Vietnam’s cheap coffee is “no longer going to be attractive to export” as the European Union tightens its sustainability rules, Binu Jacob, chairman and managing director of Nestlé Vietnam, warned last week at the Fortune Southeast Asia 500 Summit in Ho Chi Minh City on Nov. 3.
The Southeast Asian nation is the world’s second-largest coffee producer and the largest producer of robusta, the variety largely used in instant coffee. Europe is the world’s largest coffee market, accounting for about 24% of global consumption, according to the European Coffee Federation. That gives the bloc’s standards outsized importance for producers.
“Vietnam was always known to produce cheap coffee, but cheap coffee is no longer going to be attractive to export because [the] EU is coming up with very stringent norms,” Jacob said. “So if we don’t go up the value chain and create coffee that is sustainable and that meets the very high standards, we will be unable to export.”
The EU Deforestation Regulation applies to most companies from Dec. 30, 2026, though some smaller businesses will not need to comply until later in 2027. The regulation aims to curb deforestation and forest degradation linked to the production of certain commodities, and to reduce the bloc’s contribution to greenhouse gas emissions and biodiversity loss.
Hanoi is working with Brussels on compliance. The multiyear, EU-backed SustainCoffee project aims to help the country’s coffee sector meet international environmental, social, and governance standards, and support more than 400 coffee-related businesses while indirectly benefit an estimated 1.4 million farmers and workers in the supply chain.
Nestlé has applied its global research and development capabilities, partnering with the Western Highlands Agriculture and Forestry Science Institute, a prominent agricultural research institution, to develop a coffee plantlet “best suited for the soil conditions in the Central Highlands,” Jacob said.
The company propagates the plantlets through tissue culture. “From one leaf of this coffee plant, you can actually make 2,000 trees, and this is what we’ve been doing in the last 15 years,” he explained.
“We have made 100 million plantlets of this disease-resistant coffee plantlet, and then distributed it at subsidized rates to farmers all over central Vietnam,” he said. “As a result, the productivity and the yield of coffee today in Vietnam is three times that of the global average, and this can be replicated anywhere in the world.”
Still, Jacob cast the rules as a chance for Vietnam to move up the value chain. “With small farms, it’s quite easy to move from the old ways of traditional farming to regenerative farming,” he said. “Once you do that, Vietnam has a competitive advantage to export more and ensure that more value stays here.”