Swords into plowshares….

Paul Bograd

Posted on July 24, 2007

or… err… uhm… Coffee Beans!

I just reemerged from an all-night, death defying rumble through the Central Highlands of Vietnam…Pleiku, Buon Ma Thuot, Dalat, all vicious blood letting battlefields of the 1970’s.

Now stop right there! I know that you are thinking that I am off on some Apocalypse Now induced flashback in the guise of my recent cinema inspired Asian Pundit contributions. But really, I just got back.

This time however, the risk to life was not the “Homeland Security” forces of the 1970’s North Vietnamese Army. The risk to life was from the endless stream of trucks carrying the fruits of open market commerce from the Central Highlands to the rest of the world… and vice versa.

I was on my way to speak at a conference to address the challenges of winning the global coffee wars on behalf of the people of Vietnam and Daklak province in particular. Daklak is the premier coffee producing province of Vietnam.

The Challenge is not a small one. The Vietnamese have been growing coffee for a long time now. The French colonialists needed something to have with their croissants and irresponsible colonial policies; and the climate, soil and labor economics seemed perfect. The Vietnamese adapted coffee into thickened sludge of sweetened condensed milk and sugar that requires a device that sits on top of your glass. So the domestic market was captive and Vietnam has had a pretty robust coffee industry for a long time. And since market economics are a recent addition to Vietnam, the Vietnamese didn’t plow under the coffee crop at the first sign of unstable prices in the past. (Like the Philippines)

But it is in the mid 1990’s that the fun really started. Major loans from the World Bank, from the Vietnamese government (which obtained the soft money from world banking institutions) and from, guess who – the Big Four coffee processors (Nestle, Kraft, Proctor and Gamble, and Sara Lee) made it possible for thousands of poor Vietnamese to become coffee farmers. And Vietnam’s coffee output went from 90,000 tons a year to 1,000,000 tons a year in a decade. And the world coffee prices went from $2.40 per pound to around $00.40 per pound. (Actually below the cost of production for most farmers.)

So the Vietnamese trying to act responsibly have cut production in an attempt to limit supply and stabilize prices to farmers. (There is not much evidence of similar responsible actions by the coffee big corporate 4!) Of course the Vietnamese action is offset by China’s aggressive financing of massive coffee plantation in Africa and similar coffee expansion in Africa financed by multi-lateral financial institutions. ( I have no doubt that the Corporate Big 4 are encouraging this in order to maintain the supply of low priced, low grade coffee that they can synthetically flavor and turn into the “instant vanilla, hazelnut, cinnamon, low fat, frozen latte, mochchino, frappe, 3 in 1”coffees that are flooding the market.)

So the Vietnamese, being the smart people they are, figured out that they need to get out of the “no-win” competition for the lowest price coffee and figure out a way to get to “high value” coffee instead of the below production cost coffee that is flooding the world’s markets.

Hence the seminar in Daklak: it focused on higher technical quality and brand development for higher value. I was invited to talk about brand value creation.

But for me; the most interesting moment of the seminar came from one Vietnamese official, and it wasn’t really about coffee but about how different governments and civic leadership in Southeast Asia view the world.

Buon Ma Thuot, the host city for the conference is a pleasant city in the Central Highlands of Vietnam near the Cambodian border. It is famous for coffee, climate and a few other agricultural products and it is most famous as the site of the last set battle of the Vietnam War. The victory of the North Vietnamese and Viet Cong forces at Buon Ma Thuot signaled the end of the South Vietnamese regime and the fall of the former Saigon was only days away.

With such important historic significance Buon Ma Thuot has a number of appropriate military monuments around town, including a Tank that greets people as they enter the city.

At some point in the seminar one of the civic leaders suggested that maybe we should replace the gun barrel of the tank with a coffee bean, as a symbol of change. He very eloquently talked about it being time put the past away and think of our economic future. (It is more then 30 years ago that the battle of Buon Ma Thuot took place.)

What struck me most about this is what Vietnam’s Southeast Asian neighbors should learn from this. Vietnam, a society that has a genuine history of extraordinary military triumph against overwhelming odds is moving away from militaristic views of problems solving. While across the region, nations whose military history is less than stellar move more and more toward militaristic solutions. (These “armchair” soldier nations know to whom I refer.)

It is an important point, I think, in the political evolution of Southeast Asia. The Vietnamese may indeed have found a “better cup of coffee” in more ways than one.

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