What does Nestle's Tri An investment mean for Vietnam coffee?
Nestlé Vietnam will invest US$100 million to expand capacity at its Tri An coffee factory in Dong Nai Province. The plant makes products for Nescafé, Nescafé Dolce Gusto and Starbucks and exports to more than 29 countries. Nestlé has put over US$500 million into the site since 2011 and runs six factories in Vietnam, where it has operated for nearly 30 years.
The announcement came as global coffee prices stayed high. Vietnam's green coffee in the Central Highlands traded at roughly VND 68.5 million to 69.5 million per ton, slightly below the previous VND 70 million level. In 2023 the country exported more than 1.62 million tons, down 8.7 percent, yet earned a record US$4.24 billion, up 4.6 percent, with December shipments jumping 74 percent from November. Weather disruptions and the Red Sea shipping crisis added supply pressure.
Global coffee prices remain elevated. As a key producing region, Vietnam's domestic green coffee quotes have retreated slightly from earlier highs but are still at relatively high levels. Meanwhile, Vietnam's coffee exports in 2023 showed a pattern of lower volume but higher value, with total export value hitting a record high. To meet growing market demand, Nestlé announced an additional US$100 million investment in its Tri An coffee factory in Dong Nai Province, Vietnam, to expand production capacity. Behind this decision are both expectations of recovering coffee consumption demand and supply-side disruptions such as weather factors and the Red Sea shipping crisis. This article reviews recent coffee price trends, Vietnam's export data, Nestlé's layout in Vietnam, and the multiple factors affecting market supply and demand.
Data recently released by the Vietnam Coffee and Cocoa Association (Vicofa) shows that the estimated price range for green coffee in the Central Highlands is VND 68.5 million to VND 69.5 million per ton. Compared with the previous level of VND 70 million per ton, this price has edged down slightly but is still operating at a high level overall.
In 2023, Vietnam's coffee export volume exceeded 1.62 million tons, down 8.7% from 2022, yet total export value reached a record high of more than US$4.24 billion, up 4.6% year on year. The average coffee export price for the year was about US$2,614 per ton, up 14.5% from 2022. Particularly noteworthy is that in December 2023 alone, export volume surpassed 207,613 tons, surging 74% from November.
Facing continued growth in demand, Nestlé Vietnam recently announced that it will invest US$100 million to increase the capacity of its Tri An coffee factory in southern Dong Nai Province. The move is intended to better meet the rising demand for high-quality coffee among consumers in Vietnam and internationally. At present, the Tri An factory produces coffee products for iconic brands such as Nescafé, Nescafé Dolce Gusto, and Starbucks, and exports to more than 29 countries worldwide. Since 2011, Nestlé's cumulative investment in the factory has exceeded US$500 million. Nestlé has six factories in Vietnam, covering areas including coffee, cocoa malt beverages, culinary aids, and water, and has been in the Vietnamese market for nearly 30 years.
The recent rise in coffee prices has mainly been driven by a mix of factors including increased consumer demand, weather conditions, and the Red Sea crisis. On the weather side, several coffee-producing countries previously suffered severe conditions brought by El Niño, leading to lower coffee output. Along with lower production, exports also declined, and against the backdrop of growing demand, supply has tightened, allowing prices to remain high.
The International Coffee Organization previously noted that in 2022/23, affected by the chain reactions of the COVID-19 pandemic, including rising living costs and falling disposable incomes, global coffee demand shrank by 2% to 173.1 million bags. However, the organization expects global coffee consumption to recover in 2023/24 and grow by 2.2% to 177 million bags. The Red Sea crisis is also one of the factors pushing prices higher. Because Houthi armed forces attacked commercial ships in the Red Sea, some shipping companies had to adjust routes, which both increased transport costs and extended shipping times.
However, positive signals have also emerged recently. More than 20 countries, including the United States and the United Kingdom, jointly launched a maritime security mission called "Operation Prosperity Guardian," aimed at strengthening shipping security in the Red Sea region. If maritime security issues are effectively resolved in the future, transport prices are expected to fall back to normal levels.
The above content is compiled by CoffeeHunters, a coffee news website.
