Tea production, processing and consumption have seen high growth in the past few years in Vietnam. Despite Vietnam’s fifth position among the global tea producers, its export revenue ranks only 10th as about 90 percent of Vietnamese tea was exported in the form of raw materials. Insight from Vietnam Economic News.
Every year, Vietnam’s tea industry earns hundreds of millions of US dollars in export revenue. However, 90 percent of the tea export volumes are from raw tea products or in the form of mixed materials. The industry is in need of an effective solution for the added value problem.
Export volume - revenue paradox
The Ministry of Agriculture and Rural Development said that in the first 10 months of this year, Vietnam exported 116,000 tonnes of tea, worth 187 million USD and is currently among the world’s five top tea producers and also fifth leading tea exporter.
However, in terms of export revenue, Vietnam’s average export price has only reached 1,200 USD per ha, much lower than that of other exporters like Srilanka (1,200 USD per ha), Kenya (6,000 USD per ha) and only accounts for 60 percent of the global average price.
According to Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade Le Viet Nga, the reason Vietnam tea export value remains low is that about 90 per cent of Vietnamese tea was exported in the form of raw materials. There are few companies having invested to develop tea brands while there are so many companies involved in exporting tea. The latter only care about profits and willing to offer low quality tea products, which then affects the prestige of Vietnam's tea industry.
Bui Minh Hien, head of the Industrial Promotion Department, Industry Promotion and Consultancy Centre No.1, the Agency for Regional Industry Development (ARID) also pointed out that, the low Vietnamese tea export prices were attributed to problems in the chain of production and consumption of the tea industry today: small scale, lack of links in production, standards and policies on quality, food safety and hygiene management. In particular, the products slowly adapt to changes of the market tendencies and therefore were still considered as mixed products in order to reduce costs.
Solutions
There is a big contradiction between the export volumes and value in Vietnam's tea export. It is a very necessary to figure out a suitable solution to this problem, though not easy because there are still some disagreements about an orientation of the tea industry development.
Doan Xuan Hoa, Deputy Director of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production under the Ministry of Agriculture and Rural Development said to improve tea export turnover, Vietnam should raise export prices equal to the average level in the world market (2,200 USD per ton) and expand the tea cultivation scale, taking the large scale rice field model as a good example.
Based on experience and success of the tea processing and trading model of small households in Japan, Taiwan and China, Dr. Nguyen Duy Thinh from the Hanoi University of Science and Technology said that the combination of this model with the development of tea culture tourism is a suitable solution to Vietnam’s tea industry. Moreover, with tea growing and processing experience of Vietnamese tea growers, they can entirely produce high quality tea in large quantity and offer these products at high prices.
He also said the tea processing scale should be at least 500kg per day which means each production unit can produce 30-40 tonnes a year.
The development of Vietnam’s tea industry on industrial or households-oriented scale needs inspection and research of functional agencies. However, no matter the orientation is, the mechanisation in production and the shift of product structure which then bring higher added value remain the top priority of the industry./.
Every year, Vietnam’s tea industry earns hundreds of millions of US dollars in export revenue. However, 90 percent of the tea export volumes are from raw tea products or in the form of mixed materials. The industry is in need of an effective solution for the added value problem.
Export volume - revenue paradox
The Ministry of Agriculture and Rural Development said that in the first 10 months of this year, Vietnam exported 116,000 tonnes of tea, worth 187 million USD and is currently among the world’s five top tea producers and also fifth leading tea exporter.
However, in terms of export revenue, Vietnam’s average export price has only reached 1,200 USD per ha, much lower than that of other exporters like Srilanka (1,200 USD per ha), Kenya (6,000 USD per ha) and only accounts for 60 percent of the global average price.
According to Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade Le Viet Nga, the reason Vietnam tea export value remains low is that about 90 per cent of Vietnamese tea was exported in the form of raw materials. There are few companies having invested to develop tea brands while there are so many companies involved in exporting tea. The latter only care about profits and willing to offer low quality tea products, which then affects the prestige of Vietnam's tea industry.
Bui Minh Hien, head of the Industrial Promotion Department, Industry Promotion and Consultancy Centre No.1, the Agency for Regional Industry Development (ARID) also pointed out that, the low Vietnamese tea export prices were attributed to problems in the chain of production and consumption of the tea industry today: small scale, lack of links in production, standards and policies on quality, food safety and hygiene management. In particular, the products slowly adapt to changes of the market tendencies and therefore were still considered as mixed products in order to reduce costs.
Solutions
There is a big contradiction between the export volumes and value in Vietnam's tea export. It is a very necessary to figure out a suitable solution to this problem, though not easy because there are still some disagreements about an orientation of the tea industry development.
Doan Xuan Hoa, Deputy Director of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production under the Ministry of Agriculture and Rural Development said to improve tea export turnover, Vietnam should raise export prices equal to the average level in the world market (2,200 USD per ton) and expand the tea cultivation scale, taking the large scale rice field model as a good example.
Based on experience and success of the tea processing and trading model of small households in Japan, Taiwan and China, Dr. Nguyen Duy Thinh from the Hanoi University of Science and Technology said that the combination of this model with the development of tea culture tourism is a suitable solution to Vietnam’s tea industry. Moreover, with tea growing and processing experience of Vietnamese tea growers, they can entirely produce high quality tea in large quantity and offer these products at high prices.
He also said the tea processing scale should be at least 500kg per day which means each production unit can produce 30-40 tonnes a year.
The development of Vietnam’s tea industry on industrial or households-oriented scale needs inspection and research of functional agencies. However, no matter the orientation is, the mechanisation in production and the shift of product structure which then bring higher added value remain the top priority of the industry./.
