(Tiểu luận) microeconomics final group project topicthe coffee industry

Given that the population is still growing at a pace of around one million people per year, the country's coffee industry is predicted to develop significantly over the course of the pro

NATIONAL ECONOMICS UNIVERSITY

-NEU BUSINESS

SCHOOL-Bachelor of Business Administration in English

-MICROECONOMICS FINAL GROUP PROJECT

-TOPIC

THE COFFEE INDUSTRY

LECTURER: TS Trần Thị Hồng Việt

Group 9 – EBBA 14.1

Nguy-n Huy Đô 0 - 11221328 Nguy-n Qu6c Kh8nh - 11223064

L< Trần Ng=c Nam - 11224451 Nguy-n Hồng Quân - 11225377

TA VB DBng – 11221515

Ha Noi, January, 2023

Contents

1 INTRODUCTION 3

2 DEFINITION 3 2.1 COFFE COMMODITY MARKET 3-4 2.2 FACTORS AFFECT COFFEE COMMODITY MARKET 3-4

3 COFFEE INDUSTRY IS CLOSER TO COMPETITION THAN MONOPOLY 4-5 3.1 FACTOR AFFECT COMPETITION 4 3.2 WHY COFFEE COMMODITY MARKET IS COMPETITION

4 SUPPLY OF COFFFEE 6-7

5 DEMAND OF COFFEE 7-8

6 FACTORS AFFECTED TO THE SUPPLY AND DEMAND OF COFFE 8-14 6.1 FACTOR AFFECTED TO THE SUPPLY 8-10 6.2 FACTOR AFFECTED TO THE DEMAND 10-14

7 CONCLUSION 15

8 REFERENCES

Coffee is a widely used beverage in every country It is a very profitable crop Consequently, the global coffee market is quite advanced Among the nations that export coffee, this one has the fastest growth rate The demand for coffee has not dropped but rather grown, particularly during the COVID-19 epidemic when the global economy was badly impacted Vietnam is no different;The second-largest producer and exporter of coffee worldwide is Vietnam Given that the population is still growing at a pace of around one million people per year, the country's coffee industry is predicted

to develop significantly over the course of the projected period Therefore,

we chose Coffee market to be the topic of the final Microeconomics group projects

2 Definition

2.1 Coffee commodity market

A common plant, coffee, is native to Africa and is grown in parts of the Indian Ocean before eventually spreading to nearby areas and being produced all over the world Coffee has evolved over hundreds of years to become a widely consumed beverage Coffee is a very profitable crop In the coffee commodity market in Vietnam, it includes raw coffee and coffee productions which is processed into beverage,etc

In addition, Vietnam is an agricutural country, there are many areas where are able to cultivate and produce Coffee on a large scale, these areas have suitable weather, waters, bazan soil, such as Buon Ma Thuat, Daklak Besides that Vietnam has numerous enterprises capable of producing and exporting Coffee such as Trung Nguyen Legend, King Coffee, Phuc Long Tea & Coffee,etc Furthermore, the auarantee of the suppy of distributors, especially large distributors, has helped stabilize the source of manufactured goods, such as Aeon Vietnam co, the Vinmart and Vinmart +, … and major export markets such as America, China, Japan, Korea,…

2.2 Factors affect coffee commodity market

Recently, we can be seen that there is an increasing in the number of coffee raw and products, there are many other factors affecting the market, including: Price, Input price, Production technology, Supplier’s expectation, Government policy, Consumer’s income and Number of consumers These factors will greatly affect the supply from businesses

and the demand from consumers In particular, customer income, tastes, and expectations will directly affect consumer demand; selling prices, technology, human resources, and government policies will affect the supply of goods in the market

3 Coffee industry is closer to competition than monopoly

3.1 Factors affect competition

From a microeconomics perspective, competition is decided by 5 simply factors: products features, the wide variety of sellers, statistics availability, location and obstacles to entry Ech element hinges on the availability or splendor of subsitutes and while no options exist the corporation is a vendor of a completely unique product, a monopoly exists and there is a zero oppo sition In short, competition happens when there are many sellers, easy entry, identical products and sellers are price takers

3.2 Why coffee market is competition

(*) Product features:

The features of the coffee market today are similar.Coffee is a beverage that the French brought to Vietnam in the 19th century and that has since assimilated into Vietnamese life and culture Because caffeine, a component of coffee, can enhance your short-term memory if you consume it in moderation throughout the day, most individuals drink coffee in the morning Additionally, coffee aids in preventing oxidation Caffeine in coffee helps to reduce mental cognitive loss by preventing the buildup of beta-amyloid plaque, which starts the process of Alzheimer's disease, a form of dementia Additionally, coffee protects against liver, breast, and rectal cancers, especially in women For athletes, coffee can aid improve excerise performance

(*) The wide variety of sellers:

Although producing coffee is difficult and expensive but Vietnam as a developing nation and the former second-largest coffee producer in the world the quality must makes up for the quantity and assure the demand The cost of producing coffee is not too high, so that in Vietnam there arae

3 main coffee distribution channels

1, Production group: Not too much company in Vietnam are qualified

to produce coffee that complies with the prescribed standards Besides that, coffee producers must follow to a numerous requirement regarding staff, infrastructure, techonology and quality These businesses are

eligible to expand in the market and the main exporter of Vietnam’s coffee to the world

2, Agents and businesses who distribute coffee in bulk, are included in the wholesale group This organization frequently works as a production facility or

as a partner with one They are always the top businesses in the nation for the distribution and manufacture of smart devices and supplies That includes a chain

of both large and small coffee shop, a supermarket, and a shopping center,etc (*) Obstacles to entry:

We have a very large coffee production, so it is easy for sellers to import, but the cost of preserving and forming the product is quite large In order to produce better quality and better quality and quantity of coffee than usal, the production cost needs to be relatively large Producers need to be careful in barriers to entry (*) Statistics availability:

The availability of information is also important, and it largely revolves around price discovery Currently, large companies have their own websites, social media platforms to update products and prices that is so convenient for customers

to keep track and compare For ordinary coffees users can directly consult the price, because coffee products are so popular and interested by a number of consumers

(*) Strategy

Competing on the type of coffee so that each company can make a big profit, so that most of the coffee is present throughout our country for many people

to know Due to the increasing competition, most people will invest in advertising,

to promote the product to the market with new product ideas In addition, nowadays people have a tendency to buy Coffee in distance through e-markets such as shoppee food, nowfood,etc So that by locating their money resources to advertising their products on these e-market that can attract more consumers’ attention Which is very helpful for the company to increase the revenue (*) Location

Coffee are usually sold at major roads, in coffee shops, beverage spots,etc So that companies want to compete to be distributed in large locations that are easy to attract consumers Especially nowadays, consumers have a

tendency to buy coffee frequently so a large and reputable sales location will help the company increase total revenue

4 Supply of Coffee

Beginning with talking about coffee supply in the world, there are many countries capable of exporting coffee in a large quantity.We can mention of the world's leading export names such as Brazil, Colombia, Indonesia, India, etc And our Vietnam is also 1 of them Our Vietnam is the 2nd largest coffee exporter in the world Coffee is one of 6 export items with

a turnover of over 3 billion USD/year With that value, it belongs to the leading group of the agricultural sector and rural development sector and contributes to the growth of commodity exports in Vietnam In Vietnam, thanks to the climate and suitable terrain, those things have helped our country's coffee production to be higher and higher Coffee is grown a lot in Vietnam, we must mention the first is the Central Highlands In particular, Buon Ma Thuot coffee bowl in Dak Lak is one of the largest coffee bowls in the world With ideal weather conditions, this place is suitable for growing coffee, especially Robusta coffee Coffee production in Buon Ma Thuot is currently at the top of the country Besides the "coffee capitals", Vietnam has many coffee growing places: Gia Lai, Quảng Trị, Đắk Hà, Đắk Mil, Đắk Hà,

Brazil (22.2%), accounting for 16.1% market share in volume In particular,

in 2021, the rapid increase in world coffee prices has supported Vietnamese enterprises to earn very positive export turnover, although the amount of coffee exported has decreased,it leads to an increasing in price of Coffee In 2021,Because of Covid-19 the quantity of coffee Vietnam supplies to external and uses in domestic that is decreased that leads to an increasing in the price of coffee.However, despite the Covid-19 pandemic, Vietnam's coffee exports still brought in a turnover of over 3 billion USD Vietnamese coffee has accounted for more than 30% of the total imported coffee of the

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5 Demand of coffee

When it comes to supply, we definitely have to talk about demand, in

general, we can see that most people have had coffee at least once There are

people who are so addicted to coffee that without it every morning, they will work

unfocused and lack energy for the long day In the world, we can name the top

coffee consumers in the world: Finland, Norway, Iceland, Denmark, Returning

to Vietnam, coffee can also be considered a "national" drink Vietnamese people

also often enjoy coffee every day We must have encountered big coffee brands in

Vietnam When talking about coffee brands in Vietnam, people immediately think

of Trung Nguyen, Highland, The Coffee House, These coffee brands are

increasingly expanding, reaching the customer market, from which they will have

loyal customers Besides that there are numerous coffee distributors in Vietnam, so

there would be a wide range of coffee pricing Due to daily price changes in the

global market, coffee prices will also change However, Vietnamese people have

long been accustomed to drinking coffee, thus despite price changes, customers

continue to purchase the beverage Coffee helps people concentrate, become

smarter, have more energy, and reduce stress Some customers find it impossible to

stop drinking coffee since it contains caffeine Additionally, it takes a long time to

stop drinking coffee or find a substitute The growing coffee culture may

potentially lead to higher than usual consumer demand for the beverage The

popularity of coffee from other cultures has piqued consumers' curiosity and desire

to try new coffee flavors That further stimulates big brands to have strategies to

attract new customers and retain old ones thanks to the quality of coffee and

accompanying services However, with the economic situation in 2022, the

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economy is somewhat depressed and the average price level of coffee increased before the pandemic a cup of black coffee was about 20.000-25.000 VND , but

now it is 25.000-35.000 VND.But people's demand for coffee is still more and

more, no longer the same as before

Total coffee consumption in Vietnam from 2015 to 2022 with a forecast to

2023 (in 1,000 60 kg bags)

6 Factors affected the supply and demand of Coffee

6.1 Factors affected the supply

(*) The price factor

Firstly, ● The price is the main factor that directly affects the supply of the products; Until now despite being affected by Covid-19, the coffee prices have still increased well and remained above the 11-year highs in this December this year In addition, during the peak pandemic in July 2020, the price of 1 kilogram of

coffee increased before that figure before the pandemic from 34.800 VND to 40.800 VND per KG in Robusta coffee As a consequence, more and more firms and companies are engaging in this kind of commodity market Leading to an increase in supply For instance, based on a research from baonhandan.com the coffee.Leading to an increase in supply For instance, based on a research from statista.com, from June 2022 to August 2022, more than 2000 firms and companies decided to take part in the Coffee commodity market in Vietnam, which leads to the huge number of productions related to coffee that is being produced

(*) The non-price factors:

that, the improvement and advancement of technology in the coffee industry enables producers, firms, and companies to produce more and more at lower cost Therefore, a huge change in technology can increase the amount of Coffee that firms are able to supply to the market Back in the day, without technology, people

in coffee cultivation areas needed to pay 12 hours to dry the raw coffee, but thanks

to the advancement of technology that process was reduced to 2 hours For example in Dak Lak - the pyrolysis technology applied to coffee that not only helps reduce greenhouse gas emission, but also improves both quantity and quality of Coffee production and also decreases the labor costs

The third factor is ● the government policies that play a crucial role in economic regulation The legislation that the government enacts will have a direct influence on the supply of commodities Government incentives or access to inputs

at reduced costs encourage coffee producers to increase their output With the current pricing, growers can offer more coffee to the market at reduced production costs For example, Vietnam’s government decided to reduce 50% of land tax for agriculture enterprises This policy aims to support enterprises to invest in agriculture and encourage land accumulation

raw coffee with a lower price than before thanks to the

development of technology, labor’ skills and the open policies of coffee from the govenrment That saving time and money for bussiness This development has facilitated the supply of coffee

to increase significantly

influenced by the supplier's predictions for the future When coffee producers anticipate a price drop, they increase supply to the market to get rid of previously processed goods to prevent or reduce losses

6.2 Factor affected the demand

● Income: Buyer income, which is a measure of consumers' available

funds for purchases, is correlated with socioeconomic level The amount demanded rises in proportion to an individual's or group's income Additionally, the real income of the buyer or their real income may alter depending on the price of the underlying commodity Most commodities are in higher demand as income rises Coffee can be considered a commodity-common when taking into account the relationship between income and consumption Because people drink more coffee