The Vietnam National Coffee Corporation (Vinacafe), Vietnam’s largest State-owned Robusta producer, is planning an initial public offering (IPO) next year as the government cuts its stake in the company.

The IPO will include Vinacafe and 18 units, Deputy CEO Mr. Nguyen Van Minh was quoted as telling Bloomberg. 

The government also plans to reduce its stake in seven other subsidiaries by 35 per cent in separate IPOs at an undetermined time, he said, with the process valuing the company expected to begin in July.

Vietnam is the world’s largest producer of Robusta beans, used in instant coffee. Annual coffee exports are estimated at $2.5 billion to $3 billion, according to Mr. Do Ha Nam, Deputy Head of the Vietnam Coffee Cocoa Association and Chairman of Intimex Group, the country’s leading coffee exporter.

Vinacafe forecasts revenue this year of between VND4 trillion ($175 million) and VND4.5 trillion ($197 million), Mr. Minh said, compared to VND3 trillion ($131.6 million) in 2016. 

It expects to export between 80,000 tons and 100,000 tons of beans from next year, up from an expected 50,000 tons this year and 22,000 tons last year.

Currently belonging to the Ministry of Agriculture and Rural Development, Vinacafe has charter capital of more than VND900 billion ($39.5 million). 

According to its interim financial report, it recorded revenue of VND804 billion ($35.2 million) in the first half of last year, down 37 per cent year-on-year, for an operating loss of VND7.8 billion ($342,000). 

Pre-tax profit came in at VND50.5 billion ($2.2 million) for the first half.

Vinacafe sold its entire 12.85 per cent holding in Vinacafe Bien Hoa (VCF) last year for VND533 billion ($23.4 million), negating a loss for the period. 

VCF began as the Coronel Coffee Plant in 1969 and created the instant coffee brand Vinacafe, which has gained international popularity. 

It was acquired by Vinacafe in 1988.

VCF is the leading instant coffee manufacturer in Vietnam, with a 41 per cent market share, with its product portfolio including 3-in-1 Original, which has been a customer favorite for over 23 years, and Vinacafe Chat, which it launched in 2015 with specific regional filtered coffee flavors, including Chat Ha Noi and Chat Sai Gon.

In a surprisingly candid moment during a conference held last August, Mr. Nguyen Tan Ky, CEO of Vinacafe, admitted to mixing soya beans into some of the company’s products in the past. 

Though Vinacafe had only used pure coffee products since the company started in 1968, in 2012 it created two new brands of instant coffee, Wake-up and Phinn, with soya beans mixed in. 

“Honestly, both Wake-up and Phinn did well financially, but we still felt guilty because we strayed from our original coffee philosophy,” Mr. Ky said.

Last July, in an effort to revamp its image in the local coffee market, Vinacafe unveiled an advertising campaign whose centerpiece was a poster assuring customers that the company’s coffee products contain only real coffee.

About 85 to 90 per cent of the coffee in Vietnam is produced by smallholder farmers, who had 670,000 ha of agricultural land under coffee production in 2015. 

Vietnam is the second-largest coffee producer in the world, after Brazil, producing 27.5 million bags of coffee in the 2015- 2016 planting season. 

Since 2007, coffee has become the country’s second-largest source of export revenue.

VN Economic Times