Nestlé to Increase Direct Coffee Purchases From Vietnam Farmers

Posted on September 5, 2012


Nestle SA (NESN), the world’s largest food company, plans to boost so-called direct purchases of coffee from farmers in Vietnam by as much as five times over the next half decade to improve quality as demand increases.

Workers sort through green robusta coffee beans at a processing plant in Ho Chi Minh City, Vietnam. Photographer: Jeff Holt/Bloomberg

Nestle Vietnam Ltd. may buy about 60,000 metric tons from growers a year by then, compared with 12,000 to 14,000 tons this year, Managing Director Rashid Qureshi said in an interview yesterday. The local unit of the Vevey, Switzerland-based company started direct buying late last year, he said.

Vietnam, the biggest coffee exporter after Brazil, is the largest shipper of robusta beans that are used to make instant drinks. At present, Nestle buys 200,000 tons to 250,000 tons of Vietnamese coffee a year, Qureshi said. The 2011-2012 harvest was a record 1.55 million tons, according to a Bloomberg survey.

“Shortening the supply chain to reach more directly to farmers will improve the growers’ income, as well as traceability of the coffee,” Qureshi said in Hanoi. “We can train them, help them increase yield and quality of coffee.”

Production in Vietnam in the season ending this month may gain 7.9 percent to 21 million, 60-kilogram (132 pound) bags, the International Coffee Organization said yesterday. The gain helped the group raise its estimate for worldwide coffee output in 2011-2012 to 132.7 million bags from an earlier call of 131.4 million bags and last year’s harvest of 134.3 million bags.

Robusta futures have gained 15 percent to $2,081 a metric ton on NYSE Liffe in London this year as roasters use more of the cheaper grade. Costlier arabica has declined 27 percent on ICE Futures U.S. in New York in 2012.

Dak Lak
Nestle invested in a procurement center in Dak Lak, the main coffee-growing region, and set up a mill there to process beans, he said. Coffee consumption in Vietnam may double over the next decade, and Nestle’s sales of coffee products may see double-digit growth every year in the period, he said.

Nestle will start producing soluble coffee, mainly for local sale, at a $270 million plant in Dong Nai province in November after a first phase of construction is completed, Qureshi said. A second phase will be finished next year, with production of decaffeinated coffee planned for export, he said.