of Vietnam coffee exports, 59% are of the other market. Below is
a table of information of some countries in the EU that import coffee from Vietnam from
2010 to 2013.
Table 9: Volume and coffee imports turnover of some EU from Vietnam
Country
2010 2011 2012 2013
Volume
(Tons)
Turnover
(USD)
Volume(
Tons)
Turnover
(USD)
Volume(
Tons)
Turnover
(USD)
Volume(
Tons)
Turnover
(USD)
Germany 151,378 233,014,846 135,856 296,249,465 207,919 427,178,275 184,957 364,692,818
Spain 80,909 118,534,449 63,220 135,757,336 106,289 218,159,850 97,085 191,082,587
Italia 76,002 115,033,515 84,002 177,547,677 104,514 216,281,513 83,543 166,235,630
Belgium 58,647 87,739,397 94,916 210,788,653 62,427 127,190,126 45,380 94,161,865
UK 28,351 41,766,587 33,612 72,580,025 36,109 80,832,587 40,831 86,441,323
Netherlands 24,205 39,143,489 27,242 58,834,497 17,261 36,594,698 13,632 29,664,846
22
France 17,689 26,038,296 16,311 34,324,759 36,393 73,566,734 35,413 72,031,549
Portugal 7,556 11,702,757 7,627 17,227,263 11,660 25,410,758 10,605 21,923,455
Greek 3,361 5,061,341 3,661 8,168,574 7,361 15,948,935 4,856 9,626,650
Denmark 1,893 2,714,292 1,241 2,716,582 1,831 3,784,951 1,499 3,030,124
Switzerland 21,964 32,570,599 20,441 42,959,529 20,074 39,599,338 699 1,536,638
Poland 10,748 15,886,535 8,061 17,152,009 10,747 22,489,930 10,296 21,744,025
Vietnam exports over 90% of annual coffee produced, but mainly raw coffee bean so added
value is not high. When exporting processed coffee into other markets, especially the
European market, the import tariff is a major barrier. Normally tariff for roasted coffee, coffee
powder, instant coffee is very high. Besides, most coffee exporting enterprises export directly
to the importers around the world. Only a few enterprises export through supermarkets,
dealers and small distributors.
Coffee exports still focused on the traditional markets with unstable growth rates. Vietnamese
Coffee is often charged reconciling prices; face many risks of market fluctuations.
Assessments of quality of export products showed that 92.86% of enterprises assess their
products are of high quality by international standards, only 7.14% enterprises rated their
products quality to be mediocre.
2.3. Current situation of certification for businesses in the industry
The remarkable certifications for Vietnamese coffee are UTZ, 4C, Rain Forest Alliance, Fair
Trade.
Coffee 4C: This is the most popular and durable certification of the Vietnamese coffee
industry, aimed to implement the common code for the Coffee Community with the three
pillars of the social, environmental and economic sustainability based on the Millennium
Development Goals of the UN. The 4C association aimed at mass-produced coffee. The
participating units will have many benefits such as meet the increasing needs for sustainable
coffee development, increase incomes through adoption of better and more sustainable
practices, free access to information and training tools on good agricultural practice, a
stepping-stone to other sustainability standards, engage in global multilateral platform.
By the end of 2013, Vietnam 4C coffee output has reached 594,000 tons with 45 members
including foreign companies based in Vietnam and the domestic import-export enterprises.
The enterprises besides trading coffee also organize agricultural technician support to farmers,
training for farmers
Table 10: List of companies and manufacturers participating in 4C
No. Enterprise Enterprise
1 Anh Minh LLC 24 Private coffee enterprises Minh Tien
2 Anh Nhat Minh Highland Coffee
Company
25 Mitsui LLC
3 Armajaro Vietnam LLC 26 Nam Nguyet LLC
4 Cat Que manufacturing and trading 27 Nedcoffee B.V company
23
No. Enterprise Enterprise
company
5 An Phong Dak Nong Investment and
Import-Export JSC
28 Nestle Vietnam LLC
6 Hung Yen LLC 29 Neumann company
7 Khuc Gia Thanh LLC 30 Nhu Tung LLC
8 Nguyen Huy Hung One member LLC 31 Noble Coffee company
9 Hoang Quyen One member LLC 32 Olam Vietnam company
10 Minh Huu One member LLC 33 Petec JSC
11 Phúc Minh LLC 34 Thai Binh Nguyen Import-export
company
12 Tin Nghia LLC 35 Thao Nguyen LLC
13 Vinh Hiep LLC 36 Tong Teik company
14 Dai Loc company 37 Trinh Suy company
15 Ho Phuong LLC 38 Trung Tri Lam Dong company
16 Hoa Trang Gia Lai Import-export
company
39 Vietnam coffee corporation
17 Intimex DaknongJSC 40 Vinacafe Da Lat company
18 Intimex JSC 41 Volcafe company
19 Intimex My Phuoc JSC 42 Phuc Sinh company
20 Intimex Nha Trang Import-export JSC 43 Phuoc An company
21 Louis Drefus Commodities company 44 Vietnam Coffee Cocoa Association
22 Mercon Coffee incorporation 45 Thanh Ha JSC
23 Minh Nhat Vina LLC
UTZ: Coffee certified UTZ must meet the economic, social and environmental criteria of
sustainable production. In addition, UTZ coffee production also ensures traceability of the
shipment. UTZ Certified Organization also has the award system for the UTZ certified
products. The country currently has about 150,000 tons of UTZ Certified coffee with 82 units
participating include 30,000 farming households. UTZ Certified Coffee Program is
developing rapidly; more and more people are aware of the benefits and decide to participate.
Rainforest Alliance: Currently there are nine units certified Rainforest Alliance. Total
production of Rainforest Alliance certified coffee is about 40,000 tons annually. This
certification program is based on three principles: sustainability, environmental protection,
social equity and economic ability. Units are encouraged to achieve this certification through
the rewards of buyers / coffee roaster. Upon becoming a member of the Rainforest Alliance,
members have to commit to implement and comply with the SAN standards (Sustainable
Agriculture Network). Members also have the right to use free training materials on the
organization's website.
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Table 11: List of companies and manufacturers achieved Rainforest Alliance
certification
No. Companies and manufacturers
1 Dakman company
2 Acom company
3 Armajaro company
4 Thang Loi Coffee One member LLC
5 Olam company
6 Ned Coffee company
7 Dak Lak Import-export One member LLC
8 Phuoc An company
9 Nguyen Huy Hung company
Fair Trade: Currently in Vietnam there are 11 units of the coffee industry certified Fair Trade.
Current situation and potential of achieving Fair Trade certification will be presented in
detailed in 2.5. Current situation, need and possibility of Fair Trade certified businesses in
coffee industry in Vietnam.
Organic: Organic certification is not common for the coffee products from Vietnam; the
number of certified units is still low. Among enterprises surveyed, only 2.82% registered
certified organic coffee, 97.18% of enterprises have not registered to this certification.
Global Gap: In Vietnam, no coffee unit has achieved this certification.
2.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for the coffee industry in
Vietnam
Strength
Vietnam is the world second largest coffee exporting country in terms of export volume in
general and the largest Robusta coffee exporting country.
The total area of coffee growing currently in Vietnam reached over 630 thousand hectares of
which over 570 thousand hectares are harvestable. The average total annual output is from 1.4
to 1.6 million tons.
Vietnamese coffee is grown in the fertile basaltic soil; at over 400meters above sea level thus
has a sweet aromatic flavor.
The coffee farming households of Vietnam are invested with cultivation and intensive
cultivation methods and technology thus achieve higher yields compared to other countries.
Average coffee yields of Vietnam are 2.3 tons per hectares.
Total coffee bean processing capacity has met the industry's output, thus improved the quality
of coffee, lower the percentage of broken and moldy black coffee. Most of the farming
households had been able to construct their own concrete drying deck. Wet processing
capacity increases, many farming households had invested in the wet processing coffee
machine with small scale for households or groups of households’ uses.
The capacity of the coffee processing factories is increasing. Vina café Bien Hoa, Trung
Nguyen, Me Trang, Nestle, Coffee Ngon, An Thai, Neumann Gruppe have built factories with
25
total processing capacity of over 170,000 tons per year, increasing the value added to the
coffee industry.
Coffee and Cocoa Association of Vietnam along with the related sectors are also trying to
implement the product sample program, promoting the coffee product in order to increase the
rate of domestic coffee consumption. Some brands have established their positions in the
domestic market such as Trung Nguyen, Vinacafe Bien Hoa.
Weakness
90% are exported as raw coffee hence the export value is not high.
Vietnamese coffee is mostly Robusta (used mainly in blending) so the value is not high.
Cultivation area of Vietnamese coffee is over 630 thousand hectares, exceeded the planned
area of the Ministry of Agriculture and Rural Development. A lot are planted on unsuitable
ground leads to low productivity, low quality, 90% is owned by small households, each
household has only about 1 hectare so the production is fragmented.
There are too many enterprises participate together in the production of coffee, caused high
level of competition and difficulties. According to statistics there are currently about 150
enterprises engaged in the production, import and export of coffee.
Opportunities
Market that imports Vietnamese coffee is of large scale and considerably stable.
The coffee processing industry still has huge growth potential.
The coffee consumption of Vietnam is growing strongly in recent years, especially among
young people.
The potential for domestic market is also large when the proportion of domestic consumption
of Vietnam accounts for only 7-10% of annual output, equivalent to about 100 thousand tons.
Threats
The coffee industry is currently facing great challenges to maintain its position on the world
market: the competitive environment is getting tougher; agricultural input prices are
increasing.
The proportion of raw coffee exports accounted for 90% of total output, leads to losses in
added value.
High premature harvesting rate caused low coffee quality.
Need more support from the government, the organizations in order to promote trading, find
market connections for the industry.
Fragmented production, lack of concentration due to small farming households.
Planned area is not realistic, real area far exceeds the planned.
Coffee of over 20 years old has low productivity, low quality, and degenerated coffee area
increasing caused difficulties. Currently there are over 160 thousand hectares of aging,
degenerated coffee needs to be replanted.
Deforestation reduces the coverage and quality of forests, reduces biodiversity and causes
negative impacts on the environment. Wet processing industry has not yet focused on solving
environmental issues. Western Highlands is one of the areas expected to be affected the most
26
by climate change trends, affecting biological cycle of coffee trees, reducing productivity, and
may cause more severe natural disasters such as droughts, floods, forest fires ...
Replanting requires large amount of capital, on average, 150-180 million VND per hectares.
There is a need to mobilize capital from various sources with a preferential interest rate.
Vietnamese coffee prices are vulnerable to pressure from importers, are often charged
reconciling prices compared to the same type in the London market.
1.5. Current situation, need and possibility of Fair Trade certified businesses in coffee
industry in Vietnam
Fair Trade certification for coffee products in Vietnam is rather limited. Presently in Vietnam
there are 11 units certified Fair Trade, however total coffee output is 10,000 tons only.
Fair Trade certifications require the insurance of sustainability and fairness on three aspects:
economic, social and environmental. Currently in the world there are many organizations
granting Fair Trade certifications such as FLO Cert, Fair For Life, Natural Land, Ecocert and
WFTO. Currently only FLO Cert certified Fair Trade to 11 coffee producing units from
Vietnam.
When participating in Fair Trade coffee certification, in general the members enjoy benefits
such as:
- Attend programs and training on Fair Trade free of charge.
- Free use of documents offered by Fair Trade organization.
- Free counseling and support from Fair Trade experts.
- Could receive some funding support when participating in Fair Trade fairs .
- Producers have the final say in the Fair Trade organization system.
- Producers can sell at a stable price floor before the regular market fluctuations.
- Producers are paid a certain level of extra interest. This amount is used by suppliers for social
welfare purposes such as road building, construction of irrigation systems, schools...
Along with the benefits offered, Fair Trade participants must also fulfill the obligations:
- Comply with the regulations about Fair Trade and other regulations proposed by Fair Trade
organization.
- Fully pay the annual fee.
Table 12: List of coffee units certified Fair Trade by FLO in Vietnam
Units Location
1 Ea Kiet Agricultural cooperatives Cu Mgar district – Dak Lak
2 Cu Dliem Nong Agricultural cooperatives Cu Mgar district – Dak Lak
3 E Ngai Agricultural cooperatives Krong Buk district – Dak Lak
4 Thuan Phat cooperatives Krong Buk district – Dak Lak
5 Thuan An cooperatives Dak Mil district – Dak Nong
6 Chu Bo Agricultural cooperatives Krong Buk district – Dak Lak
27
7 Dak Ma cooperatives Dak Ha district – Kon Tum
8 Coffee cooperatives for public health Dak Hadistrict – Kon Tum
9 Ea Kmat cooperatives Krong Pak district – Dak Lak
10 Ea Tan cooperatives Krong Nang district – Dak Lak
11 Lam Dong cooperatives Lam Dong province
Of the 11 units above, only six are permitted to trade: Ea Kiet Agricultural cooperatives, Cu
Dliem Nong Agricultural cooperatives, E Ngai Agricultural cooperatives, Thuan An
cooperatives, Dak Ma cooperatives, Coffee cooperatives for public health. There are three
units waiting for permission: Chu Bo Agricultural cooperatives, Ea Tan cooperatives, Lam
Dong cooperatives. The remaining 2 units are being inspected: Thuan Phat cooperatives, Ea
Kmat cooperatives.
Coffee products participating in Fair Trade certification are paid a minimum price in order to
cover sustainable production costs, even if the world market price decreases. This helps
manufacturers improve quality of life, and the producers decide democratically how to apply
that price. Typically, they invest in education, healthcare, agricultural improvements or
processing facilities to increase income.
Survey by the research group showed that 80.56% of enterprises know about Fair Trade
certification, showing that the awareness of Fair Trade in the coffee industry is quite high.
Percentage of enterprises that support households (one of the important criteria of Fair Trade)
is also quite high, while 62.5% of enterprises in the survey said they supported producers with
capital, 73.61%supported fertilizer, 86.11% supported with techniques. Additionally,
enterprises are supporting the producers in other forms, such as: support prices for farmers
participating in the programs for sustainable coffee production UTZ and 4C, support bonus
prices, consulting when to harvested evenly ripped coffee and purchase ripped coffee for
processing, support farmers to implement 4C production process standards, provides market
price information regularly.
The potential of being certified Fair Trade is still very high since Vietnam has very high
coffee output. Furthermore, the proportion of processed coffee is low, less than 10%, in the
future, this will increase by development policies to encourage the coffee processing industry
by the government in order to create added value in the coffee production chain. To Vietnam
coffee industry with particular characteristics of being an agricultural industry with a large
number of small and medium scaled enterprises, weak competitiveness, Fair Trade is an
effective trading promotion channel for the disadvantaged enterprises that want to penetrate
and expand the market.
Main difficulties for the coffee industry enterprises to develop Fair Trade are entrance fee,
market and community awareness. Entrance fee is considered high for a small or medium
enterprise. Second is the output problem. Currently the total produced volume only consumes
28
1/5 of output. Thirdly, Fair Trade certified coffee in Vietnam is not common compared to
other kinds of certification such as 4C, Rainforest Alliance, UTZ.
3. Cocoa
3.1. Current situation of production
Cocoa trees are easy to grow, adapt well to the soil conditions and the climate of Vietnam.
The Ministry of Agriculture and Rural Development determined the development objective of
cocoa focused by three regions since 2003 including eight provinces: Dak Lak, Dak Nong,
Binh Phuoc, Dong Nai, Ba Ria Vung Tau, Tien Giang, Ben Tre and Vinh Long.
As of 2013, the country has 11 provinces growing cocoa with a total area of 25,000 hectares
including:
- 3 provinces in Western Highlands: Dak Lak, Dak Nong and Lam Dong, area of 4,500
hectares (focused mostly in Dak Lak, Dak Nong).
- 3 provinces in the Southern region: Binh Phuoc, Dong Nai, Ba Ria Vung Tau, area of 3,400
ha (Most concentrated in these three provinces).
- Mekong Delta has five provinces: Ben Tre, Tien Giang, Vinh Long, Dong Thap and Tra
Vinh. 17,100 hectares area (focused in Ben Tre, Tien Giang, Vinh Long).
Cocoa yields currently averaged 15- 20 tons of fresh pods, equivalent to 1.5- 2 tons of dry
bean / hectare / year. Dry bean output reached 17,500 tons, export output reached 17,400 tons,
exports turnover reached 43,500,000 USD annually.
End of 2015 goal is 40,000 hectares nationwide, of which 35,000 hectares are available for
business purposes, average yield of 1.5 tons / hectare / year, dry output reach 52,000 tons /
year, exports of cocoa beans reach 40,000 tons / year, exports turnover reached 100- 120
million USD / year.
The country is striving for 50000-60000 hectares of cocoa by 2020, including 45,000 hectares
of harvestable area available for business purposes, 67,000 tons of dry beans output, dry bean
qualified for exports reach 60,000 tons / year , exports turnover reach 150 - 170 million USD /
year.
Ministry of Agriculture and Rural Development has supported the transfer of scientific and
technical advances to cocoa farmers intercropping with cashew, coconut trees, forest trees and
other fruit crops, monoculture in the unrestorable former plant area, abolish and transfer to
cocoa cultivation, at the same time research and select the best varieties with high yield,
suitable with the land and soil to transfer to the farmers in Western Highlands, Southeast
region and Mekong Delta. Pilot planting models of intercropping cocoa with other crops in
the eight key provinces achieved good results and are replicated on each province: cocoa
intercropped with cashew in Binh Phuoc and Dong Nai, cocoa intercropped with coconut in
Ben Tre, Tien Giang and Vinh Long.
29
In addition to the government support, the cocoa farmers also receive support from the cocoa
purchasing companies in terms of seedlings transferring, technical training, construction of
the procurement station and technical advices, consultation in the process of plant and soil
tending. Additionally, government organizations and NGOs, international organizations such
as Netherlands Government, Helvetas organization, Oxfam, JICA ... also finance the
sustainable cocoa development in Vietnam.
Currently the provinces that growing cocoa has popularized the club model consists of
approximately 35- 40 farming households link with enterprises that purchase dry bean for
exports. Farmers in the club signed contracts with purchasing enterprises are advised by
enterprises regarding seedlings selecting, planting, tending, harvesting, fermentation
techniques, drying and packaging for selling to enterprises. The club members are often
provided information on production and market to avoid being pressured in prices.
Although achieved remarkable results as above, in fact, the cocoa industry Vietnam is still
very small, as of now Vietnam does not have any company specialized in cocoa, instead
combine cocoa with other products in their business operations. Among the surveyed cocoa
enterprises, manufacturing and trading enterprises accounted for 43.75%, domestic trading
and export accounted for 12.5%, manufacturing, trading and export accounted for 37.5%,
trading, export and other service sectors accounted for 6.25%.
3.2. Current situation of export
Vietnam cocoa exports market has huge potential; create opportunities for farmers to expand
the area of cocoa in the future. On average, export price of cocoa in recent years is stable and
tends to increase, so the purchase price of domestic enterprises for products of cocoa farmers
is also stable and increase along with export price.
95% of Vietnamese cocoa currently are fermented products, the average bean size is 80 to 100
bean/bulk. Exports cocoa products of Vietnam are classified as of the world's highest quality,
surpassing Indonesia (ranked 3rd in the world in output) and put into the group with high
quality products along with Ghana, Ivory Coast, Brazil.
Vietnam exports cocoa under two types: raw and finished products. Among them, the export
of finished products brings greater profits. Raw cocoa can only bring in a profit of 15%, but
finished products such as candy, flour ... can have 400% profit. Therefore, some companies
have invested more heavily on production lines in Vietnam market such as Grand Place or
Vinacacao.
Since 2011, the amount of domestically produced cocoa purchased and processed to export by
Puratos GrandPlace Vietnam, Cargill Vietnam, Pham Minh, Thanh Dat, Nguyen Loc, Trong
Germany every year make up 87% of total cocoa output of all three key areas, the remaining
13% are bought by the domestic enterprises for domestic processing and consumption.
30
3.3. Current situation of certification for businesses in the industry
Although being perfectly aware of the quality requirements of importers as well as customers,
but by investigation, only three enterprises have achieved the quality standards of UTZ, none
have other certifications like UTZ, Organic, Rainforest, Global Gap, Fair Trade.
Currently the cocoa industry mainly registered for UTZ certification. UTZ certified cocoa
products would be purchased at 15-20% higher than the market price. For products to be
certified UTZ, cocoa growers have to ensure they possess the best and controllable practice;
record physical evidence; inspected and verified by the authorities. This serves as a basis to
enhance the value of cocoa products, raise the income of farmers, and work towards
sustainable cocoa production.
3.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for the cocoa industry in
Vietnam
Strengths
Vietnamese cocoa is highly appreciated for the quality and the supply being relatively stable,
Vietnam farmers have many years of experience in planting, tending, harvesting cocoa for
high productivity.
Vietnam has successfully researched and currently replicating cocoa varieties that can
withstand drought, less vulnerable to pests, have high yield and good quality.
Cocoa is suitable for the land, soil and climate in Vietnam.
Weaknesses
Cocoa trees are now mostly grown in intercropped under cashew, coconut and other forest
trees; there is no separated land for cocoa.
Cocoa growers lack the information on production and the market so they are vulnerable to
being pressured by private traders. They also lack the resources (capital, labor, fertilizers, and
pesticides);thus, the yield is still low. Many farmers lack the knowledge of techniques in
seedlings selection, soil selection, insufficient tending, lack of scientific and technical
knowledge leads to low productivity, depression, cutting down cocoa because it seems to be
ineffective.
The enterprises have not taken care of all cocoa procurement, while traders responsible for
collecting cocoa and reselling them to enterprises often pressure farmers on prices.
Some growers who lack the cocoa drying kilns must sell the fresh cocoa in harvest season
must bear the cost of transportation from growing place to purchasing and drying place.
Opportunities
Government has the cocoa development policy through planning for cocoa development and
supporting the transfer of scientific and technical advances for farmers.
31
The needs of the world market is very high, especially in the US, EU, Europe, China, India
and Japan.
Prices of procured cocoa increased steadily and stably.
Intercropping cocoa under other trees still yields a stable result; increase the value on the
same area of agricultural land. This is very convenient for farmers to develop and expand
cocoa, generate increased income for farmers.
Threats
Vietnam is one of the countries largely affected by natural disasters such as storms, floods,
hurricanes, tornadoes. Cocoa tree is brittle, easily taken down, affecting productivity and
output.
Importers require high technical and original standards.
3.5. Current situation, the need and possibility of Fair Trade certified businesses in cocoa
industry in Vietnam
So far, in cocoa industry Vietnam has not had any Fair Trade certified enterprises. 56,25% of
surveyed enterprises are aware of fair trade certificate. 43,75% of surveyed enterprises want
to be fair trade certified.
Assessing the significance of the inputs in the production process of enterprises, all
enterprises surveyed said that quality of raw materials, raw material costs, the expansion of
production, employment, environmental protection in the production process, organization
accounting system are important. With the input selection criteria of enterprises, quality and
degree of environmental friendliness of materials are rated at the highest level. Regarding
support people to produce and supply the input of raw materials, the percentage of
unsupportive companies is only 6.25%. In 93.7% of the companies that support the people,
capital support companies account for 43,75%, fertilizers support companies account for
37,5%, technical support companies account for 25%.
Vietnam cocoa industries mainly register for UTZ certification and foreign enterprises that
purchase raw material from Vietnam mainly relied on UTZ standards as a base. Similar to
UTZ certification, Fair Trade certification will help the processors, retail companies that want
their input products to have high assurance, transparency and the traceability achieve these
requirements. This encouraged cocoa growers to participate in Fair Trade certification. In the
future, they will participate more if they know about the benefits of the Fair Trade
certification. Because they understand it, the enterprises interviewed were striving to achieve
the standards of Fair Trade or continue to maintain the standards of UTZ they achieved.
From the demand side, with about 85% of the cocoa grown in Vietnam exported and less than
15% serves the domestic market, the main market for Vietnam's cocoa is the international.
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World demand for cocoa currently is very large. Report from the International Cocoa
Organization (ICCO) shows that the demand for cocoa is growing, the global cocoa industry
is undergoing the longest shortage in the last 50 years; the output of cocoa beans in 2014 saw
a reduction of 150,000 tonnes.
According to the Mars Incorporation from US, the world has a shortage of around 160,000
tonnes of cocoa in 2013 and this number is expected to rise to 1 million tonnes in 2020. This
deficiency is explained by the reduction in output due to the strong cocoa countries such as
Ghana, Ivory Coast, Indonesia and some cocoa growing countries in Asia, and also due to the
increased demand from the United States, Japan and Europe (accounting for 76% of global
cocoa consumption), Brazil, Russia, Ukraine, the Middle East and Asian countries with large
population (China, India)...
In that situation, most of the world's large cocoa farming areas gather many farmers living
below the poverty line, the elderly and the next generation does not want to continue growing
cocoa due to the low income. Supporting cacao growers is one of the important measures
suggested by experts to increase supply and stabilize the market. This is an opportunity for
Fair Trade certification for the cocoa industry in Vietnam.
Fair Trade certified cocoa products are sold in over 120 countries around the world. In the
years 2012-2013, cocoa producers earned 9.8 million euros from Fair Trade bonus price. At
the Fair Trade International Workshop in Berlin, Ferrero promised to buy 20,000 tonnes of
Fair Trade certified cocoa in 3 years from 2014. In Vietnam, since 2009, Vietnam
HELVETAS Swiss Intercooperation has implemented the certified cocoa (Eco-cocoa)
development program in Ben Tre, applying the cocoa producing standards (organic, UTZ and
Fair Trade) and promotion of certified cocoa to the international buyers. Halba Company
(Switzerland) planned to purchase 1,000 tonnes Fair Trade certified cocoa from Vietnam
annually with a price of around 200 USD / tonne of dried cocoa.
4. Spices
4.1. Current situation of production
Vietnam is one of the typical spices producing and exporting country characterized as a
developing country, large population and belongs to the tropical climate zone. Vietnam has
many advantages in growing and processing spices regarding nature (rich soil, subtropical
climate, high humidity, high precipitation), people (large population, diligence, inquisitive
farmers) and apply science and techniques in production and processing. Spices in Vietnam
are very diverse with more than 70 categories. Nevertheless, the industry accounted for a
small proportion of agricultural products in Vietnam. In Vietnam currently there is no
company specializing in spices but combining spices with other sectors in their business
operations such as coffee, cocoa...
33
Table 13: List of spices in Vietnam
No. Spice No. Spice No. Spice
1 Hat doi 21 Me chua 41 Coriander
2 Zanthoxylumrhetsa 22 Sesame 42 Vinegar
3 Clausena 23 Sorbus 43 Powdered grilled rice
4 Black cardamom 24 Lemon leaf 44 Salt
5 Anise 25 Lemon 45 Fish sauce
6 Cinnamon 26 Coastal Premna 46 Sugar
7 Bischofia 27 Lolot 47 MSG
8 Tau soi 28 Blumealanceolaria 48 Bitter candy
9 Tay’s sausage 29 Garcinia cowa 49 Cooking oil, fat
10 Allium
schoenoprasum
30 Endive 50 Soy sauce
11 Co khau, khau den 31 Basil 51 Black sauce
12 Tau choong 32 Crested Latesummer
Mint
52 Seasoning sauce
13 Pandanus
amaryllifolius
33 Apricots leaf 53 Crab sauce
14 Fresh green onion 34 Culantro 54 Celery
15 Garlic 35 Mugwort 55 Onion
16 Ginger 36 Lemongrass 56 Chili
17 Pepper 37 Dill 57 Hue’s sauce
18 Red cashew 38 Knotgrass 58 Leek
19 Turmeric 39 Perilla leaf 59 Chives
20 Galangal 40 Rice paddy leaf 60 Honey
The survey results showed that: manufacturing, trading export enterprises accounted for
84.48%, trading and export enterprises accounted for 1.72%, trading, export and other
services sectors enterprises accounted for 1.72%, manufacturing, trading, export and other
services sectors enterprises accounted for 12.07%.
Also by investigation, approximately 43.84% of enterprises surveyed have 0-250 employees,
54.36% have 251-1,000 employees and 1.8% has more than in 1000 employees. Regarding
export value, approximately 70.13% of enterprises have export value of 0-5 billion VND,
26.27% have 5-15 billion VND, 3.6% with sales of over 15 billion VND. Regarding domestic
sales value, 81.83% have sales of 0- 5 billion VND, 18.17% have sales of more than 5 billion.
Pepper is a key product in the spice industry of Vietnam; the Vietnam Pepper Association
currently has 98 members. Due to the key role of pepper in the spice industry, the analysis of
the following spice industry will focus mainly on pepper.
34
Pepper is one of the agricultural products with the highest profit margin in the country.
Pepper’s area of cultivation in 2013 is about 60,000 hectares, accounting for about 9% of the
world pepper area and 30% of the world output. Strong pepper growing provinces are
Southeast region provinces (accounting for over 50% of the area), Western Highlands
(accounting for 31% of the total area), followed by the Central region provinces...
Pepper products include two main types: black pepper and white pepper. White pepper and
pepper powder have higher values, however the production process has more stages, longer
until break-even point thus are not prioritized by farmers. Ministry of Agriculture and Rural
Development are investing on upgrading existing processing factories, including 14 advanced,
high quality processing factories, while also expanding capacity and investing in new white
pepper processing factories, increasing the percentage of white pepper products from 19.4%
in 2010 to 30% in 2020, bringing the percentage of powder pepper from 12.2% in 2010 to
25% in 2020.
A common weakness in the current pepper industry is there are still many intermediaries in
the supply chain (such as collectors and dealers levels) so pepper trading channel has not been
really advanced and efficient, has not ensured the legitimate rights of the growers as well as
the quality of input materials for processing enterprises.
Image 2. The supply chain of pepper industry in Vietnam
Source: Chu Se Pepper Association, 2012
Structure and linkages between the components involved in the supply chain of export pepper
are being established and perfected towards being more effective. In addition to building
national brands, many locals are building collective brand associated with landmarks and
tourist attractions like Chu Se pepper, Phu Quoc pepper, Tien Phuoc pepper... and building
geographical indications. The enterprises specialized in processing and exporting also
coordinate with locals and home gardens to produce pepper following the "large sample field"
structure. This allows enterprises to be able to trace the origin of goods when necessary and
80%
20%
enterprisesexport
Tiêu dung nộiđị
a 5%
95%
Pepper
growers
Dealers
Collectors
Domestic
consumption
Export
enterprises
35
obtain good ingredients to produce high-quality, diversified products, increase the value
added. Enterprises can also sign contracts to supply ingredients, contracts to purchase and
consume products with farmers, organize the "pepper purchasing location" in the area in order
to directly purchase 100% of the pepper of farmers to limit the situation of the traders putting
pressure on the price of the growers’ products, and ensure the quality of input ingredients
processing and exporting enterprises. The associations serve as the supervisors and have the
responsibility to be the connections and arbitrators between the two sides. Pepper growing
clubs are formed in which club members will link the pepper fields together to form the
“linked field” and grow pepper intensively, ensuring the quality and sustainability of raw
pepper area.
4.2. Current situation of export
The most popularly consumed spices in the world market presently are pepper, chili, nutmeg,
ginger, cloves, cinnamon, vanilla, saffron, bay leaf ... Largest spice consuming markets are
EU, US, and Japan, while spice growing and exporting countries mostly are developing or
underdeveloped countries with tropical or subtropical climate including Vietnam.
Table 14: The main spice producing countries in the world
Spice Producing countries
Pepper
Chili
Vanilla
Cinnamon
Nutmeg
Unprocessed ginger
Coriander, Dill…
Mixed spices: Turmeric, Anise
India, Indonesia, Vietnam, Malaysia ...
India, Chile, Jamaica, China...
Madagascar, Indonesia, China, Mexico...
Sri Lanka, China, Vietnam, Indonesia...
Guatemala, India...
China, India, Nigeria, Jamaica...
Iran, India, China, Vietnam...
India, Turkey, Vietnam, Thailand...
Regarding pepper, Vietnam is considered the world's leading exporter in terms of size, quality
and potential. 95% of Vietnam's pepper production is used in exports. Vietnam pepper output
accounts for nearly 40% and its share of imports accounted for nearly 50% of the world with
more than 120,000 tons of pepper, the average growth rate reached nearly 25% / year for
2008-2013.
There are currently more than 200 enterprises involved in the direct export of pepper, of
which approximately 30% are FDI enterprises. Despite the large volume, capable of
regulating the market but the enterprises did not take advantage Vietnam of the opportunity to
increase the exports value since they are still exporting unprocessed products. Besides, the
national brand of pepper is poorly built and developed thus affect the export price of pepper,
Vietnam pepper exports consisted mainly of two products: black pepper and white pepper
ungrounded. Vietnam Pepper products that are being produced and exported are mainly black
and white pepper of the Piper genus (commodity code 0904), dried ungrounded (code
090411), crushed or ground (code 090412). In addition, in our country there is the Amazon
pepper discovered 7 years ago with pest resistance advantage, however weak to drought thus
not being prioritized for the research to grow and export. According to Trademap, export
36
turnover of Vietnam ungrounded pepper increased by 23% / year over the period of 2009-
2013. Ground pepper exports have grown faster with the rate of 37% / year over the same
period. However, the proportion of ground pepper exports is not high compared to
ungrounded pepper (ungrounded pepper 83%, while ground accounted for 17% of total
exported pepper).
In recent years the due to the increase in price of pepper (in 2011 prices reached record levels
of 5.500- 5,800 USD / ton for black pepper and 8.000-8.500 USD / ton for white pepper),
with stable output, guaranteed quality, competitive price, Vietnam pepper exports in 2014 are
estimated to reach the recoded value of 1 billion USD.
During the 2009-2013 period, average export was 120.000-129,000 tons / year. Vietnam
pepper had been exported to nearly 80 countries and territories. Especially export of high
quality products to the US market and EU market was increasing. Current main export
markets are the US, Germany, Saudi Arabia, Netherlands, Singapore, India, Egypt, Spain and
Pakistan. On average, Vietnam pepper exporting market share in Asia is 36%, Europe 34%,
America 20%, Africa 10% (Vietnam Pepper Association, 2014b).
However most export enterprises purchased pepper from traders, accounting for about 80% of
the total volume of included in transactions, causing major difficulties for enterprises in the
quality control stages of pepper origin, technical processes and types.
Table 15: Vietnam pepper exports to the South Asian markets first 7 months of 2013
and 2014
Unit: million USD
No. Country 2013 2014 Increase/decrease(%)
1 India 26.82 56.23 109.66
2 Pakistan 10.78 33.54 211.13
3 Bangladesh 0.64 3.27 410.94
4 Nepal 0.25 2.12 748
5 Sri Lanka 0.1 0.56 460
Source: Vietnam General Department of Customs
India is one of the world’s leading pepper producers in the world, while the country imports
the largest turnover of pepper from Vietnam in South Asia. In 2014 while domestic output of
India pepper plummeted, imports of Vietnam pepper of India surged to 8,000 tons, accounting
for over 90% of total import of pepper into this country.
4.3. Current situation of certification for businesses in the industry
Best-known certification in the spice industry, especially pepper is UTZ certification.
However, the number of enterprises achieved UTZ certification is very limited, among
enterprises surveyed, there is no spice enterprises meeting this standard.
Although clearly aware of the requirements and criteria of quality that the importers as well as
the customers demand, there is currently no Organic, Rainforest, Global Gap or Fair Trade
certified enterprise. Among the interviewed, there is no enterprise registered for international
certification for their organization’s system and products.
37
4.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for the spice industry in
Vietnam
Strengths
Vietnam pepper has quite high quality, flavor, spiciness, can compete with large pepper
countries such as Indonesia and India.
Pepper harvesting season spread equally over the year, the Western Highlands provinces
harvest and sell pepper February-July, Quang Tri July-December, Phu Quoc, Kien Giang
February-April, convenient for buyers to export, producers can maintain high prices over the
year.
Pepper productivity is higher than average.
The experiment pepper fields grow many good pepper types.
Vietnam is a country with a stable yield of pepper thus strongly influences the world pepper
market.
Weakness
Requires large investments, while most farmers lack the capital for long-term production and
processing therefore the production and business of pepper is unstable.
Pepper is difficult to grow, easily infected with diseases. Farmers are not equipped with
technical knowledge about planting, tending and fertilizing pepper.
The trend of spontaneous, unplanned acreage increase makes it difficult for the effective
production planning. Have not had oriented planning as required for optimal ecological for
pepper according to market demand.
Vietnam pepper production consists mainly of small producers under individual households,
largely depends on climate, weather, insects, epidemics…
Price of Vietnam pepper is often pressured. Quality of pepper is not consistent, lower export
prices compared to other countries. The case of traders mixing low quality pepper and sold to
processing and export enterprises still exists.
Domestic consumption is not high, relying on the export market.
Sustained high prices leads to large increase in pepper growing area, but due to lack of
technical knowledge in tending, selecting varieties, case of destroying fields, stealing ... the
efficiency is low;
Ground pepper exporting ratio is lower than ungrounded. Outdated processing technologies
lead to low quality products. Most are exported in the form of raw pepper; the value is not
high.
Links between the parties in the supply chain are unstable, affecting the sustainability and
reliability of products.
Opportunities
38
Pepper is a spice commonly used by people in many regions of the world.
At the time of festival such as the festival of the Muslim countries, the end of year festival in
western countries, pepper demand grows sharply.
Along with the development of the fast-food chain around the world, demand for pepper is
also growing strongly.
Due to being the world's biggest pepper exporter, Vietnam pepper brand in becoming
increasingly popular, the opportunity to diversify export market is high.
The demand of valuable pepper products, white pepper and ground pepper in the world is
increasing. This is an opportunity to diversify commodity products, increase processing to add
more value to the products.
Vietnam natural conditions are suitable for the production and development of spices in
general, pepper in particular.
Threats
Strict requirements on food safety, concentration of plant protecting drugs in the export
market.
Climate change, fast spreading plague.
Unstable prices, subject to competition from other large exporting countries like India,
Indonesia, Malaysia...
4.5. Current situation, the need and possibility of Fair Trade certified businesses of the
spice industry in Vietnam
From the enterprises and producer side, currently in Vietnam, spice industry there is no
enterprises certified Fair Trade. The awareness and level of participation in the Fair Trade of
spice enterprises is very low. This condition is common in the spice industry; not only with
Fair Trade certification but also with other international certifications such as UTZ, Rain
Forest Alliance and Global Gap... the awareness and participation levels are low. 54,24% of
surveyed enterprises are aware of fair trade certificate. 59,32% 54,24% of surveyed
enterprises want to be fair trade certified.
Assessing the significance of the inputs in the production process of enterprises, all
enterprises surveyed said that quality of raw materials, raw material costs, the expansion of
production, employment, environmental protection in the production process, organization
accounting system are important. With the input selection criteria of enterprises, quality and
degree of environmental friendliness of materials are rated at the highest level. Regarding
support people to produce and supply the input of raw materials, the percentage of
unsupportive companies is only 6.25%. In 93.7% of the companies that support the people,
capital support companies account for 56.25%, fertilizers support companies account for
62.5%, technical support companies account for 75%. These figures show that in reality
39
Vietnam pepper enterprises have the mental of Fair Trade and working towards the principles
of Fair Trade. With concern for the environment, employees, product quality, accounting
systems, supporting suppliers of the enterprises, many are following some guiding principles
of Fair Trade. However achieving this certification requires improvement, effort and
determination of enterprises.
It is clear that the main problem in spices industry regarding Fair Trade is the awareness and
the attitude of enterprises towards this certification. In generally, many big enterprises are
concerned with the large number of workers, products, high sales will be difficult to ensure
the qualifications of the whole system and high entry costs. Meanwhile the small enterprises
are worried that small scale will lack the resources to meet the standards, encounter
difficulties in the construction process, such as interviews, inspections, audits at each
enterprises, not enough budget for Fair Trade registration.
Despite such concerns, a large number of spice enterprises surveyed (59,32%) want to register
for Fair Trade certification. Desire to join the Fair Trade of enterprises is explained from two
sides. The processor and retail companies want high quality, transparent, traceable input
products, so the products supplied by enterprises can meet the requirements of consumers.
The manufacturers (companies, cooperatives, farmers) producing the ingredients should have
programs to help them become more professional; improve their productivity and quality as
required by the market.
Regarding the demand for spice products, EU is one of the three largest markets of spices in
the world, along with North America and East Asia. The most consumed spice in the EU is
pepper. Because of the concern for the processing of traditional ethnic cuisines and eating
habits change of EU consumers, the new recipes made EU consumers use more of spices and
herbs previously little known. EU is also an important export market of Vietnam spice
products. In Europe, demand for Fair Trade certified spices are growing with more awareness
of consumers about ethics and the social responsibility of enterprises / producers. Fair Trade
spices in Europe are consumed mostly in supermarket chains and a little in retail. Though the
scale is still small, European Fair Trade market is increasing very quickly. The largest Fair
Trade spice market in Europe is UK (49%), followed by France (14%), Germany (12%),
Sweden (4%) and Austria (4%). Fair Trade spice markets with the fastest growth rates are
Sweden (increased 75% in 2007- 2008), Finland (57%), Germany (50%), UK (43%),
Denmark and Spain (40%).
As for pepper, according to the Vietnam Pepper Association, world pepper demands is greater
than the supply in both 2014 and 2015. Average price is predicted to remain high, though
prices may fluctuate downwards at some points such as the harvest season and can be
controlled by speculators.
40
5. Handicrafts
The handicrafts industry has an important role in socio-economic development of Vietnam,
contributing to poverty reduction, preserving cultural identity, gender equality with the active
participation of women and ethnic minorities. Handicrafts industry has high multi-sector
cohesion, particularly with tourism services industry. Due to the nature of the industry
(employment for women workers and those in difficult circumstances, using environmentally
friendly materials, the production process...), a handicraft product is considered quite
appropriate with Fair Trade certification.
Among the surveyed enterprises, all enterprises are engaged in production, sales, of which
85% are engaged in exporting. This is also a common situation in the handicrafts industry
when the enterprises tend to participate more in the stages with high added value in the value
chain, rather than just focusing on production orders with low added value like before.
5.1. Classes of handicraft products and export value
Rattan bamboo
Vietnam is one of the countries with advantages in raw material and labor to develop rattan
products. Rattan goods are scattered throughout the country, the Northern region and Central
region have high concentration of rattan and sedge products, Southern region has hyacinth,
leaf product... Bamboo group not only contributes to the value of exports but also contribute
to jobs creation for the participants in the value chain, especially poor rural women and ethnic
minorities.
According to the General Statistics Office, in 2012, the total export value of rattan product is
231,719,155 USD, accounting for approximately 16.33% of the total export turnover of
handicrafts.
According to Trademap, total export value of rattan group is 240,879,000 USD in 2012,
accounting for 14.31% of total turnover of the country in which HS 460 219 (bamboo, wicker
and other items made directly from plants), HS 940 389 (architectural furniture made from
wicker or similar materials except bamboo, rattan) and 460 211 (bamboo, wicker and other
items made directly from bamboo) have the highest proportion with a total turnover of
145,087,000 USD. Market share of Vietnam rattan on the world market reached 3.73%, while
the major rattan imports markets of Vietnam in 2008-2012 are the US, Germany, Japan,
France. USA is the largest importer of Vietnam rattan goods, accounting for 23.89% of total
export value of this products group.
Also according to Trademap, some export markets of Vietnam rattan emerged in recent years
are China, Spain, Russia, Australia ... In 2012, Spain imported rattan handicrafts of Vietnam
with a value of 5,604 thousand USD, increase 86.2% compared to 2011, the average in the
2008-2012 period increased by 13.2% / year. This can be viewed as a potential market for
Vietnam rattan group imports by strong growth in recent years; particularly during the period
2010-2012, the average annual imports increase by 47.3% annually. Compared with the
41
previous year, imports of rattan products from Vietnam of China increased significantly in
2012, if the 2011 value of imports is around 860 thousand USD, in 2012 this figure was 1,743
thousand USD, an average increase of 40% / year in the 2010-2012 period. Some emerging
markets such as Russia, Australia ... although have not grown in imports over the years, the
speed of import growth is relatively fast, which suggests new market development
opportunities for the rattan products group in the near future.
Ceramics
Ceramics is one of the commodities in Vietnam that has advantages by utilizing the
competitive advantages of raw materials, workmanship and manufacturing tradition. Ceramics
in Northern region are concentrated in traditional craft villages like Bat Trang (Hanoi), Phu
Lang (Bac Ninh), Chu Dau (Hai Duong). The Central region has some scattered ceramics
village with no export potential. In the Southern region, ceramics products are concentrated in
the major industrial zones such as Dong Nai, Binh Duong, manufactured under modern
production lines to meet the requirements of importing countries.
According to the General Statistics Office, in 2012, the total export value of the country's
ceramics group was 123,160,367 USD, accounted for approximately 8.68% of the total
handicrafts export value.
According to Trademap, total export value of rattan group is 169,477,000 USD was 2012,
accounted for 10.70% of total turnover in the country, of which 691 390 (small statues and
other kinds of decorating products made by ceramic), 940 490 (other ceramic products)
accounted for the most with 150,931,000 USD total turnover.
Vietnam ceramics market share on the world market reached 4.11% while the major import
markets in 2008-2012 are the US, Germany, UK, Australia. USA is the largest import market,
accounting for 26.18% of total export value of this products group.
Wood and wooden products
Wood furniture and products are the export strengths of Vietnam, in which woodcraft
furniture including woodcarving, antique imitation, picture frames ... has relatively good
export potential. The wood carving products focused mainly in the Northern craft villages,
while antique imitations, frames, handicraft boxes are produced mainly in the industrial areas
in Ho Chi Minh City, Binh Duong and Vinh Long. Central region has some wood handicraft
villages but none with export potential.
According to the General Statistics Office, in 2012, the total export value of the country's
wooden products group was 133,795,813 USD, accounted for approximately 9.43% of the
total handicraft exports value.
42
According to Trademap, total export value of Vietnam wooden products group is 192,449,000
million USD in 2012, accounting for 11.43% of total turnover of the country. 442 190 (other
wooden products: necklace, accessories, door blinds, toothpick...), 441 900 (tableware,
wooden kitchen utensils) and 442 090 (inlaid wood; caskets and containers of jewelry)
account for the most with total of 163,032,000 USD. Vietnam's market share on the world
market of wooden products reached 2.16%, the major market importing woodcraft items of
Vietnam are the US, Japan, Germany, South Korea in 2008 and expanded to Malaysia, France
and Sweden in 2012. However, the main export market of Vietnam wooden products is still
Japan, accounting for 24.56% of total export value and US is placed 2nd with 17.78% total
export value in 2012.
In the period of 2008-2012, the export market for Vietnam wooden products expand to many
countries such as Malaysia, Sweden, Taiwan (China) sharply increased turnover in 2012.
Specifically, in 2012, export turnover of Malaysia was 4,960 thousand USD, increase 7.5
times; Sweden was 4,426 thousand USD, increase 4.5 times and Taiwan (China) 2,207
thousand USD, an increase of nearly 5 times the value of imports in 2011.
Embroidery
Currently there are about 341 embroidery villages, 120 thousand embroidery workers, focused
primarily on the cities and provinces of Ninh Binh, Thai Binh, Ha Nam, Hanoi, Thua Thien
Hue, Quang Tri, Lam Dong and Ho Chi Minh City. There are also ethnic minorities such as
Hmong, Thai, Lao... The main materials used in embroidery are silk, linen, cotton, coarse
cloth. Main embroidery products include table clothes, clothes, skirts, bags and other
household items, embroidered landscape paintings; portraits are also very popular.
According to the General Statistics Office in 2012, the total export value of the embroidery
product groups is 3,630,271USD, account for approximately 0.26% of the total exports of
handicrafts in the country.
According to Trademap, total export value of the country's embroidery group reached
2,294,000 USD in 2012, representing approximately 0.14% of the total turnover of
handicrafts throughout the country.581 099 (other embroidery), 581 010 (embroidery in long
form or following model, embroidery without visible ground) and 581 091 (embroidery from
cotton) accounted for the most with total turnover of 2.273 million USD. The market share of
the embroidery product group of Vietnam on the world market reached 0.38%, in which
Japan, Britain, France, Italy are the main import markets.
Textile products
Silk and linen products are diverse in type, design, can be divided into groups of accessories
and fashion crafts such as clothing, towel, hat...; interior decorations crafts such as curtain,
wall hanging, tablecloth, cushion, pillow, blanket ...; gift: wallet, cup lining... Some craft
43
villages use silk as material including Van Phuc (Ha Noi), Nha Xa (Moc Nam, Ha Nam) and
Nam Cao (Thai Binh)...
According to the General Statistics Office in 2012, the total export value of textile products of
the country reached 194,602,234 USD, representing approximately 13.72% of the total
exports of handicrafts in the country.
According to Trademap, total export value of textile products was 257,689,000 million USD
in 2012, accounting for 15.31% of total turnover of the country, of which 420 222 (handbag
with outer surface made of plastics or textiles), 420 232 (items in the handbag), 630 499
(sanitary towels, kitchen towels) account for the most with total turnover of 197,048,000
USD. The market share of this group on the world market reached 0.77%; the major import
markets of textile products of Vietnam are the US, Germany, France and some Asian markets
such as Japan, Malaysia.
Metallic craft
Metal crafting is distributed in most provinces across the country, which are mainly
concentrated in the Red River Delta region and thrived in recent years in Southeastern region
such as Dong Nai, Binh Duong...
Main exports products are metal planting pots, bent iron furniture... produced mainly in Nam
Dinh, Thai Binh, Dong Nai and Binh Duong. The products were developed in the recent 10
years while traditional items such as bronze casting (statues, crafts, worshiping objects, tools,
bells), copper furniture (trays, vases, teapots), silver objects (boxes, trays, plates, bowls,
ornaments), three-metal objects (fine art, statues, worshiping objects), iron items (knives,
scissors, farming utensils), crafts (jewelry, small ornament) primarily serve the domestic
market.
According to the General Statistics Office, in 2012, the total export value of metal products
group was 163,818,812 USD, accounting for 11.71% of total exports of handicrafts of the
country.
According to Trademap, total export value of metal products group of the country was
255,741,000USD in 2012, accounting for 15.19% of total turnover of the country. 940 179
(Other chairs with metal frames), 940 320 (furniture made of metal) and 830 629 (Small
statues and other ornaments) accounted for the most with total turnover of 251,786,000 USD
(representing 44.14%, 49.68% and 4.63% respectively).
Paper products
Paper products are mainly made from poonah paper, bamboo and secondary materials like
limestone, wood plastic composite. Handicraft paper products are used primarily for the
purpose of worshiping and some for exports. Famous paper villages were Yen Thai, Nghia Do
in Hanoi and Duong O in Bac Ninh. Ethnic people such as Cao Lan, Hmong and Dao... also
44
produce handicraft paper products. In recent years, a number of handicraft products made
from recycled paper such as old newspapers, paper powder was developed by Fair Trade
enterprises and exported to the international market, but the quantity is low.
According to the General Statistics Office, in 2012, the total export value of the paper
products group was 14,947 USD nationwide, or about 0.001% of the total export value of the
country's handicrafts.
According to Trademap, total export value of the paper products group was17,000 USD in
2012, representing about 0.001% of the total turnover of the country, of which 480 210 (paper
and cardboard, handicraft production) accounted for a total turnover of 100%. The market
share of these products on the world market reached 0.02%.
Gifts, crafts using other materials such as horn, stone
In Vietnam there are about 45 stone carving villages, where 40 villages (88.9%) are located in
the Northern region, 2.2% in Central region and 8.9% in the Southern region.
The stone products are usually statues of Buddha, people, animals, household items. Hard
rock is often used for traditional products such as Buddha statues, animal statues, used in
structures such as pillars, floors, bridges, corridor steps... Soft rock products are more varied.
Stone carving are growing stably on both the domestic and international market. The main
export markets are currently Asia and Europe. However, this product line is limited in input
materials.
According to the General Statistics Office, in 2012, the total export value of gifts from horn
and rock is 26,927,926 USD, representing approximately 1.92% of the total export value of
the country's handicrafts.
According to Trademap, total export value of gift from horn and rock are 57,464,000 USD in
2012, representing approximately 3.41% of the total turnover of the country, of which 680
299 (other stone products), 680 293 (products from granite) and 960 629 (buttons) have the
highest proportion with total turnover of 33,929,000 USD (accounting for 22.84%, 18.69%
and 17.52% respectively).
Other handicrafts
Other handicraft products include many kinds such as products for holidays (Christmas,
Easter), handicraft toys, musical instruments...
According to the General Statistics Office, in 2012, the total export value of other handicrafts
group was 520,684,053 USD, representing approximately 37.80% of the total turnover of the
country.
According to Trademap, total export value of other handicrafts group of the country was $
502,547,000 USD in 2012, accounting for 29.85% of total export turnover of the country's
handicrafts, which 340 600 (Candles), 711 319 (other products made by precious metal), 711
45
311 (silver jewelries) accounted for the most with total turnover of 432,909,000 USD. Market
share of other handicrafts group of Vietnam on the world market reached 0.35%, in which the
main import partners are USA, Japan, Switzerland and Australia.
Artworks
The artwork consists of antique imitations, paintings, sculptures, mostly export paintings.
Paintings are divided into two series: modern paintings and folk paintings. Some folk painting
lines had their heyday and today retain to some extent, such as Dong Ho folk paintings (Bac
Ninh), Hang Trong paintings (Hanoi), Kim Hoang paintings (Hanoi), Sinh village paintings
(Hue). There is also a modern painting line consist of lacquer paintings, oil paintings, silk
paintings, sketch paintings...
According to the General Statistics Office, in 2012, the total export value of artworks was
4,587,784 USD, representing approximately 0.32% of the total export value of the country's
handicrafts.
According to Trademap, total export value of artworks was 4,943,000 USD in 2012,
representing approximately 0.29% of the total turnover of the country. 970 110 (Paintings,
sketches and pastels paintings), 970 600 (antiques of more than 100 years) and 491 191
(Paintings, blueprints and photographs) have the highest proportion with total turnover of
3,693,000 USD (43.70%, 20.21% and 10.80% respectively).
5.2. Current situation of export
Exports of handicraft products have an important role, contribute to the added value of local
economy in particular and the country in general. If in the value chain of some key export
industries of Vietnam such as textiles, footwear, electronics, the ratio of retained export value
is up to 20%, the export of handicraft products of villages retain almost the entire export value
to the economy, thanks to the use of available domestic raw materials, imports of raw
materials accounted for only3-5% of export value.
The global consumption of handicrafts and gifts valued 100 billion USD annually, of which
the main markets are the US, Germany, France, UK, Spain, Netherlands, Japan, Hong Kong
(China) and some other Western European countries. US is the largest market with 67.5
billion USD of consumption, followed by Europe with about 13 billion USD of which
Germany is the largest consuming country, accounting for 23% of total European
consumption, followed by Italy (16%), UK (13%), France (13%), Spain (11%), Netherlands
(3.9%) and Poland (3.5%).
Import market statistics of Vietnam major products group in 2012 showed that US, Germany,
Japan, France, UK markets are the largest consumers of rattan products. With ceramic
products, the US, Germany, Britain, France, Japan are the largest importers. With wood
products including furniture, Japan, USA, Germany and France are the largest importers.
46
Table161: Export markets of handicraft products (2012)
Unit: thousand USD
No.
Market Rattan products
Ceramic
products Wood products
1 USA 57,544 44,365 34,219
2 Japan 11,277 5,735 47,262
3 Germany 36,455 26,339 26,418
4 France 9,264 7,276 4,756
5 Britain 7,085 9,637 520
6 China 1,743 0 0
7 Spain 5,604 0 87
8 Canada 3,072 3,848 348
Source: Trademap
Market potential of handicrafts and gifts is very positive throughout the recent years and
forecasted in the coming years as consumers always have high demand, especially items
marked with the culture of each country with sophisticated manufacturing techniques,
innovative design. This is a good opportunity for developing countries to promote these
products, including Vietnam.
Regarding competitiveness, while China continues to rely on the strengths of mechanized
production processes to enhance the competitiveness of the three main products groups: sedge
/ sedge mats, bamboo and bamboo household items (excluding knitting); Indonesia continues
to focus on developing rattan furniture; the Philippines still consider designing as the main
strategy to maintain its position as the No. 1 in high quality crafts market..., the manufacturers
of handicrafts of Vietnam are producing cheap products in bulk, mainly for some large
retailers such as Ikea (Sweden), Wal-Mart and Peer 1 Import (US)... will continue to face high
competition from China (knitting, ceramics and textiles), Indonesia (rattan furniture)... In
addition, the industrial production methods from China can produce large volumes of
products that superficially resemble the handmade products but with very low cost, making it
difficult for the consumers difficult to distinguish between the crafted products and the
products produced by machines...Moreover, consumers are increasingly expecting good
quality, well designed but low price products... also add some pressure to eliminate products
without real competitiveness from Vietnam (as well as from other countries) - this is also a
precondition for the craft villages, the export enterprises to review the development strategy
for survival ...
47
Regarding on-spot export, sales to tourists are a major source of income for handicrafts
makers. The tourism industry worldwide is growing, increased from only 25 million
international tourists in 1950 to 925 million in 2008. It is predicted that this figure will reach
1.4 billion by the year 2020.
According the General Statistics Office of Vietnam in 2009, the structure of expenditure of
tourists coming to Vietnam is as follows: 25.67% for accommodation, 19:19% for food and
drink, 7.6% for visiting, and 14:09% for shopping which are mainly crafts since tourists look
for products that bear the characteristics of Vietnam culture for gifting or for the memories of
the trip to Vietnam.
A recent survey conducted by the Vietnam Institute of Research and Development of rural
industries (VIRI) indicates that there are about 450 souvenir shops for tourists in Vietnam,
mostly in Hanoi and Ho Chi Minh City. Most of the stores are facing the diversification
problem of products to attract tourists. With a number of specific measures to intervene and
develop the products market, this is considered to have good potential to increase tourist sales.
5.3. Current situation of certification for businesses in the industry
Market Europe and North America are currently two biggest import markets of Vietnam's
handicrafts. Both these markets are tightening regulations on the import standards of
handicraft products from developing countries such as Vietnam. Besides the technical barriers
that some products are required to pass when approaching European market, the enterprises
also equipped themselves with the certifications for easier access to this market.
REACH chemical law
REACH stands for Registration, Evaluation, Authorization and Restriction of Chemical. This
was a regulation in EU on chemicals and the safe use of chemicals, issued on 06.01.2007 and
would be implemented in several phases over 10 years.
The purpose of this regulation is to ensure the safety of human health and the environment by
evaluating the hazardous level of substances that do not affect the circulation of chemicals in
the EU market.
The list of mandatory evaluation covers all products in the industry, related to consumer
goods such as chemicals, dye, printing, textiles, garments, footwear, toys, electronics,
household items, furniture, cosmetics, fragrances ingredients in candles, paint...
REACH is applied in all 27 EU countries. In addition, Iceland, Lichtenstein and Norway,
countries in the European economic area are planning to use REACH in their law. When
applying this rule, the exports to these countries must also comply with REACH as the
countries of EU.
FSC certification for products made from wood
48
Consumers, companies and governments are demanding more that the trees, paper and wood
products are harvested from properly managed sources. FSC certification system (Forest
Management Council) helps distinguish the wood products that are manufactured under a
responsible forest management system and create added value. The certification system is
based on the principles of sustainable development and continuous improvement in forest
management and principles of traceability applied to the trading and manufacturing
companies using woods products from certified origin.
Fair Trade Certification
Fair Trade certification will be analyzed in section 5.5 (The situation, needs and possibilities
of Fair Trade certification for the handicraft industry in Vietnam).
5.4. SWOT analysis (strengths, weaknesses, opportunities, threats) for Vietnam handicraft
industry
Strengths
High amount of skilled workers
Able to cope with both large and small orders
The enterprises have accumulated experience in the export market
Weaknesses
The domestic high quality materials are insufficient. No FSC certified materials. 80% of raw
materials have to be imported.
Products refining skills are limited, export many semi-finished products.
Weak designs.
Number of enterprises meet the standard requirements is low (almost none).
Wood group accessories are very weak, mainly imported from Taiwan (China), China.
The enterprises have no clear branding strategy and group brand has not been promoted.
Market information and trading promotion is limited.
Links between factors in the value chain, particularly between research and development on
the products is limited.
Villages’ environmental policies are not thoroughly implemented.
Opportunities
Government always facilitates the development of wood products.
Opportunities to combine wood products with other natural products in Vietnam is quite
diverse
49
Many importers left China market due to political / environmental reasons, create great
opportunities for the wood products export enterprises of Vietnam.
Russia, China, Brazil, India are the emerging markets, an opportunity to develop the BRICS
market
Upcoming TPP trading agreement is an opportunity to develop the market in Asia - Pacific
(Australia, China, Japan, South Korea...)
Threats
Raw material prices rise fast, enterprises have not proactively grabbed hold of materials
Still depend on a number of customers who buy in bulk and low price cheap
A large number of export enterprises are enterprises with foreign investment
Number of employees quit their jobs due to declining revenue is increasing
Great competitiveness from the neighboring countries on the same kind of products
(especially China, Malaysia, Indonesia)
Large trading markets are increasingly using trade protectionism (LACEY, US CPSIA,
FLEGT, REACH, FSC...).
5.5. Current situation, the need and possibility of Fair Trade certified businesses in
handicraft industry in Vietnam
More and more enterprises and production facilities are choosing Fair Trade in order to
increase the value of the handicraft products. Fair Trade is one of the certifications that ensure
economic, environmental and social aspects, very suitable with the trend of production and
business of Vietnam handicrafts enterprises towards sustainable development. Currently
Vietnam has five enterprises and production facilities in the field of handicrafts certified Fair
Trade, all five are certified by the World Fair Trade Organization World (WFTO). Compared
to the food industry of the same study, the number of handicraft enterprises certified Fair
Trade is less than that of the coffee industry (11 units) but more than that of the tea industry (2
units), cocoa and spices industry (0 unit). Handicraft enterprises awareness towards the
certification were also higher with about 75% enterprises surveyed know about this
certification.
Development of Fair Trade facilitates the development of export models in the regions,
providing opportunities to the poor, ethnic minorities involved in the value chain, providing
increased products and brand building in the regions. Similar to other certification, besides the
benefits that Fair Trade certification gives companies such as added value, competitive
advantage and reputation on the market, the Fair Trade certified enterprises also face
difficulties similar to others in the same industry, which is to meet the increasing demand of
50
buyers for quality and product design, find the market for its products in the race with the
usual handicrafts products and with companies from China, Indonesia, India... However, the
enterprises with Fair Trade certification are optimistic and expect the growth in the not too
distant future for Fair Trade is getting increasingly popular and perceived positively by
consumers.
Regarding the desire to participate in Fair Trade, more than 80% enterprises want to
participate and will participate if possible. The main purposes of joining Fair Trade
certification of enterprises are to have the market, achieve higher selling prices and create
long-term, sustainable business relationships. However, the difficulties restricting the
participation of enterprises are investment capital (53% of enterprises), entry costs (87% of
enterprises), complex process (66% of enterprises) and difficult to meet the criteria (92% of
enterprises). In addition, in-depth interview shows that output for Fair Trade products is also
one of the top concerns of Vietnam handicraft enterprises.
Table 17: The handicrafts units with Fair Trade certification in Vietnam
PART 3: CONCLUSIONS AND RECOMMENDATIONS FOR FAIR TRADE
DEVELOPMENT POLICIES IN TEA, COFFEE, COCOA, SPICE AND
HANDICRAFT INDUSTRIES IN VIETNAM
Fair Trade is an international certification well recognized for products of tea, coffee, cocoa,
spices and handicrafts in the world today alongside other certifications such as Global Gap,
RainforestAlliance, UTZ, Organic, 4C (for coffee), etc. The overall trend of global trade
today is that products, especially agricultural products and handicrafts, must be certified in
Units Address Website Products
Au Lac
Designs
Hanoi http://aulacdesigns.com
Ornaments, pottery,
embroidery, horns,
shells...
Craft Link 43 - 51 Van Mieu, Dong
Da, Hanoi
http://www.craft-
link.com.vn/vn/
Fashion and accessories,
decoration
Craft
beauty
Workshop
407 Ngo Gia Tu Str.
Hanoi
http://vnhandmade.com
Silk products
Hold The
Future
Centre
No 96 - 19B - Vien Lam
- Co Nhue -Tu Liem –
Hanoi
http://www.hold-
thefuture.org/
Handicraft products from
fabric, paper, wool...
Mai
Vietnamese
Handicrafts
MVH
298 Nguyen Trong
Tuyen, Tan Binh Dist.,
Ho chi Minh
www.maihandi-
crafts.com
Handicraft products from
fabric, decoration...
51
order to be recognized and sold. From 2015, cocoa products, and products such as tea, coffee
in the period 2015 - 2020 onwards, are all required to be certified. Thus, achieving
certification is one of the top concerns by Vietnamese enterprises in those five industries so as
to get their products recognized, value-added, marketed and promoted for sales.
The popular fair trade label for Vietnamese enterprises is FLO (for products such as tea,
coffee, cocoa, and spices) and WFTO (for handicrafts). Although the perspectives and fair
trade development purposes of the two institutions are basically similar, the requirements and
specific guidelines are not entirely the same.
Four common principles towards organizations certified “fair trade” by FLO include:
Social development: Organizations must demonstrate that revenues from fair trade will
contribute to promoting socio-economic development for farmers and small households;
Economic development: Organizations must ensure adequate infrastructure and apply
technical standards on products;
Environmental requirements: Organizations must manage their production and protect natural
environment in the use of land, water and other natural resources, as well as fertilizers,
chemicals and other farming techniques;
Forced labor or child labor: no use of forced labor or child labor.
Ten criteria of fair trade identified by WFTO include:
Create opportunities for producers who face economic problems;
Open and transparent;
Practice fair trade;
Pay a fair price;
No child labor and forced labor;
No discrimination, apply gender equality and association freedom;
Ensure good working conditions;
Build capacity;
Promote fair trade;
Protect the environment.
The benefits of fair trade certified enterprises are summarized as follows:
Achieve global brand name: Fair trade is a global brand which supports to recognize
manufacturers
Meet the market demand: Fair trade meets the requirements of the market that products are
labeled and certified; Demand for fair trade products is increasing; Tourists’ interest in
socially responsible souvenir products such as tea or coffee; Differentiated selling points.
Valuation: The valuation of costs and prices follows fair trade standards; Access to
information on prices; Stable price due to the minimum price set by fair trade bringing the
overall stability of the price in the market.
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Finance: Financial benefits for producers from the fair trade minimum price which is above
the overall price in the market and the fair trade insurance for farmers; Funding
opportunities domestically, regionally and globally;
Improve organization and contribute to achieving the best results: Practical tools to improve
commercial activities; Enhance living standards;
Be a part of the global network: with members including both producers and buyers
Opportunity to exchange and learn from other member organizations; Contribute to a
stronger voice on fair trade.
Source: WFTO and information collected by the research team
From the demand side, the current trend is that customers and consumers increasingly pay
attention to the origin of products, especially products having transparent origin without
causing negative effects on society or the environment.
Regarding domestic demand, the current perception of fair trade and fair trade products by
domestic consumers is not high, only 24% of the consumers including commercial companies
and individual customers know about fair trade products. In-depth interviews with domestic
fair trade manufacturers and businesses also show that fair trade products are primarily used
for export, only a negligible percentage go to domestic market and those usually are the
products that cannot be exported due to excess of quantity ordered. And when sold in
domestic market, the price does not follow fair trade price but is set at mass commodity price
or high standard certified products but with lower prices.
About potential domestic demand, as for individual customer group, with increasing
awareness about fair trade, as well as awareness of quality products and social and
environmental responsibility, domestic demand for fair trade products will increase in the
future. 86% of the surveyed customers said that they would choose fair trade products if given
the opportunity and conditions.
Regarding exporting market for fair trade tea, coffee, cocoa, spices and handicrafts from
Vietnam, currently more than 95% of fair trade products from the 5 researched categories are
for export. It is forecasted that exporting market for fair trade products from Vietnam will
expand thanks to the advantages of natural conditions, labor and material resources of the
country for these 5 product categories. International importers are more and more concerned
about fair trade commodities. Purchasing power rose from EUR 815 million in 2004 to USD
3.4 billion in 2009, handicrafts and gifts in Europe alone valued EUR 438 million in 2010. In
1998 the European Parliament issued fair trade resolution no. A4 - 0198 to officially promote
fair trade in Europe.
Besides the traditional customers through websites like www.world-of-good.com,
www.mayatraditions.com, www.globalexchange.org, www.tenthousandvillages.com,
www.serrv.org, www.fairtradefederation.org, www.coopamerica.org, www.gepa.de, fair
trade products also attracted many new customers such as Ikea, H&M, Tesco, etc.
53
A survey on the expectations of customer towards fair trade products shows that 57%
expected better quality, 86% desired a more reasonable price, 55% stated that further work is
required in design, packaging and 69% needed better service.
From the supply side, fair trade certification is a major advantage for enterprises in Vietnam,
since certified businesses will have more channels for product consumption, and more
opportunities to expand exporting markets. Fair trade is an effective trade promoting channel
alongside traditional trade, via which businesses can sell more products through thanks to the
certification.
Compared with other certifications, fair trade certification is simpler for businesses because it
favors the control over systems and processes (input, process and output) rather than the
control of quality, and so it is not too demanding on quality. Also, the certification fee for fair
trade is less costly since fair trade is fond of the interests of vulnerable people and
communities. This really is a great opportunity for Vietnamese enterprises to expand sales
channels, particularly exporting channels.
Although there are certain benefits listed as above, fair trade is relatively new and little known
in Vietnam in general, and in the five industries of tea, coffee, cocoa, spices and handicrafts in
particular. Fair trade in enterprises is happening individually, and associated with protecting
the rights of some vulnerable groups in production and business activities, rather than the
nature of a national movement. The number of fair trade certified enterprises is still low. The
majority of fair trade enterprises are small businesses run by specific groups such as the small
business model of people with disabilities, or small businesses of disadvantaged groups;
therefore, there is not yet a high impact. Moreover, fair trade practices in enterprises have
primarily been supported both financially and technically by international organizations,
which is not sustainable when enterprises no longer receive funding from outside and have to
face competition in the domestic market which has not really favored fair trade. There is a
lack of alignment among fair trade enterprises, between sellers and buyers, and especially the
lack of comprehensive national policies for fair trade development. Despite receiving plenty
of attention and support from small businesses, fair trade in Vietnam currently is just a
movement without broad coverage.
In order for the sustainable development of tea, coffee, cocoa, spice and handicraft industries,
and the assurance of benefits for vulnerable producers and sales promotion for products in
those five categories via fair trade channel, the efforts of all parties including producers,
enterprises, buyers, and policy makers are necessary to achieve common goals.
1. For manufacturers
Add values to the value chain.
Adding values to the value chain of production process will help manufacturers reduce fair
trade price management costs, leading to benefits in cash and increase income for producers.
To achieve this, the manufacturers can establish an association of producers to persuade fair
54
trade organizations to allow them to add value to their products, or the manufacturers can
identify the segments that can add value and have them added.
Strengthen connection and exchange of knowledge about production and market information
among producers
Reality shows that the level of success in fair trade manufacturing and trading of different
manufacturers is not the same. In one fair trade manufacturer, the understanding level about
fair trade of different individuals may not be similar, either. Strengthening connection and
exchange of information among manufacturers and within a manufacturer will help share
information back and forth so that organizations and individuals have better access to
information and be able to practice fair trade better by learning from each other. In fact, the
transparency of information and information sharing is also one of the fair trade principles. If
manufacturers perform this criterion well, not only do they comply with the fair trade
principle but also benefit from it.
Actively select the organization issuing certification and continuously improve capacity.
To sustainably maintain fair trade criteria, enterprises and manufacturers need to constantly
improve to meet with the criteria of the principles, and actively develop products to find
market for the products by themselves.
Establish a fair trade network in Vietnam
Currently the fair trade certified enterprises in Vietnam are scattered and have no connection
with one another. Some enterprises joined the Fair trade Network of Asia and Pacific
Producers (NAPP) as an individual organization. Nevertheless, there is not yet a national
network or system to connect fair trade enterprises in Vietnam. It is necessary to set up a fair
trade network in Vietnam to connect fair trade certified enterprises, not just among the
enterprises certified by one same organization or enterprises in the same industry, but among
all fair trade certified enterprises in Vietnam. This national network can later on split up into
sub-networks of enterprises certified by the same organization, or enterprises in the same
industry. So far, Vietnam Rural Industries Research and Development Institute (VRIR) has
registered as Fair Trade Network, a part of World Fair Trade Organization (WFTO).
Therefore, Fair trade enterprises in Vietnam can join in the fair trade network set up by VIRI.
2. For organizations issuing fair trade certificates
Expand fair trade market
A major challenge for fair trade enterprises and manufacturers is the lack of market for fair
trade products. If the challenge is too big, leading to a decrease in benefits, the interest of
enterprises will also go down, which will cause reduction in membership for organizations
issuing fair trade certificates. Therefore, these organizations should investigate fair trade
55
demand in new markets. Not only will this help these organizations to expand the scope of
fair trade activities, but also help them to identify and attract new customers while increasing
sales to existing customers. Expanding the North - South trading market will also contribute
to reducing dependence and consumption of fair trade products on spot and increase the flow
of products among regions.
Promote fair trade market
Although the international organizations have the responsibility to support market promotion
for fair trade enterprises, the actual operation is not enough to help enterprises find market
since the results stop at listing of fair trade customers to provide to fair trade sellers. This
information lacks future forecast of market demand. Furthermore, the responsibility of finding
market completely belongs to enterprises while the organizations issuing fair trade certificates
only act as intermediary between buyers and sellers. The international organizations should
actively seek and develop new markets for the fair trade manufacturers
Reduce costs of issuing and maintaining fair trade certificates
Although fair trade certification is considered cheaper than many other international
certifications such as Global Gap, Rainforest Alliance, UTZ, Organic, or 4C since it focuses
on small producers who often suffer from difficult conditions, the current certification fee is
still quite high for many of them. Some costs such as audit fees which include travel expenses
and accommodation for auditors and issuing fees are all added to the bore by the
manufacturers. The organizations issuing certificates currently appoint their audits only for
groups of countries in each geographical area, for example, Thailand-based office of WFTO
conducts auditing reports for all enterprises in Southeast Asian countries, or auditors only at
headquarters like FLO. This increases the cost of fair trade management for enterprises a great
deal. If it is allowed to use auditing services locally, the cost will be remarkably reduced due
to saving in travel expenses for auditors.
3. For the Government
Development planning for ingredients cultivation and supplying area
Currently, tea and coffee have had a national plan for ingredients cultivation and supplying
area. However, the spice industry does not have a thorough plan for cultivation area which is
needed by many crops such as cinnamon and herbs.
For the handicrafts industry, building materials center in national scale based on public-
private partnership is necessary.
Perform market forecasting well
Some opinions opposing Fair Trade believe that the higher prices of Fair Trade goods are
causing manufacturers to produce more and creating new Fair Trade manufacturers, leading to
a surplus in supply. Fair Trade manufacturers also can easily get the wrong market signals.
While overproduction and oversupply cause the prices to fall, Fair Trade goods’ prices
56
remained at a high level. This encourages manufacturers to produce more even though the
supply is already too high. Explaining the problem, Fair Trade organizations justify that those
involved in world trade have different starting points; weaker manufacturers need to be
supported by Fair Trade since conditions such as slow development, weak products or limited
product support on the market all have negative impacts on economic growth.
Although international Fair Trade organizations have established the list of Fair Trade
customers and organization and provided it to Fair Trade certified sellers, the information
provided was incomplete and could not be used to forecast market demand. In the case of 5
researching branches in Vietnam, market forecasting is needed in order to fully identify the
demand of Fair Trade market in the future as a basis for decision making and production
planning of the Fair Trade enterprises at present. Fair Trade products market information
collecting, generalizing, analyzing and forecasting should be placed under the administration
of the government agency on trade promotion, or the Trade Promotion Department under
Ministry of Industry and Trade on national level, along with the collaboration of tea, coffee,
cocoa, spices and handicrafts associations.
Strengthen government management on Fair Trade promotion
The common difficulty for enterprises, cooperatives that joined Fair Trade certification is the
output for products. To solve this difficulty, they need to have trade promotion programs in a
systematic way in order to find sustainable output.
Vietnam currently has national trade promotion program and locals have programs as well as
the budget for trade promotion activities in their respective localities. However, so far in
Vietnam there is no government agency that has officially implemented Fair Trade promotion
activities.
Fair Trade promotion needs to be carried out along with traditional trade promotion activities,
both at the national level as well as local. There is no need to establish government
management offices or agencies in particular for Fair Trade, because this is also
unprecedented in the practice of other countries. However, there is still the need for
government management for Fair Trade, and this task will be carried out by the government
management agencies in charge of commerce. For example, the Trade Promotion Department
under the Ministry of Industry and Trade will manage national Fair Trade promotion while
locals will manage their own Fair Trade promotion. Fair Trade promotion activities will be
implemented into the general trade promotion. Raising the awareness and participation of
trade promotion staff about Fair Trade activities will strengthen the trade promotion system
overall. The staff of local trade promotion should be properly aware of Fair Trade and
participate in Fair Trade ability and awareness enhancement activities. Fair Trade Promotion
helps advertise and popularize Fair Trade products on the international as well as domestic
market, and therefore the government management for Fair Trade promotion will help
develop the market for the Fair Trade products in tea, coffee, cocoa, spices and handicrafts
industry.
57
Raise awareness of Fair Trade production and business for all parties concerned.
Currently, the requirements for the production and business of Fair Trade enterprises are not
fully aware of by business communities, manufacturers, consumers, research institutions and
policy makers in Vietnam. Survey of Vietnam handicrafts exporting Association has found
that over 80% of their members have no information on the Fair Trade market, 12% have
information but do not know how to become a member of Fair Trade. Some stores from big
Fair Trade companies such as Mai Handicraft in Ho Chi Minh, Reaching Out in Hoi An, Craft
Link in Hanoi also have limited access to the market. Moreover, even when small and
medium enterprises, manufacturers are ready and capable of participating in Fair Trade, they
still face difficulties in accessing Fair Trade market, mainly due to low awareness of
customers, especially domestic customers.
Once the requirements and benefits of responsible production and consumption of Fair Trade
enterprises are well-understood by small and medium enterprises, manufacturers, research
institutions, policy makers and consumers, more manufacturers will follow Fair Trade
principle, more consumers will learn about Fair Trade products and participate in Fair Trade
market. Raising awareness is the first and very important step in Fair Trade development in
Vietnam since to achieve development goals, Fair Trade must undergoes three levels: parties
involved understand and properly aware of Fair Trade => desire to participate in Fair Trade
=> the act of participating in Fair Trade).
Develop Fair Trade policies for the agriculture and handicrafts industries in Vietnam.
According to experts, Vietnam currently has only general policies relating to Fair Trade, not a
separate policy framework for Fair Trade. At the national level, the Government has issued
policies to encourage the development of agriculture and handicrafts industries in Vietnam,
including financial policy (borrowing, interest rates and investment incentives), technology
policy, environmental policy, infrastructure policy, raw material policy, labor policy,
employment and training policy... These policies involve a number of Fair Trade criteria,
demonstrated by the following text:
Resolution 80/NQ-CP of 2011 on sustainable poverty reduction orientation period
from 2011 to 2020 emphasizes the role of vocational training and development as well as
special attention to people in mountainous areas, the poor and ethnic minorities (Concerning
principle 1 of FLO, Criterion 1 of WFTO).
Decree No. 66/2006/ND-CP July 7, 2006 of the Government on the development
of rural industries, including conservation policies, developing traditional craft villages,
investment support and infrastructure planning in craft villages. Local and Government
budgets are used for processing craft villages’ environment. The effective business plans are
supported in investment, interest rates, capital loan. Favorable conditions are created for trade
promotion activities. The application of science and technology in the production is
financially supported. Vocational training receives financial support from the national
program for job creation. (In relation to Rule 3 of FLO, Criterion 10 of WFTO).
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Decree No. 45/2012/ND-CP of the Government on industrial promotion, which
emphasizes the importance of the development of handicraft industry towards clean
production. (In relation to Rule 3 of FLO, Criterion 10 of WFTO).
Decision No. 1956/QD-TTG of the Prime Minister: Approve the project
"Vocational training for rural workers until 2020". (In relation to Principle 1 of FLO,
Criterion 8 of WFTO).
Decision No.11/2011/QD-TTG dated 18/02/2011 of the Prime Minister on
policies to encourage development of the bamboo and rattan industry. This decision provides
regulations on planning, policies and measures to encourage the development of bamboo and
rattan industry related to materials area creation, materials extraction, processing and
consumption of bamboo and rattan products. The production facilities will enjoy a tax rate of
0% while importing machines and equipments used in the production of bamboo and rattan
products. (In relation to Rule 3 of FLO, Criterion 10 of WFTO).
Compared to many developed countries and countries in the region, Vietnam lacks the
government policy to develop Fair Trade in particular, at both national and local level.
Moreover, there is no government agency to lead Fair Trade activities. Transparent and
appropriate Fair Trade policy will establish the legal framework for Fair Trade enterprises in
Vietnam. The policies support Fair Trade development in Vietnam will make businesses and
producers more responsible of labor, resources and environment. It will also help the
manufacturers in 5 industries, especially the workers of tea and handicrafts industry (80% of
whom are women) to have jobs and workers' rights will be respected. Therefore,
manufacturers will benefit the most, and local women will have their rights and receive
protection because they have multiple channels and tools to reclaim their rights. Fair Trade is
one of the important policy directions of Vietnam when joining the world economy. To fight
for Fair Trade, Vietnam will have to gradually implement Fair Trade from the domestic
market. This is also a factor confirming the strong development potential of Fair Trade in
Vietnam.
In addition, businesses and Associations want the Ministry of Agriculture and Rural
Development recognized Fair Trade as one of its confirmed certifications and households may
be supported in training by the Government. At the local level (province/ district/ commune),
the local authorities enact support policies by recognizing or encouraging businesses and
households in their industries to participate in the certification.