Arabica craze tests Vietnam's grip on major market

The growing popularity of premium coffee – brewed from arabica beans – is to weaken the grip of Vietnam, the top robusta grower, among some of Asia's keenest consumers of the beverage.

South Koreans' thirst for coffee - which has taken their average annual consumption to an average of 1 kilogramme per person, five times the Asia-Pacific average – has historically been met by robusta beans, which have held a market share of 90%.

The "dominant" share of these has been met by imports from Vietnam, which ranks South Korea as its top developing-country export market, and ahead of many of the big Western importing countries such as France, Switzerland and the UK.

Arabica vs robusta

However, coffee made from arabica beans, grown mainly in South America has "consistently gained market share", US attaches in Seoul said, noting industry estimates that robusta's share could be reduced to 60% over the next five years.

Growth in South Korea coffee consumption

2010-11: 1.75m bags

2009-10: 1.71m bags

2008-09: 1.68m bags

2007-08: 1.55m bags

2006-07: 1.40m bags

Source: USDA

"As consumer tastes are becoming more sophisticated, they seem to demand more varieties and premium quality in coffee products," the attaches said in a report.

Already, some traditional robusta-based products, such as instant coffee sold through vending machine, are "facing a tough time".

Meanwhile, coffee shops are "offering exotic [arabica] coffee beans from places unfamiliar" in order to cash in on the "premiumisation" of the market.

Even in instant coffee, the robusta stronghold in most countries, arabica is taking a greater share, with Maxim, for instance, offering an "Arabica 100" product to cash in on the change in palate.

Market opportunity

Indeed, South Korea appears to be in a "transitional phase" over the "spread of arabica-based coffee", the attaches said.

And, given the pace of consumption growth - expected by the USDA at 2.6% this year, taking expansion in five years above 20% - that represents a significant opportunity for arabica suppliers, among which Vietnam has a lowly rating.

Vietnam's arabica harvest, while growing, represents less than 3% of national coffee output, and, at less than 500,000 bags, is well below that of top African coffee producing countries, such as Ethiopia and Tanzania, let alone that of Americas' heavyweights such as Brazil and Colombia.

Nonetheless, Vietnam's growers are enjoying strong prices for their produce, with cash robusta prices hitting a record, in local terms, of 45.7m dong ($2,200) a tonne on Tuesday.

The high prices have lured out sellers this month, fostering a rise to 90,000 tonnes (1.5m bags) in coffee exports, a rise of 16.9% year on year, data on Friday showed.

(Source: http://www.agrimoney.com/news/arabica-craze-tests-vietnams-grip-on-major-market--2867.html)