King of coffee

Trung Nguyen founder building a global brand with brews for all market segments.

When most people think of coffee they do not usually think of Vietnam. Few realise that the Southeast Asian nation last year surpassed Brazil as the world’s biggest coffee exporter. However, almost all of the output is low-quality robusta beans with high caffeine content, used mostly to make instant coffee.

Dang Le Nguyen Vu wants to change the country’s reputation as cheap coffee bean supplier, offering a luxury brand that appeals to both domestic and export markets.

Mr Vu’s involvement with coffee began in 1996 during his senior year in medical school, when he visited a home-stay in Buon Ma Thuot, the regional “coffee capital”. What struck him was the poverty of the local people and the low revenue the world’s second largest coffee producing country was receiving for its products.

“Spending time in the coffee region, I realised that Vietnam had the potential of achieving high economic growth and becoming a powerful economy if the coffee sector could be improved and upgraded. I wanted them to play in the right game,” he said in an interview in Trung Nguyen’s head office in Ho Chi Minh City.

Mr Vu pointed out that like most other growing nations, poor tropical countries typically receive only about 5% out of the money earned by the global coffee industry, where huge profits go to the likes of Nestle and Starbucks. The unfair trading environment brings to mind memories of how his family and millions of others in Vietnam had to fight against poverty.

“I was born during the Vietnam war. My parents worked at a small brick factory. We had to go through many difficulties and when my dad fell sick we didn’t have enough money to get him cured. I was very upset, couldn’t sleep at night, and I swore to myself that I would do my best to get my family out of poverty,” he recalled.

Mr Vu describes himself as a person with extreme views, some of which might even appear radical. A quick learner who always excelled in school, he was destined for a rewarding career. But after graduating from university, he decided he didn’t want to be a physician. Starting with a big dream but no money, he opened a small coffee business and named it Trung Nguyen or Central Highlands.

“The initial capital for my business was the trust of growers who gave me their beans based on the promise that I would share the profits with them,” he said. “I made coffee deliveries by bicycle (it was the only property he owned at that time). I had to go around and persuade everyone that I could make something big happen.”

Fifteen years later, Trung Nguyen has 3,000 employees and a truck fleet. It is Vietnam’s biggest coffee processor, exporting to 60 countries and planning greater expansion into China and the United States. It has around 60 cafes in Vietnam and aims to have 100 by the end of this year, with more franchised locations abroad as well. “My ambition is to make Trung Nguyen a global brand,” he told Asia Focus.

His company is already considered highly successful in the home market. But the big challenge he faces is convincing overseas customers that Vietnam can produce gourmet coffee.

Given the difficulties he overcame to build his company back when few people in Vietnam knew much about capitalism, let alone running a business, the next stage shouldn’t be too hard.

“There was no internet, no books or related materials on how to be an entrepreneur in Vietnam,” he said of the early days. “Our long history has always been engaged with wars. What I had to do was study by reading books such as The Art of War and applying them to my business. I found that the ideas could eventually turn to be an inspiration or an advice on how to succeed in a competitive business situation.”

Trung Nguyen now has its sights set on the world’s biggest name in coffee. Mr Vu maintains that most of Starbucks’ success lies in its branding, not the actual product. (“coffee-flavoured water” he called it in one media interview).

Implanting a story in consumers’ minds has been the key victory of the US-based chain, he added. He has also dismissed claims by Starbucks and some other large companies that they engage in fair trade with farmers.

He believes that his company has a much better story to tell about how it has improved the lives of people in Vietnam’s coffee-growing highland region.

Vietnam coffee industry has prospered as well, achieving sales of about $3 billion last year, by continuously improving agricultural productivity and adding more value through roasting, blending and packaging. Mr Vu foresees $20 billion in revenue from the country's coffee within 15 years.

Trung Nguyen purchases its coffee from ethnic minority farmers who live in the country’s Central Highlands, and imports technology and fertiliser to guarantee more stable productivity.

Capitalising on an emerging market with a growing number of affluent middle-class consumers, the 41-year-old entrepreneur now offers a range of luxury roast and ground coffees and has diversified into decaffeinated and instant coffee in order to capture a wider range of consumers.

“We expect to benefit from the fast-growing popularity of coffee in many traditional tea-drinking countries of Asia. I hope to lift Vietnamese coffee consumption from one kilogramme per head per year to as high as the five kilogrammes we see in Brazil,” said Trung Nguyen’s chairman, who says he drinks up to 10 cups a day.

“The whole point is that we need to connect and develop the coffee spirit and culture in producing countries like ours. Sales volumes in overseas markets are still considered quite small compared with those in Vietnam; I want to enlarge that share.

“For Asean, which is a market I see as a domestic rather than an international one, we will focus more on the distribution system, particularly for instant coffee. My job is to make everyone in the company believes the same as me.”

Passionate about learning and overcoming new challenges, the lover of books still finds time to read for some new food for thought. He says he wants to be remembered as an entrepreneur who brought the coffee industry into a new era and a person who devoted his whole life to sustainable development.

When asked if he had any plan for retirement, he tosses his head, and with an incredulous look says, “There are so many things I want to do. And in pursuing those goals, one lifetime isn’t long enough.”

About the author

columnist
Writer: Nithi Kaveevivitchai
Position: Asia Focus Reporter