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Trung Nguyen Coffee Group Seeks Foreign Strategic Partners

March 30, 2012 (by Nguyen Pham Muoi of Dow Jones Newswires) — Trung Nguyen Coffee Group Corp., Vietnam’s biggest coffee processing firm, is seeking foreign strategic partners to boost global sales of its coffee products, Chairman Dang Le Nguyen Vu said Thursday.

“We have strong local supply sources and technology to make special products, and now we want to build a partnership with foreign investors to meet rising global demand for our coffee products,” Vu told Dow Jones Newswires in an interview in Hanoi.

Vu said privately owned Trung Nguyen, which is based in Ho Chi Minh City, aims to raise revenue to $1 billion by 2015 from $370 million this year. In 2011, the company had revenue of $250 million.

“We have exported special products to more than 60 countries, of which the U.S., South Korea and China are the biggest markets,” Vu said, adding that China has been the firm’s fastest growing market in recent years.

Trung Nguyen has invested $110 million to build five processing plants and four of them have started operations with a combined annual output of more than 60,000 tons of processed products, including instant coffee and roasted coffee beans, Vu said. Its most recent plant opened Wednesday.

The fifth plant, in Buon Ma Thuot city in Dak Lak province in the central highlands of Vietnam, will be the company’s biggest coffee processor and is set to become operational next year with a daily output of more than 100 tons of instant coffee for export, he added.

Demand for Trung Nguyen’s G7 instant coffee products has markedly increased in recent years in both local and foreign markets, Vu said. To meet the demand, the company on Wednesday opened a $30 million plant in Bac Giang province in the north of Vietnam with an initial daily processing capacity of more than 100 tons of instant products for the northern Vietnamese and Chinese markets.

Trung Nguyen’s G7 instant coffee currently has a 75.8% market share in the north of Vietnam and a 38% share of the national market. This compares with the nationwide market share of 35% held by local rival Vinacafe Bien Hoa Joint Stock Co. and the 22% share held by global food and beverage giant Nestle SA , Vu said, citing surveys by international marketing firms. It also exports the G7 brand via Costco supermarkets in the U.S. and E-Mart in South Korea, as well as small importers in Japan and China.

Though Vietnam is the world’s second biggest coffee producer after Brazil, the country has only processed about 12% of its total bean production, Vu said. “On average, each Vietnamese consumes only about one kilogram of processed beans a year, and I see very large room to boost that, with an initial target of raising it to three kilograms after the next five years, and Trung Nguyen will dominate the local market,” Vu added.

Given the naturally favourable conditions for coffee plantations in Vietnam, the country is likely to generate annual revenue of $10 billion to $20 billion in the coming years from its coffee processing industry, much higher than its total annual coffee export earnings in recent years, Vu added.

According to the government’s statistic figures, Vietnam exported 1.15 million metric tons of coffee beans valued at $2.425 billion in the 2010-2011 crop year, compared with 1.16 million tons valued at $1.663 billion in the previous year.


* By Nguyen Pham Muoi, Dow Jones Newswires; 84-4-35123041; phammuoi.nguyen@dowjones.com


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