Greening Viet Nam’s Coffee Supply Chain

Walk down any street in Viet Nam, and it quickly becomes apparent that this country is crazy about coffee. In its capital, Hanoi, you’ll see people sipping on cups perched on low stools along the sidewalks, as well as inside its ubiquitous trendy cafes.

A local fruit vendor navigates a busy street in Hanoi, Vietnam.

Customers at the famous Cafe Giang are enjoying “cà phê trúng”, or egg coffee, a Hanoi specialty in which creamy egg white foam is served on top of dense coffee. At the counter sits Nguyen Tri Hoa whose father invented the drink in 1946. At the time, milk was extremely scarce in Viet Nam, so his father used egg yolk as a replacement instead. Necessity is the mother of invention, and today, thanks to this unique recipe, business is booming.

“We sell 400 cups of egg coffee daily. All our coffee beans come from the Central Highlands of Viet Nam,” says Nguyen Tri Hoa, who has a second cafe location in Japan. He hopes to use his growing success to promote Vietnamese coffee to the entire world.

Viet Nam’s Central Highlands

Globally, we drink over 500 billion cups of coffee each year. Yet most consumers don’t actually know where their coffee comes from.

While 67 percent of the world’s coffee is grown in Latin America, Viet Nam is, in fact, the second biggest coffee producer and exporter after Brazil. Production in Viet Nam has steadily increased from some 78,000 tons in 1990 to 1.8 million tons in 2018.

Robusta dominates Viet Nam’s coffee industry. Robusta coffee is bitterer and less aromatic than Arabica, so it is often used for instant coffee. This makes it a staple of commercial coffee giants such as Nestle (Nescafé), who have multiple factories in Viet Nam.

Coffee beans from Viet Nam

The Central Highlands region produces 95 percent of the country’s coffee. More than 80 percent of the coffee plots belong to smallholder farmers.

Cil Mup Ha Thoan and his wife Ro Ong K’Son are among the 600,000 households in Viet Nam that are directly employed by the coffee sector.

Ro Ong K’Son

“My husband and I have been growing coffee for 10 years,”

says Ro Ong K’Son,
a mother of five children.

They live in the Dung K’No commune of Lam Dong Province. Here, forests cover 80 percent of the land and the majority of the population belongs to the K’Ho ethnic minority group.

In 1985, the Government of Viet Nam started a coffee project here to boost rural development. Before then, the local people were hunting, selling timber and living off subsistence farming. With its high revenue potential, coffee soon became an attractive crop for smallholders.

Cil Mup Ha Thoanh and Ro Ong K'Son pictured with their daughter Ro Ong Massa.

Cil Mup Ha Thoan with his daughters. 

“We earn decent money by growing coffee. We can pay for our food, electricity and water bills. We can pay the tuition for our children,”

says Cil Mup Ha Thoan.

Between 1990 and 2000, coffee production increased significantly with the land area under cultivation growing ten-fold from 50,000 to 500,000 hectares.

“In 2018, we exported 1.8 million tons of coffee and obtained $3.54 billion USD in revenue, which played an important role in the socio-economic development of the region,” says Le Van Duc, Deputy Director of the Department of Crop Production at the Ministry of Rural and Agricultural Development (MARD) in Viet Nam.

A customer buys coffee beans at one of Hanoi's many coffee shops.

Environmental and Economic Concerns

Yet while this growth has bolstered the Vietnamese economy, it has not come without cost. Maintaining high levels of productivity has generated a series of environmental challenges, including deforestation and ecosystem degradation.

“The forest is the main thing we have to be concerned about. The second is soil and the third is water conservation,” says Hao Duc Bui, an agronomist expert in the Central Highlands working for the Sustainable Trade Initiative (IDH). “Farmers increasingly need more land for cultivation, so they cut down trees. We need to prevent that.”

A degraded and deforested area near Da Lat, in Lam Dong Province, Vietnam.

Another challenge is the fact that more than 20 percent of the aging coffee farms in Viet Nam need to be replanted. This, coupled with episodes of drought, has led to yields stagnating. As a result, maintaining high yields has become a function of heavy and sometimes inefficient application of fertilizers and pesticides by the farmers. For poor farming households, it is often difficult to generate the savings necessary to purchase increasing volumes of fertilizers and other agrichemical inputs required to compensate for diminishing yields.

“When the soil becomes poor, farmers need to apply more fertilizer. But local communities don’t have enough money to invest, so they borrow money from people outside of the banks at high interest rates that they cannot pay back, impoverishing them,” says Mr. Hao.

A bird's eye view of D'Kno Commune in Lam Dong Province.
A local farmer tends to his coffee trees in Lam Dong Province.

Worse, world coffee prices have fallen by two thirds since the early 1980s, and the earnings of coffee farmers have halved in that time. As a result, farmers are switching to other crops like black pepper, avocado and passion fruit in order to generate higher incomes.

Mr. Pham Cong Tri

“Coffee is one of the main crops helping farmers to make a living. However, climate change has directly impacted the effectiveness of coffee production,”

says Pham Cong Tri,
Head of the Agriculture Forestry Department of the Western Highlands Agriculture and Forestry Science Institute (WASI) in Viet Nam.

“If we can’t come up with suitable measures, the role of coffee as a primary crop will diminish. This is why it’s not just a concern of the agriculture sector and the coffee industry. The Vietnamese Government is also paying attention now.”

Declining agricultural yields not only represent a risk to farmers’ livelihoods, but also represent an operational risk to the global coffee supply chain, including international coffee roasters that source a significant portion of their supply from the Central Highlands.

“If these issues go on for another 10 or 15 years, 20 to 30 percent of coffee plantations will disappear. The remains will be severely eroded and productivity will decline. That’s a dreadful future for the coffee industry,”

says Pham Cong Tri.

Local coffee farmers working in Lam Dong Province.

Scaling up Sustainable Practices

Through the UN-REDD Programme, UNEP has been working with partners to scale up alternative cultivation practices that can support the long-term sustainability of the coffee sector, by reducing the pressure on the environment while maintaining production volumes.

Among them is the Sustainable Trade Initiative (IDH), an NGO that carries out a program in the Central Highlands that addresses three key issues: extreme climate events, particularly recurring droughts; deforestation; and agrochemical overuse. Joining forces with coffee companies, traders, and the Government in public-private platforms, IDH supports coffee farmers to become more climate-resilient, cost-efficient and improve their livelihoods.

Among the traders it works with is the local agribusiness ACOM, which gives regular trainings to the farmers of Lam Dong Province, including Cil and Ro.

“We realized that the farmers didn’t use pesticides according to any guidelines. They were also destroying the forests to grow coffee. We saw how it affected the environment negatively,”

says Cao Xuan Loc,
Manager of Sustainability Management Services at ACOM.

Mr. Cao Xuan Loc
Cao Xuan Loc (in white) from ACOM demonstrates pruning techniques to local farmers.

Trainings include lessons on soil regeneration, irrigation, pest control, and farming techniques like pruning. They also encourage the use of agroforestry and “intercropping” (combining multiple crops on one plot), which can diversify incomes and reduce the impact of coffee price fluctuation. Intercropping has the added benefit of providing shade for the coffee plants, which allows the coffee beans to mature more slowly, increasing their quality and as a result, price.

For smallholders, converting to climate-resilient models can provide economic benefits when compared to mono-cropping models. However, the conversion to alternative production models requires a substantial capital investment at the onset, which is followed by a period of limited revenue between replantation and first production. This makes the conversion financially challenging for poorer households, which lack access to additional financing.

To this end, UNEP is working in Viet Nam to complete a business case analysis to better understand the critical issues surrounding commodity supply chains and deforestation; building value chains in the country to connect supply chain actors and address issues of commercial viability of alternative models. It is also developing financial instruments for financial de-risking and incentivizing investments in sustainable land use.

Pine forests in the morning fog near Da Lat, Lam Dong Province.
Cil Mup Ha Thoan, his wife Ro Ong K’Son, and their five children.

Additionally, as part of a consortium of partner organizations including UNDP, CIAT, IDH and EFI, UNEP is now working to establish a zero-deforestation jurisdiction for commodity cultivation in four districts of the Central Highlands. This includes fostering partnerships with agricultural solution providers, agribusinesses, as well as public and private financial actors to develop financial systems that can channel the investment capital required for the conversion to more resilient agricultural production models. The aim is to help green Viet Nam’s coffee supply chain, one bean at a time, while increasing farmers’ livelihoods.

Story: Leona Liu, Asia-Pacific Regional Communications & Knowledge Management Specialist for the UN-REDD Programme in Bangkok, Thailand
Photographs by: Cory Wright/UN-REDD Programme
Videos by: Khuong Duy Do/UN-REDD Programme