Vietnam’s coffee industry is facing some of its greatest challenges in recent memory. A combination of falling prices and lower yields from recent harvests are threatening the coffee bean as a proven and staple breadwinner for Vietnamese farmers. In the middle of confronting this industry challenge, is CEO and Founder of The Coffee House, Nguyen Hai Ninh.
The Coffee House is one of the top business success stories in Vietnam today. CEO Hai Ninh is betting that the company’s future success will not only depend on the popularity of its stores, but also in its social impact business at Cau Dat Farm.
In 2018, The Coffee House acquired Cau Dat Farm, an agricultural business based in Da Lat. Integrating Cau Dat Farm has given the team at The Coffee House a directive to not only bring the best coffee experience to consumers, but also to produce the highest quality coffee. And it starts with the Vietnamese farmer.
So what is the future vision and goal for Cau Dat Farm? What role does The Coffee House play in the greater industry? We meet with Ninh to help shed light on his vision on how Cau Dat Farm will play a role in elevating the Vietnamese coffee industry.
What are three core values that would describe your management style?
There are three values that I always respect and want to convey: humanity, kindness and caring for others. People often say The Coffee House is a coffee-first business model. For me, our business model is first and foremost about being human-centric. Everything about the business model has to promote humanistic values.
I also believe that only actions that are performed in a kind way from the heart will be able to reach the hearts of others. As a human enterprise, everyone must share the same philosophy of happiness of others to make their own happiness.
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Describe your ideal hire. And share what someone should understand about the industry and The Coffee House team.
My ideal team member at The Coffee House is someone who is passionate about coffee, likes to work with people, loves serving others, and seeing customers happy. I also like to work with people who have a clear mission and position, while living honestly with themselves.
The food and beverage industry in Vietnam often means staying up late and getting up early. At many of our venues, each year our stores only close for one day during Tet. The business never stops. Because of this, many think that careers in the industry can be temporary, unstable, and provide few career advancement opportunities. I think only those who are passionate can have enough courage to overcome these challenges to see how fun and rewarding it can be down the road.
On the global team for The Coffee House, there are many who dedicate their time exploring coffee farms throughout Vietnam. There are even some who are proud to claim that there is no coffee farm in Vietnam that they have not set foot on. If they find any good quality coffee, they will do what it takes to help bring it to the end consumers at The Coffee House.
What are some ways to build a scalable team culture?
When I opened the first few shops, I would personally go to each location to meet with the staff and the shop manager. Now that our pace means that we’re opening a location each week, personal communication with every team member is not a sustainable way for me to build team culture.
It’s now my responsibility to establish a core value system that our 160-location strong brand can build upon. It’s also my responsibility to make sure that this core value system is never compromised. I believe that when everyone shares the same value system, the team will automatically work together using the same brand language.
As our business evolves, we also have to be able to adapt our team culture system. Previously, the primary business of The Coffee House was to focus on the coffee chain model. And so, the core value is to serve our end consumers. After bringing Cau Dat Farm into our team culture system, we’ve expanded our scope to also focus on bringing benefits to the greater Vietnamese community, from the farmers that we work with to the end consumers we serve.
Where does your love with coffee beans come from?
My passion for my work doesn’t come from a personal interest in drinking coffee. I started The Coffee House simply because I like to work with people. In the process of working with a friend on this project where I found my passion for coffee beans.
It was in 2014, after the launch of the first store, when this friend asked me to accompany him to his hometown in Cau Dat. Here, the two of us went on a tour of the coffee farms in the area. For the first time, I witnessed the extreme conditions for the average coffee farmer. Despite the volumes and qualities that an average farmer in Vietnam can make, especially here in Cau Dat, it seemed to me that the rewards compared to their efforts weren’t worth it.
But on that day I couldn’t even imagine what we could do for Cau Dat. At the time, our business was still very young. It was only last year in 2018, when the business became stable, when I thought about expanding our business model out of the brick and mortar framework. That’s when I decided to invest in Cau Dat Farm.
After a year of operating both The Coffee House and Cau Dat Farm, can you share the current conditions of Vietnam’s coffee industry?
In 2018, Vietnam’s coffee industry experienced a free fall in prices and productivity. Drought meant that the coffee harvest was much weaker than normal. The price of coffee also remained at its lowest level in 10 years due to the impact of a floor in international coffee prices. 90% of Vietnam’s coffee output is for export, meaning that returns for farmers were at historical lows.
Most urban consumers aren’t aware of the challenges I’m talking about. But the moment you go out to the provinces such as Gia Lai, Dak Nong, or Cau Dat, you’ll see that the coffee farms and the people that rely on these harvests are struggling. Many farmers are moving away from the coffee bean as a means to make a living. The money is not enough to pay for the harvest.
A few years ago, the same situation happened to Vietnam’s pepper harvests. If it continues like this, I’m afraid that in a few years Vietnam may lose its position on the world coffee map.
With that in mind, what’s the future direction for the Vietnamese coffee industry?
Vietnam is the second largest coffee exporter in the world. However the quality is not quite there yet. The standards for cultivation, harvesting, and treatment practices amongst most Vietnamese farmers are not international grade. And so, the majority of Vietnamese coffee has never been able to sell at a high price.
I believe the only solution for the Vietnamese coffee industry is to set its sights on producing the highest quality coffee. Not only will increasing the quality of our coffee beans improve prices for Vietnamese farmers, it will also improve international awareness about the potential of Vietnamese coffee beans.
In recent years, the movement of enjoying clean coffee in Vietnam has also become increasingly popular. People are giving up the habit of drinking laced, diluted coffee and switching to drinking clean, authentic coffee. It’s our mission at The Coffee House and Cau Dat Fam to produce high quality coffee to serve this growing demand.
It’s time for Vietnamese to expect that the highest quality beans are used in each of their daily cups of coffee. Vietnamese coffee growers deserve a better life. Vietnamese coffee beans deserve to be known internationally as high quality products.
So what solutions will you bring to the farmers?
This year, the average output per hectare at Cau Dat Farm decreased by 30%, while the price of Cau Dat arabica dropped to 66,000 VND per KG.
Despite these challenges, The Coffee House has committed to buying at a price of 1.5 times higher than the market. We hope this price is enough to maintain farmers’ confidence with coffee.
We’re also expanding inventory space at our Ho Chi Minh City-based coffee warehouse to support purchases of up to 120% of our expected demand, to help ensure security for our farmers.
Moreover, 2018 marked the first time we successfully exported 10 tons of high quality coffee to the US market. In 2019, through the end of April alone, we’ve already exceeded 2018’s entire volume. We aim to double our export volume to 20 tons from now until the end of the year.
This may not be a lot in the entire scope of our business, though these are early proactive steps we’re making on the path to globalize and improve the Vietnamese coffee brand.
Can you share some of your long-term goals?
It’s estimated that Vietnam currently has about 18,000 coffee shops. At The Coffee House, we have only 160 branches. We want to open more locations to bring a clean, modern coffee experience to more people. While, there are many shops that can handle the demand for Vietnamese coffee, the ultimate goal of The Coffee House is to contribute to the sustainability of Vietnam’s coffee industry.
It’s one of my personal responsibilities at The Coffee House to ensure we have ongoing access to the best coffee supply in Vietnam. Each year, my team and I set up another farm to find the best coffee.
Last year I went through Bao Loc, Gia Lai, Dak Nong, and Buon Ma Thuot. Our next upcoming trips will cover Khe Xanh (Quang Tri) and Lang Son. I joke that maybe someday I can introduce a full range collection of Vietnamese coffee from across all the provinces.
Finally, do you have any advice for young millennial readers of Vietcetera?
Never stop dreaming. Though younger millennial and Gen-Z professionals are inexperienced, it’s often made up with ambition and energy. A bit of motivation and good attitude on the side can make wonders happen. Everything else can be learned.