[Asia Report] The New Center of Global Coffee Culture

Coffee beans are piled up at a coffee roasting factory in Hanoi, the capital of Vietnam. Photo by Reuters and Yonhap News.

With the summer vacation season underway, visits by Koreans to Vietnam are in full swing. One reason Vietnam is considered more convenient and familiar compared to other tourist destinations is the abundance of Korean-style coffee shops everywhere. In every alley of city centers like Ho Chi Minh, Hanoi, and Da Nang, familiar coffee chains welcome customers with affordable, aromatic coffee drinks filled with ice.

The overall quality of Vietnamese coffee shops is comparable to or even surpasses that of Korea. Vietnam is a powerhouse in both coffee production and consumption. 'Cong Cafe,' which features interior designs themed around the Vietnam War, expanded to Korea in 2018 and gained great popularity among hipster consumers. However, not many Koreans know that Vietnam is a coffee production powerhouse. This is due to the long-held belief that 'coffee is from Latin America.' Vietnam has already caught up to half of Brazil's absolute number one production volume (60 million bags annually, 1 bag = 60 kg) over nearly 20 years, ranking second in global coffee production.

This figure is twice that of third-ranked Colombia and three times that of fourth-ranked Indonesia, so the rankings are expected to remain stable for the time being. Vietnam's rise as a coffee powerhouse is attributed to the legacy of French imperial rule as well as its natural conditions. The Central Highlands of Vietnam, especially Dak Lak, Lam Dong, and Gia Lai provinces, are considered ideal for coffee cultivation due to favorable climate, suitable altitude, and volcanic soil.

Additionally, the government's role in consistently recommending coffee as an economic crop to farmers in these highland areas after the reform and opening-up policy is commendable. Focusing on Robusta beans, widely used in coffee mixes instead of the premium Arabica variety, proved to be a wise choice. In an era of rapidly increasing coffee demand in Asia, including China, Vietnam absorbed the demand for low-cost coffee and grew rapidly. Now, Vietnam is expanding Arabica cultivation and developing several domestic retail brands, firmly establishing itself as a global coffee powerhouse.

The Rapidly Growing Chinese Coffee Industry

The love for coffee in the ASEAN (Association of Southeast Asian Nations) region is not just a recent trend. Traditionally, East Asian regions including China consumed more tea than coffee, but coffee demand has increased following industrialization and urbanization. Moreover, since 2000, Starbucks from the United States has led a global trend, sparking a 'Starbucks imitation craze' across Asia.

Recently, visiting Bangkok, Thailand, and Singapore, I noticed a new coffee brand called 'Luckin Coffee' prominently opening large stores and gaining popularity. Curious about this unfamiliar brand, I discovered its identity thanks to the small Chinese characters beside it. It was Luckin Coffee, known as the 'Starbucks of China.' The English name means 'luck is coming.' Although Luckin Coffee was once known to have collapsed after being delisted from the U.S. Nasdaq stock market in 2020, it bounced back like a phoenix and expanded its store count to about 10,000. Now, wherever there are many Chinese people, this Chinese brand coffee can be found.

Currently, Luckin Coffee's approximately 10,000 stores across China and ASEAN countries fall short of Starbucks' 30,000 stores worldwide, but its potential has been proven. Especially since China's younger generation and urban residents have developed a taste for coffee, the next coffee star is likely to emerge from China. Furthermore, nearly all coffee-related machinery and products rely on China's manufacturing infrastructure centered in Guangzhou. Naturally, China is also growing into a giant in the coffee industry.

Challenging Luckin is Thailand's coffee brand 'Cafe Amazon,' a low-cost coffee chain. This specialty store, whose major shareholder is PTT, the equivalent of Korea's Korea National Oil Corporation, has secured 5,000 stores nationwide, becoming the largest coffee brand in ASEAN. Although criticized for imitating Starbucks and Luckin Coffee, it has received favorable reviews for its deep coffee flavor at less than half the price. Naturally, it serves domestically grown coffee, focusing on coffee cultivation in Thailand's highlands. Thailand is also striving to replicate Vietnam's coffee success story.

Cafe Amazon is a coffee specialty store in Thailand that has rapidly grown by adopting a strategy of following Starbucks and Luckin Coffee.

Emerging Myanmar, Traditional Java

Recently, I met a Myanmar-born entrepreneur in Thailand. Among his various businesses is a large-scale coffee farm near Pingoulin in central Myanmar. Since the reform and opening-up, the Myanmar government has actively encouraged poor mountain farmers to cultivate coffee, entering the coffee industry late but significantly increasing production. In the past, farmers in Myanmar's mountainous areas often secretly produced and distributed drugs such as opium to make a living, as it was difficult to grow profitable crops in Third World mountain villages. Therefore, coffee bean cultivation has become almost the only hope to escape the drug industry.

The entrepreneur's concern is that coffee exports have become more difficult than before due to negative perceptions of Myanmar following the 2001 'military coup.' He even asked me to help import Myanmar coffee to Korea. I advised him, "If possible, rebrand it as 'Burma Coffee' instead of Myanmar." Since the coffee industry can be the last hope for poor farmers, especially those wanting to escape the drug trade, I felt we should consume it without prejudice.

The traditional coffee powerhouse in Asia is Indonesia. Before the 17th century, Java Island received coffee culture from the Middle East via South Yemen and was recorded as the first place outside Arabia to cultivate coffee. It still maintains production ranking within the world's top four, and 'Java Coffee' is synonymous with high-quality Arabica coffee, even leaving a distinct legacy by lending its name to the 'Java language' in the computer industry. Despite this long tradition, Indonesia's challenge remains its weak domestic coffee competitiveness. Farmers are still small-scale, investment in processing industries is stagnant, and it has long been overtaken by Vietnam, while facing competition from latecomers like Thailand, Laos, and Myanmar.

Overall, the Asian coffee market is highly optimistic and promising. Of course, disposable income is still significantly lower than in Europe and the United States, so coffee consumption amounts do not yet match those regions. However, the growth rate is unparalleled. Moreover, Asia has traditionally been known more for coffee consumption than production, but soon, considering the 10 ASEAN countries, it will surpass Brazil's coffee production volume. In coffee consumption as well, Asia, with its large population, has long been the largest region. This means the center of global coffee culture has already shifted to Asia.

Jung Ho-jae, Researcher at Korea University ASEAN Center

This content was produced with the assistance of AI translation services.