Export demand for coffee: The case of Intimex Vietnam JSC
A study of Export Demand for Coffee: The
Case of Intimex Vietnam JSC
Name
: Nguyen GiaPhuc
English Name : Clinton
Date of Birth : 25/09/1963
Hanoi – 2013
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Export demand for coffee: The case of Intimex Vietnam JSC
ACKNOWLEDGMENTS
I would like to thank Dr. Eduardo T. Bagtang and the International
center Education of Thai Nguyen University, Southern Luzon State
University for guiding me throughout this research and for providing
me with the opportunity to conduct this research and for helping me to
carry out the necessary revisions to this dissertation.
I would also like to express my deep gratefulness to Vietnam
Intimex Company for providing me with useful and necessary
information for doing this research, to my wife, my son and daughter,
my colleagues for encouraging, inspiring me when I conduct this
research, giving necessary feedbacks for making this dissertation
successful.
Finally, I would like to thank all my classmates for giving me
constant support and encouragement as well as helping me with needed
materials and reference.
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Export demand for coffee: The case of Intimex Vietnam JSC
APPROVAL SHEET ..................................................................................................... x
CHAPTER I: THE PROBLEM AND ITS BACKGROUND ................................ 11
1.1. Background of the study ................................................................................... 14
1.2. Statement of the problem .................................................................................. 18
1.3. Objectives of the study...................................................................................... 18
1.4. Hypotheses of the study .................................................................................... 20
1.5. Significance of the study ................................................................................... 20
1.6. Scope and Limitations of the Study .................................................................. 20
1.7. Location of the study ........................................................................................ 21
CHAPTER II: REVIEW OF RELATED LITERATURE AND RELATED
STUDIES .................................................................................................................... 23
2.1. Coffee Production in Vietnam .......................................................................... 23
2.1.1. Coffee Export into USA‘s market.............................................................. 26
2.1.2. Vietnam coffee export: Lesson learnt ........................................................ 29
2.1.3. Vietnam coffee industry at present ............................................................ 31
2.2. Future of Vietnam Coffee Export ..................................................................... 36
2.2.1. Quality Improvement for Vietnam coffee.................................................. 37
2.2.2. Production cost reduction .......................................................................... 37
2.2.3. Variety and product shifting, production adjustment to the market
demands ............................................................................................................... 38
2.2.4. Coffee consumption promotion in the domestic market as well as to great
potential countries ................................................................................................ 39
2.2.5. Reorganization of production and export structure in a better scientific,
modern, effective and steady way ........................................................................ 39
2.3. Major Market For Coffee Exports .................................................................... 40
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Export demand for coffee: The case of Intimex Vietnam JSC
2.3.1. Problems Encountered in Doing Business in the US ................................. 41
2.3.2. Countries Considered by Vietnam as Competitors .................................... 42
2.4. Company Analysis: The Intimex JSC Vietnam ................................................ 43
2.4.1.
Features .................................................................................................. 43
2.4.2.
Organizing structure............................................................................... 45
2.4.3.
Management ........................................................................................... 46
2.4.4.
Achievements of Intimex Vietnam ........................................................ 50
2.5. Other Related Studies ....................................................................................... 51
2.6. Conceptual Framework ..................................................................................... 61
CHAPTER III: METHODOLOGY ......................................................................... 64
Methods and Procedures .......................................................................................... 64
3.1. Research Design and Methodology .................................................................. 64
3.2. Respondents of the Study.................................................................................. 64
3.3. Data Gathering Tools ........................................................................................ 65
3.4. Treatment of Data ............................................................................................. 67
CHAPTER IV: RESULT AND DISCUSSION ....................................................... 69
4.1. The Current Status of the Coffee Exporting Companies of Vietnam ............... 69
4.2. Qualitative Data Analysis ................................................................................. 89
4.2.1. Existing competitors and market structure of coffee export ...................... 89
4.2.2. Product Quality .......................................................................................... 91
4.2.3. Coffee drinking trends in the American..................................................... 92
4.3. Test of Significant Relationship........................................................................ 94
4.3.1. Hypothesis testing .................................................................................... 100
4.3.2. Individual partial coefficient test ............................................................. 102
4.3.3. Testing overall significance of the multiple regressions.......................... 105
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Export demand for coffee: The case of Intimex Vietnam JSC
4.3.4. Testing the drop variable in the regression model ................................... 106
4.3.5. Errors in the model................................................................................... 108
CHAPTER V: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 116
5.1.
Summary of Findings .................................................................................. 116
5.2.
Conclusions ................................................................................................. 119
5.3.
Recommendations ....................................................................................... 120
BIBLIOGRAPHY
APPENDICES
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Export demand for coffee: The case of Intimex Vietnam JSC
ABSTRACT
Following the trend of globalization, especially after Vietnam joins the WTO, in
order to enter the international playing field, Vietnam has determined that it needs to
boost exports. In terms of agricultural products, the export of coffee is one of the first
priorities. With that business orientation, enterprises specializing in processing and
exporting coffee are looking for strategy to penetrate international markets. One of the
leading enterprises pursuing this direction is the Vietnam Intimex Joint Stock
Corporation (Intimex). With its export turnover reaching an annual average of nearly
$300 million, Intimex is the leading enterprises in Vietnam of which product lines
have been certified by many associations of coffee in the world, namely 4C,
UtzKappeh, Organic coffee.
For several years, the United States (U.S) has become one of the biggest importers
of coffee products. The Intimex‘s export value of coffee to this market accounts for
US Dollar 200 million in 2009.
With a view to maintaining its dominant status in this field and increasing its
market shares in the U.S, Intimex always place much importance to the marketing
activities, having the good marketing mix will bring efficiency to the company‘s
export business.
Given the above-mentioned rationale, I have decided to choose the topic: A study
of export demand for coffee: The case of Intimex Vietnam JSC.
After collecting data from both primary sources by utilizing questionnaires,
interviews and secondary sources: articles, published documents, books and online
articles, regression analysis models were utilized to find out the factors affecting
coffee import demand of the US. By statistical approaches, the dissertation points out
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Export demand for coffee: The case of Intimex Vietnam JSC
different qualitative and quantitative factors that have influence on the coffee import
demand. These factors are:
Quantitative data: commodity price, coffee beverage price index,
price of the biggest substitute, and coffee market share.
In data analysis, E-view program was used to deal with figures from secondary
sources. By statistical methods, I draw the conclusion about the dependent variables
as follow
On the hypothesis of significant relationship, it was found out that the key
factors affecting coffee import demand are commodity price, price of the
biggest substitute (tea) and coffee market share of Vietnam in the US market.
The commodity beverage price index of the U.S. as one of the four has no
significant impact on the dependent variable.
The model of regression analysis has been checked for errors: multi-co
linearity, heteroskedasticity and autocorrelation. In general, after conducting
a set of statistical treatments, the model proves to be quite reliable and can
explain the dependent variable based on independent variables.
After data analysis using regression models, results are drawn and conclusions are
made. Based on those results and conclusions, I have point out the recommendations
to improve current situation of coffee export to the US markets in Chapter 5. These
conclusions are based on findings from the data analysis and qualitative data
assessment.
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Export demand for coffee: The case of Intimex Vietnam JSC
LIST OF FIGURES
Figure 1: Organizational Chart of Intimex Vietnam .................................................... 17
Figure 3: Coffee productivity, area, and output in province Daklak in period 2006–
2012 (%)....................................................................................................................... 25
Figure 4: Vietnam coffee export market share 2st half of 2013 .................................. 26
Figure 5: Amount and value of coffee export into USA‘s market for period 2006–
2012.............................................................................................................................. 27
Figure 2: Conceptual Paradigm ................................................................................... 63
Figure 6: Data collection and process .......................................................................... 66
Figure 7: Coffee market shares .................................................................................... 80
Figure 8: World's export value of coffee ..................................................................... 90
Figure 9: Heteroskedasticity graph ............................................................................ 111
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Export demand for coffee: The case of Intimex Vietnam JSC
LIST OF TABLES
Table 1: Vietnam Coffee export to the world .............................................................. 36
Table 2: List of respondents......................................................................................... 70
Table 3: No. of Companies with Coffee as Major Export ........................................... 71
Table 4: Coffee Export destinations ............................................................................ 72
Table 5: Type of Coffee being exported to USA ......................................................... 72
Table 6: Possible problems when doing business in the US for Vietnam coffee
enterprises .................................................................................................................... 73
Table 7: Opportunities for Vietnam coffee exporters .................................................. 74
Table 8: Solutions posed by respondents ..................................................................... 75
Table 9: US Import Policies That Affected the Coffee Export Business of Intimex
Vietnam JSC to US ...................................................................................................... 76
Table 10: Factors that affected the market share of Vietnam Coffee Export .............. 77
Table 11: Vietnam Government Interventions to Help Coffee Industry ..................... 78
Table 12: Countries Considered as Competitors in Coffee Export.............................. 79
Table 13: Marketing Strategies Adopted and Found to be Effective as Identified by
Intimex Vietnam JSC ................................................................................................... 81
Table 14: Product Policies Adopted and Found to be Effective by Intimex Vietnam
JSC as Marketing Strategy ........................................................................................... 82
Table 15: Distributor chain Policies Adopted and Found to be Effective as Marketing
Strategy as Identified by Intimex Vietnam JSC ........................................................... 83
Table 16: Price Policies Adopted and Found to be Effective as Identified by Intimex
Vietnam JSC ................................................................................................................ 84
Table 17: Advertisement Policies Adopted and Found to be Effective as .................. 85
Table 18: Challenges experienced by Intimex ............................................................. 86
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Export demand for coffee: The case of Intimex Vietnam JSC
Table 19: Measures and Strategies Recommended by Intimex Vietnam JSC to
Increase Volume of coffee Export to the US ............................................................... 88
Table 23: Analysis of Covariance .............................................................................. 100
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Export demand for coffee: The case of Intimex Vietnam JSC
THAI NGUYEN UNIVERSITY
Socialist Republic of Vietnam
SOUTHERN LUZON STATE UNIVERSITY
Republic of the Philippines
APPROVAL SHEET
This thesis, entitled ―A STUDY OF EXPORT DEMAND FOR COFFEE:
THE CASE OF INTIMEX VIET NAM JSC‖, prepared and submitted by Nguyen
Gia Phuc in partial fulfillment of the requirements for the degree of Doctor in
Business Administration, has been examined and recommended for acceptance and
approval for FINAL ORAL EXAMINATION.
Adviser
July 25, 2013
Date
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Export demand for coffee: The case of Intimex Vietnam JSC
CHAPTER I: THE PROBLEM AND ITS BACKGROUND
Introduction
Founded in 1979, Intimex Vietnam JSC has operated for 32 years with many ups
and downs along with the economy of Vietnam. Until now, the company has got
remarkable achievements during the operation and development process, Intimex has
affirmed its position in the domestic and international market, to become one of the
leading companies in import and export, supermarket business and manufacturing
sectors of Vietnam (Intimex Company Profile, 2010).
The success was recognized by the State, in 1986 the Government decided to put
Intimex into one of the largest corporations of the Ministry of Domestic Trade,
Intimex has been as important as the big corporations for many years in the industry
and in 1988 the company has been honored by the State with the third class Labor
medal (Intimex Business History, 2010).
A relatively new activity for beginning period, has been thoroughly exploited by
Intimex was sales of foreign currency for staff and oversea students,...( called spot
export) in order to take advantage of markets and products and that were legalized by
the States, Intimex implemented the strategy and the results were very encouraging.
The creative application of this policy increased the Company's foreign currency
funds a lot.
In the early 90s, the subsidy economic mechanism was eliminated, Intimex and
other businesses throughout the country are confident to get into the market economy.
State regulatory mechanism was the open but social upheaval was really complicated,
the economic policies of the Party and State are in the testing phase that was a time
series of companies protected by subsidy system failed to operate to generate income.
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Export demand for coffee: The case of Intimex Vietnam JSC
Unemployment rose and there was a production surplus. Intimex was also one of the
units enjoying the advantages of the mechanism of the subsidy system, so it was also
inevitably affected by this storm surge. The company had to face lots of disadvantages
now.
Facing this difficult, company leaders, trade unions and staff tried their best to
overcome, the measures were set out in line with new situations, and the quota was
initially formed. Open regulations facilitate companies to promote creativeness in
doing business. Thanks to the positive measures, the company has survived and
developed until now.
In the following years, the company continued to perfect the by-the-piece
mechanism for departments that have taken initiative in creating a dynamic business,
breaking the deadlock and stagnation. The company's activities were close with the
market and brought about certain results, maintaining the company's development,
ensuring the lives of employees, while many other state enterprises went bankruptcy
or made losses.
Entering the new millennium, besides the basic advantages, the company faced
many difficulties and challenges. The world economy faces new recession cyclones.
Integration process poses new issues to businesses, especially trading companies: to
exist or not in the context of cumbersome structural apparatus, inappropriate labor and
wage policy with market economies, outdated and seriously degraded infrastructure,
working capital losses in the mechanism transition process. In that context, what to do
to bring the company through tough times and create the competitiveness in the
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Export demand for coffee: The case of Intimex Vietnam JSC
market and integrate into the international economy? This is a difficult problem that
companies have to find an optimal solution. The 5-year business strategy (2001-2005)
was born in this situation and has demonstrated the validity through remarkable
results. In particular, the export performance of the Company continues to rise:
exports turn-over has soared admirably. A rapid rise in exports has contributed to
enlarge rapidly the scope of the company.
Over the past few years, Intimex had the boom in import and export business,
especially exports turn-over. In 1999, Intimex‘s export turnover was USD 23 million
and in 2007, it reached USD 227 million (Intimex Company Profile, 2010). The
company's exports accounts for 70% of the total import and export with mainly
agricultural products, especially coffee and pepper. For many consecutive years,
Intimex was number two on coffee exports and was the best pepper exporter in the
country. Thanks to Intimex‘s export activities, Vietnam's strong traditional
commodities such as coffee, pepper, agricultural and aquatic products ... have
affirmed its position in the world's largest market. The company has been very proud
of the results.
To achieve such great success, Intimex concentrated on developing export, export
growth was the company‘s first priority. Intimex actively enhance the value of goods
processing of exported products, production development by investing in a number of
manufacturing and processing factories of agricultural products such as: Clean pepper
processing plant in Binh Duong, cassava starch production plant in Nghe An, the
aquatic plant in Thanh Hoa... These projects are and will help ensure high-quality and
stable supply of goods for domestic market and export. Besides, Intimex always
focused on improving export business to raise the prestige in the domestic and
international market.
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Export demand for coffee: The case of Intimex Vietnam JSC
Besides business, Intimex also focuses on market development. The company has
been doing business with more than 100 countries and is continuing to looking for
new customers. It also actively participates in business promoting activities and trade
fairs.
Intimex pays special attention to human factors. The staff of the company has
continuously improved their knowledge and raise qualifications as well as
professional abilities. The achievements of Intimex today were the contribution of the
Board of Directors and Company‘s employees.
With these achievements, the company has received numerous awards by State
agencies and organizations, namely Vietnam Gold Star Award in 2005, the title of the
most satisfying supermarket in 2008, golden Cup for supermarket brand in 2009, Top
500 enterprises in Vietnam in 2008, 2009 and 2010 ... Especially in 2009, to
commemorate the 30th anniversary, the company was honored by the State with the
Second Class Labor Medal (Intimex Company Profile, 2010).
Since 2009, the Company began operating paradigm from state-owned enterprises
into a joint stock companies. In the early days of operation under the new model,
there were difficulties to be solved, obstacles and many challenges that Intimex had to
overcome, but in the context of new opportunities and challenges, the company will
continue to utilize its available and potential strength to further confirm its leading
position in the field of import-export and domestic business and to promote
production. That is the goal orientation of Intimex Corporation Vietnam today.
1.1. Background of the study
Coffee was introduced to Vietnam in 1857 by the French and slowly grew as
producer of coffee in Asia. The height of coffee production occurred in the early 20th
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Export demand for coffee: The case of Intimex Vietnam JSC
century as small scale production shifted towards plantations. The first instant coffee
plant, Coronel Coffee Plant, was established in Biên Hòa, Đồng Nai Province in 1969,
with a production capacity of 80 tons per year.
The Vietnam War disrupted production of coffee in the Buôn Ma Thuột region,
the plateau on which the industry was centered. Although seldom involved in conflict,
the area was a crossroads between North and South and was largely depopulated.
After the North Vietnamese victory the industry, like most agriculture, was
collectivized, limiting private enterprise and resulting in low production.
Following ―Đổi mới‖ reforms in 1986, privately-owned enterprise was once again
permitted, resulting in a surge of growth in the industry. Cooperation between
growers, producers and government resulted in branding finished coffees and
exporting products for retail. It was during this time that many new companies
involved in coffee production were established, including Đắk Lắk-based Trung
Nguyên in 1996 and Highlands Coffee in 1998. Both of these continued on to
establish major brands distributed through a widespread network of coffee shops. By
the late 1990s, Vietnam had become the world's #2 coffee producer after Brazil, but
production was largely focused on poor-quality Robusta beans—considered inferior
to Arabica due to their bitterness—for export as a commodity (Vietnam Coffee
Annual Report, 2010). Recent government initiatives have sought to improve the
quality of coffee exports, including more widespread planting of Arabica beans, the
development of mixed-bean coffees, and specialty coffee such as kopi luwak
(Vietnamese: cà phê chồn, "weasel coffee").
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Export demand for coffee: The case of Intimex Vietnam JSC
By 2000, coffee production had grown to 900,000 tons per year. Price decreases,
however, led annual production to drop to around 600,000 tons/year in 2003. In 2009,
Reuters reported Vietnamese coffee exports at "an estimated 1.13 million tons" for the
previous year, stating that coffee was second only to rice in value of agro-products
exported from Vietnam (GSO, 2010).
Vietnam is the second largest producer after Brazil, accounting for 14.3 per cent
of the world market share (World Bank, 2010). The quality of the beans, however, has
typically limited their marketability. Robusta coffee accounts for 97 per cent of
Vietnam's total output, with 1.17 million tons exported in 2009, a value of USD 1.7
billion (GSO, 2010). Arabica production is expected to rise owing to the expansion of
growing areas. Other types of coffee grown in Vietnam include Chari (Excelsa) and
Catimor.
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Export demand for coffee: The case of Intimex Vietnam JSC
Chief Executive Officer Board
Management Division
Business Division
Market Management
Wholesale and Store
Finance-Accounting
Business 1
General Economy
Business 2
Human Resource
Business 3
Direct Units
Subsidiary Companies
Joint-venture Companies
Intimex Hanoi
Production and Trade
Joint stock Company
Intimex Saigon Joint
stock Company
Intimex Export and
Import Company
Training Staff
Administrative
Intimex
Quang
Minh
HaoNam
Intimex
Market
Intimex
Commer
ce&
Service
Intimex
QuangNi
nh
Lac
TrungInt
imex
Market
Intimex
HaiPhon
g
Huynh
ThucKha
ngIntime
x Market
IntimexT
hanhHoa
Dinh
Cong
Intimex
Market
Intimex
Nghe An
HoaBinh
Intimex
Market
Intimex
Da Nang
Hung
Yen
Intimex
Market
Intimex
Dong
Nai
Hai
Duong
Intimex
Market
SwordLa
keIntime
x Market
QuyNho
nIntimex
Market
Figure 1: Organizational Chart of Intimex Vietnam
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Export demand for coffee: The case of Intimex Vietnam JSC
INTIMEX Company is one of the leading coffee export enterprises in the country
besides other commodities. The company has got many important achievements that
have been recognized by the state organizations such as Ministry of Industry and
Commerce, Ministry of Agriculture and Rural Development.
In 2006, the company received the title of ―The company with excellent
achievements‖ Award held by International Economic Cooperation Committee and 53
other organizations.
INTIMEX Company is one of the leading coffee export enterprises in the country
besides other commodities. The company has got many important achievements that
have been recognized by the state organizations such as Ministry of Industry and
Commerce, Ministry of Agriculture and Rural Development.
In 2006, the company received the title of ―The company with excellent
achievements‖ Award held by International Economic Cooperation Committee and 53
other organizations.
1.2. Statement of the problem
The coffee-exporting Vietnam companies are relatively small and medium in size.
These companies particularly INTIMEX aim to expand their market share in coffee in
the United States of America (USA). In order to this, the companies must understand
the playing field they have to do business into.
This study therefore aimed to
determine the measures and strategies to increase the volume of coffee export to the
USA.
1.3. Objectives of the study
1. To determine the current status of the companies in terms of?
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Export demand for coffee: The case of Intimex Vietnam JSC
a. Major business of the company
b. Major market for coffee exports
c. Types of coffee exported to the US
e. Expansion of coffee export to the US
2. To determine the problems encountered in doing business in the US.
3. To identify possible solutions to the problems encountered in doing business in the
US.
4. To know the specific Import policies of US that affected the Intimex Vietnam JSC
coffee export business to the US?
5. To determine the factors that affected the market share of Vietnam coffee exporting
companies to the US as per experience of Intimex Vietnam JSC?
6. To determine the interventions that the Vietnam Government have introduce to
help coffee export to the US?
7. To know the countries that Vietnam would consider as competitors in terms of
coffee export to the US?
8. To determine the experiences of Intimex Vietnam JSC that helped the company
became Successful in terms of the following:
8.1. Marketing strategy
8.2. Product Policies
8.3. Distributor chain Policies
8.4. Price Policies
8.5. Advertisement Policies
9. To identify the challenges experienced by Intimex Vietnam in exporting coffee?
10. What Measure and strategies can INTIMEX Vietnam JSC propose to increase
volume of coffee export to the US?
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