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Comprehensive Analysis of Vietnam's Black Tea Export Business Strategy

GOOVER DAILY REPORT October 9, 2024
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TABLE OF CONTENTS

  1. Summary
  2. High-Quality Production Emphasis
  3. Technological Advancement and Innovation
  4. Strategic Market Diversification
  5. Promotional Activities and Market Presence
  6. Adaptability in Dynamic Global Markets
  7. Factors Driving Tea Export Growth
  8. Conclusion

1. Summary

  • The report provides an in-depth analysis of Vietnam's black tea export business strategy, focusing on high-quality production, technological advances, and market diversification. Key findings include the emphasis on specialty teas to increase profitability and the pivotal role of strategic trade relationships with countries involved in the Belt and Road Initiative. Notable insights demonstrate a shift towards premium tea products by brands like Thạch Cổ Trà to enhance export value. The Vietnam Tea Association (VITAS) advocates for advanced technology and quality control to remain competitive in global markets. The report also addresses the impact of post-pandemic market reopening and export price fluctuations on the tea industry, highlighting the potential for expansion into emerging markets by diversifying offerings and improving trade promotion activities.

2. High-Quality Production Emphasis

  • 2-1. Shift towards specialty teas

  • The Vietnamese tea industry is increasingly focusing on the production of high-quality specialty teas to enhance both domestic consumption and export markets. The Vietnam Tea Association emphasizes the need for domestic companies to prioritize high-quality tea products. During the period from 2018 to 2023, Vietnam exported between 125,000 and 140,000 tonnes of tea annually, generating a turnover ranging from US$220 to US$240 million per year. Notably, some companies have introduced high-end tea products, with prices reaching between $15,000 and over $50,000 per tonne. This contrasts sharply with the average export price of Vietnamese tea, which is only $1,700 to $1,800 per tonne, indicating a significant potential for profit in the specialty sector. Despite this potential, the proportion of high-quality tea products remains low in the overall export mix.

  • 2-2. Current export volumes and revenue analysis

  • In January 2024, the average export prices for Vietnamese tea to key markets ranged from US$1,300 to US$1,600 per tonne, with much higher prices in specific markets such as Germany, where average prices reached US$7,579 per tonne. The tea industry's overall trade dynamics indicate a trade surplus of US$4.1 billion by mid-February 2024, with total trade reaching US$84.74 billion and exports valued at US$44.42 billion. These figures illustrate the importance of improving trade promotion activities and advancing technology in order to enhance the export value of Vietnamese tea in the coming year.

3. Technological Advancement and Innovation

  • 3-1. Use of advanced technology in production

  • The Vietnamese Tea Association (VITAS) emphasized the importance of applying advanced technology in tea production to enhance export value. This recommendation aims to improve efficiency and quality, ultimately increasing competitiveness in the global market.

  • 3-2. Quality control measures

  • Quality control is critical in the Vietnamese black tea export industry. In January, average export prices to key markets reached between US$1,300 to US$1,600 per tonne. In Germany, for instance, prices significantly exceeded this range, reaching US$7,579 per tonne. This indicates a strong market demand for high-quality tea, underlining the necessity for stringent quality control measures to meet international standards and maximize export profits.

4. Strategic Market Diversification

  • 4-1. Trade relations with Belt and Road countries

  • Vietnam's tea export business has significantly benefitted from its trade relations with countries involved in the Belt and Road Initiative. According to data from the Tea Industry Committee of the China Association for the Promotion of International Agricultural Cooperation (CAPIACCTI), these partner countries emerged as the largest tea trade partners for Vietnam, with a total of 168,400 tons of tea traded in the first half of 2024. The expansion of trade with these nations is attributed to the easing of pandemic restrictions, which has allowed for a resurgence in export volumes. This relationship is essential for Vietnam’s strategy to diversify its market and increase export opportunities.

  • 4-2. Emerging market opportunities

  • The Vietnamese black tea export sector is diversifying through various emerging market opportunities. The recent rebound in tea exports during the first half of 2024 aligns with the reopening of markets and a shift in consumer preferences towards specialty teas. This trend is underscored by a notable increase in tea import volume from Vietnam observed in China, which reached 24,400 tons with a significant value increase of 41.5%. The report highlights that with ongoing advancements in technology and growing international relationships, Vietnam is strategically positioned to capitalize on these emerging markets, particularly in the specialty tea segment.

5. Promotional Activities and Market Presence

  • 5-1. International Exhibition Participation

  • The Vietnamese Tea Association (VITAS) has emphasized the importance of increasing the variety of Vietnamese tea booths at international exhibitions as part of its strategy to enhance tea export activities. This recommendation aims to improve trade promotion activities, facilitating better visibility and engagement with potential buyers in global markets.

  • 5-2. Direct Buyer Interactions

  • To augment the value of tea exports, VITAS has urged Vietnamese businesses to enhance direct interactions with foreign buyers. The association believes that such efforts in trade promotion will lead to improved relationships and better understanding between Vietnamese exporters and international customers, thus potentially raising the overall demand and pricing for Vietnamese tea products.

6. Adaptability in Dynamic Global Markets

  • 6-1. Responsive pricing strategies

  • Vietnamese firms are encouraged to produce high-quality tea products, including specialty teas, which enhances product value and promotes consumption. The average export price of Vietnamese tea is approximately $1,700 to $1,800 per tonne. However, some enterprises have successfully introduced high-end tea products at significantly higher prices, ranging from $15,000 to over $50,000 per tonne. This indicates a potential for revenue growth by offering higher quality products, although the current ratio of these specialty products remains low.

  • 6-2. Adapting to market fluctuations

  • The Vietnamese tea export industry experienced a rebound in 2024, particularly with the easing of pandemic restrictions and the expansion of trade with Belt and Road Initiative countries. The total export volume of tea in the first half of 2024 suggests a response to evolving market dynamics. Notably, the demand from China has increased, with Vietnamese tea exports to China generating a total export value of $5.16 million. This strategic adaptation showcases the industry's agility in the face of changing economic circumstances.

7. Factors Driving Tea Export Growth

  • 7-1. Impact of market reopening post-pandemic

  • The reopening of markets following the pandemic has facilitated a rebound in tea exports for Vietnam. As restrictions faded, trade with Belt and Road Initiative countries notably expanded. In the first half of 2024, exports from Vietnam saw significant recovery, indicating a strong resurgence of demand. Increased consumption and production of high-quality tea products were encouraged to meet both domestic needs and export demands, leading to greater product value and market engagement.

  • 7-2. Export price dynamics

  • Vietnam's export price dynamics reveal a notable disparity in tea prices. During the 2018-2023 period, Vietnam exported between 125,000 and 140,000 tonnes of tea annually, generating a turnover of approximately $220-240 million per year. The average export price for Vietnamese tea was around $1,700-1,800 per tonne. However, some high-end specialty teas commanded much higher prices, ranging from $15,000 to over $50,000 per tonne. This high-value segment, although profitable, represented a small proportion of total exports, emphasizing the need for a shift toward more premium tea products to boost overall revenue and profitability in the industry.

8. Conclusion

  • The Vietnamese black tea export industry is strategically positioned for growth through an emphasis on specialty teas, technological advancements, and robust market diversification. The Vietnam Tea Association (VITAS) plays a pivotal role in guiding industry efforts to enhance product quality and export potential, with significant opportunities emerging from trade with Belt and Road Initiative countries. Despite these prospects, challenges such as price fluctuations and maintaining international quality standards persist. Thạch Cổ Trà's success in the high-end market highlights the potential gains from premium tea segments. Future prospects involve delving into niche market segmentation and understanding globalization's impact on Vietnamese tea exports. The report suggests a continued focus on technological and trade advancements to capitalize on global demand shifts, emphasizing the importance of adaptability in dynamic economic landscapes to strengthen Vietnam's tea export foothold.

9. Glossary

  • 9-1. Vietnam Tea Association (VITAS) [Trade Association]

  • Provides strategic guidance and support for the Vietnamese tea industry, focusing on export growth and quality enhancements.

  • 9-2. Belt and Road Initiative (BRI) [Economic Initiative]

  • A strategic infrastructure and trade network that strengthens trade relations between Vietnam and participating countries, impacting tea export strategies.

  • 9-3. Thạch Cổ Trà [Tea Brand]

  • Specializes in high-end specialty teas, contributing to the shift towards premium tea production and enhancing export value.

10. Source Documents