This is an interview with Timen ter Meulen Swijtink, Managing Director, Collective Company (producer of LaCaph-branded coffee).
It covers how the Middle East crisis is affecting Vietnam’s coffee sector, how Vietnam’s coffee industry is evolving, and how younger farmers and closer feedback between producers and consumers are driving rapid improvements in coffee quality across Vietnam.
Video
Audio
Transcript
BARNES: So, you’re happy for me to record?
TER MEULEN SWIJTINK: Yeah. Let me see if the background is appropriate, though. Maybe let me just change it from this ugly whiteboard to something a little bit different. More interesting.
BARNES: Cool. All right. So, we good to go?
TER MEULEN SWIJTINK: Sure.
BARNES: Okay. So yeah, first up I wanted to ask you, the Middle East crisis — how is that affecting your business?
TER MEULEN SWIJTINK: I think, frankly, I would say that the immediate impact is relatively manageable, but the concern is more for where we would go if the crisis continues for three months, or six months, or even longer.
Now, obviously, there are some signs of a reprieve in the situation. There’s at least the willingness to talk again in the Middle East, it seems.
So we’ll see how things go. Of course, nobody knows, because nobody seems to be able to predict very much of anything these days.
But the most immediate impact that we’ve seen is just in our logistics fees, right? So logistics costs have increased.
But if the situation continues, then obviously the big impact could come from the increase in fertiliser costs and input costs going up for farmers, especially if the trend or the situation really continues, because a lot of the global fertiliser supply is still coming from that region as well.
So, that’s what we’re kind of concerned about.
I think if things were to go back to normal in the next four weeks, then the overall impact will be manageable. But if it continues, it could be very significant, because it could be a stacking up of multiple issues, right?
Not only logistics, but logistics from importing the product, from the creation of the product, and the export of the product — everything will go up. So, that’s what we’re trying to keep an eye on.
But we hope that coffee businesses have created a baseline for their contracts for the year. The harvest is almost done in Vietnam, and companies like ours have signed contracts with various suppliers to have an upper limit for what the cost will be. So hopefully we’ll be able to rely on those. Luckily, the price is still far below that at the moment.
So we think it’ll be manageable, but let’s see. If it lasts a lot longer, it could be a bad situation for Vietnam, for sure.
BARNES: Sure. One of the other people I spoke to mentioned they were having problems with packaging costs. Have you felt that?
TER MEULEN SWIJTINK: We have not. I mean, I don’t know what suppliers you’re talking to. It could be that if you’re an FMCG company with very tight margins doing huge volumes, these sorts of issues can definitely eat into your margins very quickly. We don’t have that issue because we’re not that big.
So we order packaging only four to six times per year, and we’ve not really had to order or get significant restocks of our packaging.
Most of our packaging issues are just because the capacity in Vietnam is often limited. So if we want packaging, we sometimes need to see if we can get it, especially as a smaller customer. But that’s not really connected with the issue in the Middle East.
BARNES: Okay. And consumption — so people buying coffee to consume — Has that changed in the past month or so?
TER MEULEN SWIJTINK: Again, if we were a very large company like Nestlé, we might have a very different experience, but we cater to quite a premium audience.
Vietnam’s tourism figures so far this year are still very good. We did hear some people say this is going to impact tourism arrivals. I’m sure there has been some impact, but our numbers so far have been quite good.
We’re a heavy growth company, right? We’re coming from a relatively low base compared to some of the big players. So maybe that’s also why —maybe we would have seen faster growth — but so far our numbers are looking good.
The tourism numbers that we have — because we do a lot of workshops for visitors, coffee workshops — they’re still up, and we had a record month last month. So yeah, things are looking, so far, so good.
BARNES: Cool. Cool. And then I also wanted to ask you about coffee prices. Do they hugely impact you? Because you said most people have their contracts organised. So, when prices drop off, does it matter to you?
TER MEULEN SWIJTINK: Oh, it definitely matters. But at the moment, what we did is we set a baseline in January, and since then, the prices have fallen. So we have kind of—well, it only covers about 40 percent of what we need for the year.
So it’s more of a backup if prices go back to where they were towards the end of last year. Then we are in a good position, but so far we’re actually buying direct without contracts because the price at the moment is lower.
So this sets a top line for how much we’re going to be paying for the rest of the year, most likely, if we manage things well and if prices don’t continue to increase too much.
But of course, if we are able to buy coffee at a reduced rate, it creates a more profitable situation for us overall.
It’s more of an emergency hedge, so to speak, an emergency mitigator, and not necessarily something we can keep up for two years or anything like that. It’s more of a backup situation if we were to see prices like they were late last year.
BARNES: Okay. What about the farmers? You work directly with them, right? Like you go out there. Do they worry about these lower prices, or are they just fluctuations?
TER MEULEN SWIJTINK: Yeah, I think we came from such high prices at some point — I don’t want to say they’re high prices, because farmers certainly deserve to be paid well for what they do. But the thing is, the shock and the speed at which prices have increased over the last three or four years has been very tough for us.
As roasters, we’re essentially in the middle, right?
We buy beans at the price that the market dictates, and we often buy above that because we’re buying premium-grade coffee, not commodity.
So we have to buy at that rate, but our retail partners that we sell to have limitations on how much they accept in increases. Sometimes they’re pretty difficult with that, because they’ll only accept, for example, a 10 percent price increase year-on-year. But when our input costs have doubled over a year or even more, that puts us in a very tough position.
So you said prices have come down a lot. That’s true, but they’re still way above what they were three or four years ago. Three or four years ago, they were not sustainable. So we’re in a much more comfortable position now than we were a year ago.
So I’m not going to complain too much.
BARNES: Sure. Cool. So now, just moving on to more general points about the business and setting it up. I was looking at how you do farm-to-consumer, basically the whole way through—you manage it yourself.
TER MEULEN SWIJTINK: Yeah, we don’t own farms. We don’t own any farms. We work with farmers who own the farms and the land, most of the time.
We work very closely to understand their production and influence their standards, of course.
We do quality control at the farm and obviously at our roastery.
But we basically take green beans through to the consumer.
We don’t do the cultivation or processing before the green bean phase.
Sure.
And when you were developing those supply chains, particularly as a foreigner, how easy was it?
What sort of challenges did you run into, or was it pretty straightforward?
TER MEULEN SWIJTINK: I mean, over the past six years—if you look at it in a condensed way—it’s not easy, right?
But over six years, as you improve incrementally, it’s not too bad.
I think trust is a very important factor in these kinds of relationships. Trust is built over time, so it’s not like they’ll give you everything you want from day one. You need to first buy, you need to first increase, you need to first build that relationship, and over time, trust improves, and they will be more welcoming to your input.
So, as your volumes increase with certain farms, you’ll obviously have an increased influence over how they manage their farms.
I’m not saying control, but you can have a bigger influence on how they manage their farms and how they process the beans.
So it was not easy. I don’t think it’s easy. That’s one of the reasons why companies like Simexco do so well, because they’re the glue between the people who grow the coffee and the buyers internationally.
But our relationship with the handful of farmers that we work with directly — we work with maybe about 12 farms most of the time — is very good. The trust has improved, and that’s a two-way street. It’s not just us to them, but them to us as well.
I’m quite confident in it, but I cannot say that it was a straightforward process.
Me being a foreigner does not make it necessarily easier. There are benefits, though.
The cultural etiquette required in a Vietnamese-to-Vietnamese relationship is very different from a Vietnamese-to-foreigner relationship.
If you visit a different country and you do something wrong, they’re not going to immediately think it’s strange—they’ll assume you’re from a different culture and be a bit more flexible. But at the end of the day, making sure that you follow agreements, pay on time, and handle those basics is very important.
BARNES: Sure. And going the other way—selling your product, firstly business-to-business—how straightforward was that?
TER MEULEN SWIJTINK: I think I probably moved too fast, and I realised this late last year or halfway through last year. Too quickly, I tried to prioritise exports too quickly, and we were not strong enough domestically — and still aren’t strong enough — to really have a good foundation to support exports.
So we’re going to continue doing exports, but what we’ve decided now is to focus on Vietnam first and build a stronger foundation at home with our sales network.
It’s not easy, because a lot of hospitality businesses, in particular, still see coffee very much as a cost rather than an opportunity.
So it’s our job to make our hospitality partners see coffee more as an opportunity to connect with their guests in a meaningful way.
For them to communicate something local—a local experience—but at a very high quality, and to see it as a business opportunity rather than just a cost.
At the moment, most hotels — first of all, I would say 95 percent of four- and five-star hotels still — really focus on European-style coffee, right?
So if you go, they have lattes, cappuccinos, espresso, americano — these different European-style coffees — and then at the bottom of the menu, café phin, and that’s it.
They also have a legacy coffee supplier who still adds a lot of artificial products into their blends, like artificial flavouring, butter, soybean, that sort of thing.
Sometimes they’re not even aware that the ingredients they’re using are so out of date.
So it’s our job to say, first of all, why don’t we focus on making Vietnamese coffee drinks at least as good as the European-style drinks?
Because also, when you’re a foreigner visiting Vietnam, at least from my perspective, you want to try the local style coffees.
That’s what I would be interested in, especially given Vietnamese coffee is really on the up as a coffee category in the world.
So what we’re trying to do is get people to buy better-quality coffee for those drinks and more options — not just the beans, but also the drinks.
So café muối, like salted coffee, coconut coffee, even egg coffee potentially.
There are some hygiene concerns that certain hotels have, but there’s much more than just café phin.
It’s always an afterthought, and they consider it more like a cost, like breakfast and people don’t want to pay and instead, why not make really good coffee drinks and charge people — not necessarily at breakfast, but in the lounge, for example?
BARNES: Totally. And then consumers — Vietnamese consumers are your target now. From what you’re saying, it sounds like you focus mostly on Vietnamese-style coffees.
TER MEULEN SWIJTINK: Yeah, we only source domestic beans, and we have an espresso blend and a pour-over blend, but our most important product by far is our phin blend — our Vietnamese-style blend.
It’s a two-star Great Taste Award from the UK. It’s the powerhouse behind our recipes.
So our idea is to focus on Vietnamese drinks.
BARNES: And do you sell a lot of those to Vietnamese customers, or is it more tourists?
TER MEULEN SWIJTINK: It’s not just tourists — it’s also a lot of business travellers.
I would say about half of it — it depends.
We sell our products to GS25 (a convenience store chain), and most of the consumers there are Vietnamese.
But those products are usually under our second label, which is more affordable and doesn’t use specialty-grade beans.
Our signature products are a little bit more for five-star hotels and tourists. But we do see Vietnamese consumers buying them every day.
It’s just an expensive product compared to something like Trung Nguyên, for example. But what we think about is that we’re making products for the future of Vietnam.
I don’t see young Vietnamese consumers saying “Hey I want to drink more artificial, flavoured coffees” and most of them are becoming more aware, and with the quality of cafés , Highlands, from my understanding, doesn’t use artificial ingredients in most of their products. Every Half doesn’t use artificial in most of their products. So, that’s the way Vietnam is going.
Some of our products may be a bit ahead of that trend, but we’re trying to make things so that Vietnam can grow into our product portfolio.
It might not be exactly what everyone needs right now, though—not for everybody, at least.
BARNES: Sure. And do you find Vietnamese consumers embrace Western coffees?
TER MEULEN SWIJTINK: Oh, absolutely.
You know, but the reason why we’re not as focused on it is because we see ourselves as a cultural company as much as a coffee company.
We see our products as a way to bridge conversations between the country and the rest of the world.
So we represent Vietnamese coffee.
Even though we do have an espresso blend and a filter blend, Vietnamese-style coffee is what we like to talk about the most.
From a strategic perspective, it’s also the most underinvested IN.
When you look at five-star hotels, there are three or four espresso machines, each costing around US$5,000, but no NICE phin coffee service, and that’s a much cheaper, much lower barrier-to-entry option.
But you see brands like Profetto or Folie, you see all these coffee companies and they’re all focused on European coffee for some reason.
I think there’s a huge opportunity for companies that focus more on Vietnamese coffee.
BARNES: Sure. Sure. I’ve always found that very strange myself—that a lot of these cafés push Western coffee when Vietnamese coffee is fantastic. It’s a great product.
TER MEULEN SWIJTINK: Yeah. But the thing is, it’s always done with low-quality ingredients — really cheap beans and very low-quality robusta.
We make products with really high-quality robusta, so you don’t need to add so much stuff to it to make it taste good.
I think over time it will improve, but we need make sure that people come to the realisation that they need to seize that opportunity more — especially in hospitality.
There’s a big opportunity around local-style drinks executed at a high level.
BARNES: Cool. Cool. All right. That’s plenty for me. Did you have anything you wanted to add?
TER MEULEN SWIJTINK: No. I’m curious to see what you’re going to do with it.
If there’s anything I can be more insightful on, maybe next time I could get the questions in advance so I can develop my thinking a bit more on the subjects.
BARNES: Personally, I think that was great. That’s all I was looking for.
TER MEULEN SWIJTINK: Okay, good.
BARNES: I quite like doing it off the top of my head rather than having it too formal. Yeah. I’ll send you what I do. One of the things I’ve been thinking about is that a lot of people have a lot of interest in coffee in Vietnam. I mean, it’s a big traded commodity. So anything you write about coffee generally tends to get a bit of traffic. One of the things I was looking at doing — it’s just an idea at the moment — is starting a monthly coffee report and sending it out. There are a lot of coffee-focused media outlets online, and I was thinking of trying to syndicate it. I don’t know if I’ll go ahead with it, but it’s something you might want to keep in mind. It looks much better when I have comments from someone in the industry on the ground.
TER MEULEN SWIJTINK: I’m happy to contribute, as long as you can link to lacapf.com and, if it’s my name, link to my LinkedIn or something like that.
I’m interested.
I really believe in the quality of Vietnamese coffee beans.
What we’re trying to do with Lacaph could not have been done 10 years ago in Vietnam.
Back then, farmers were not really focused on quality, and over just 10 years that has changed a lot — it’s unbelievable.
A big reason is because young coffee farmers are taking over the business.
People in their late 20s or 30s are taking over family farms.
Sometimes they went to college in the city, but city life didn’t appeal to them, and then they decided to go back, and then they speak English, they have exposure to new ways of thinking, research, to the internet, so they are far more open to new ideas around coffee cultivation and processing.
They’re far more aware of the possibilities, where their parents were often taught what to do over the years by people, whether it was their parents, or their fertiliser suppliers, and because they were overusing fertiliser because of that, like synthetic nitrogen fertiliser. So these younger people are taking over, so that’s the first thing.
And the second thing is that there is a huge consumer base in Vietnam for coffee.
I think it’s different from many other producing countries. Many other sourcing countries, I would venture to say, 98 percent of their beans are exported.
In Vietnam, there’s a strong consumer base. There are a lot of people in their 20s and 30s that are really into high-quality coffee.
You know, there will be young baristas working at Every Half and their friends and their networks and all these young people, and they understand what good coffee is, they have formal and informal education around coffee.
What’s happening is, because there’s such a short physical distance between farmers and consumers, the feedback loop is so much faster and so much shorter than in most other producing countries.
Farmers in places like Kenya will not often speak to people who actually roast or drink their coffee very often. And they might get feedback on a crop a year or two years later, if at all.
While here, I see some of the farmers I work with two or three times a year, and my team maybe another couple of times as well.
And then there are other brands that they work with who also come by to visit, or they come to visit us.
You multiply that across the 12 farms that we work with and all the brands, and there are way more frequent, immediate conversations between the people cultivating and processing, the roasters, and the consumers.
So the speed of improvement in Vietnam’s high-quality coffee is, I believe, never been seen before in the history of the world.
You know, where Panama and — those are still products that are very niche towards a very specific specialty coffee audience.
And the reason is because, you know, what our idea is is we actually roast the coffee, and then we bring these coffees back to the farm, and we drink the coffees together with farmers, and, you know, we talk about it.
Not always it’s their coffee. It’s something from the region or something like that.
But, you know, we just have a chat and talk about the coffee, but also talk about their lives, get to understand them better and things like that.
And, you know, I think that idea of that feedback loop, so making sure that not just the farm to cup but the cup goes back to the farm and that kind of continuous cycle, I I hope that that, you know, can speed up, and I think it’ll speed up even more in the next, in the next 10 years because farmers are becoming also more open to having feedback, you know, which was not the case at all six years ago when I started talking to people.
But that’s a trust issue again, right, like once they once you know them for six years, they’re more open to your ideas. But also they’re seeing the impact, right, like, you know, their parents’ beans were sold at market rate, that’s it, and now because of the improvements that they made they can actually sell it for two or three times market rate.
Even though maybe the quantity has gone down, which is usually the case if you try to improve the quality.
The, you know, they’re still much more profitable also because they’ve been able to reduce their inputs because they were using way too many inputs in the past.
BARNES: Sure. Sure. Makes sense. Cool. All right, man. I’m a bit mindful of time. Yeah. Yeah. Thank you very much for that. I’ll let you know how it goes. Enjoy the rest of your day.
TER MEULEN SWIJTINK: Yeah, let me know if you wanna want to talk more.
Happy to see what you’re working on.
And I have a newsletter that I try to post a bit on, but I’m not really a good writer.
So, but it’s it’s a called cup to farm coffee story coffee newsletter on you can have a look there.
I post it once in a Yeah, sure.
BARNES: I’ll have a look.
TER MEULEN SWIJTINK: And then my wife and I are opening a small cafe in probably in July or August or so.
And it’s going to be all about it’s going to be a cafe that features only specialty coffees from Vietnam.
It’s the only thing we have.
We don’t have Kenyan, we don’t have Ethiopia, we don’t have Panama, we don’t have you know Peru.
And the reason is because we noticed that a lot of coffee farmers are making excellent product but they can’t always find the buyers.
So, what we did is we’re going to have a place, it’s kind of like a wine bar, but then for coffee.
So, you have like 30 different coffees that you can try.
BARNES: I feel like if you try 30 coffees, 30 Vietnamese coffees though, you’re going to be pretty buzzed, right? Yeah.
TER MEULEN SWIJTINK: But the style is a bit different, you know?
So, it’s not really geared towards like super dense robusta style.
So, it’s more about the flavour of the coffee itself.
So, we’re not going to like, I mean, know you can get a cafe sua da.
It’s not like we don’t have it at all, but it’s not going to be focused on like fancy drinks.
It’s going to be like mostly pourovers and stuff.
And then when you do multiple drinks, you’re not going to have a whole glass.
You’ll have like little cups, you know, like to sit.
BARNES: Do you notice a difference between the coffee in Hanoi and the coffee in Saigon?
TER MEULEN SWIJTINK: People’s preferences tend to be a bit different. You know, and in the south it’s very, very focused on iced products, on iced drinks more than in the north.
Yeah, I mean, there might be some sort of I mean there’s a preferential difference, right?
Coffee is not as big in Hanoi because there’s a little bit more still the tea culture although that’s changing.
BARNES: Sure.
TER MEULEN SWIJTINK: So what is your observation?
BARNES: So I lived in Hanoi for a long time, and then I was down in Ho Chiming last year for about a year. I don’t know. I think the coffee was better in Hanoi, but I think everywhere you went in Hanoi, you could get just a regular Vietnamese coffee. You couldn’t really get like Western coffee was really only in like the Old Quarter or Tay Ho.
When I moved to Saigon though, I found like most cafes, even like the ones on the street, some of them had little espresso machines and they would make Vietnamese coffee with an espresso machine, which I I don’t think is right.
Like I’m just like that’s kind of blending the two together.
Very, very wrong. Yeah. Iit drove me crazy.
TER MEULEN SWIJTINK: I was like, I just you know that that phenomena with the cafe cafe you know ca phe may you know like “machine coffee” it’s called, right, so so they call it cafe mai like machine coffee, and they have these espresso machines that, and I find it actually impressive, you know, because sometimes you go to the middle of nowhere and they have now espresso machines there, but you know what the what I’ve realized is that part of the reason why it’s popular is because it’s ground coffee to cough to your drink.
So it’s way so so a lot of Vietnamese are quite concerned about what’s in their drinks, what’s in the coffee, right?
Because of all these scandals about food safety and about, you know, there was like, you know, battery acid coffee, and then there was like recently also all this fake coffee that was found out.
And so a lot of those are actually there’s a grinder and then the machine.
So they can see the beans being ground, going to the machine, and then they drink that.
And so, somehow they feel like it’s way more trustworthy than some sort of random bag that somebody’s scooping some pre-ground coffee out of and putting into a phin brewer.
And a little bit the fancy, of course, as well, right?
The fancy element.
So but yeah, it is interesting.
Yeah.
Yeah.
BARNES: Cuz I was yeah, it was very upsetting. Even I was in Khanh Hoa for a bit as well, and it was the same thing. They would make all their Vietnamese coffee with espresso, and it was like, how do you not know that this is not how a Vietnamese coffee should taste?
TER MEULEN SWIJTINK: Yeah.
BARNES: Yeah, it was an interesting experience.
TER MEULEN SWIJTINK: But yeah. Okay, cool.
BARNES: All right, man. Well, thank you very much for your time.
TER MEULEN SWIJTINK: Yeah, my pleasure. Keep in touch.
BARNES: Yeah, will do, mate.
TER MEULEN SWIJTINK: Cheers.
BARNES: Cheers, Mark.
TER MEULEN SWIJTINK: See you.
BARNES: Bye.
TER MEULEN SWIJTINK: Bye.