Group members: Huynh Anh Tin, Pham Le Bao Tran, Pham Le Thien Huong

Vietnam coffee market structure:

Vietnam coffee market structure is oligopoly, because there are a few firms that have the ability to enter this industry, and with many similar product taste (Sloman, Garratt, 2013). The production of coffee is expensive, it include land, machine, labor, and material. Coffee only grows in high land area of Vietnam, so the investors have to buy large land and burn forest. The labor forces are the farmers, who have years of experience on growing coffee, are paid to grow the coffee to export over sea. Due to coffee planting become popular in Vietnam, Vietnam coffee production surpass Colombia to become the second largest coffee producers. (The popularity of coffee More over, there are also some brands of coffee product such as: Trung Nguyen, Y 5, Vina, etc. Most of Vietnam coffees are export to countries such as: England, United States, Japan, Korean, Hong Kong, Italy, etc.

Elasticity of Demand:

Vietnam has many coffee distributors, so there will be many different prices of coffee. Coffee price will also change because of the world market price change everyday. However, Drinking coffe is a Vietnamese’s culture for years so even if price change the customers are still buying the coffee. Coffee makes people focus, smarter, gain energy, release stress (Gunnars, 2013) . Because coffee is consisted of caffeine, so some of customers cannot quit coffee. And it takes a lot of time to find other substitute or to stop drinking coffee. Coffee Culture is increasing can also make consumers demand more coffee than before. Rise of other culture coffee makes consumer curious and want to taste the different coffee style. And young people also drink coffee to prove that they are already grow up. base on the survey of director of Thu Ha company, Thu Ha company produced 100 ton per year but only 30% of product was exported and the rest was consumed in domestic. It proved that the demand of coffee in Viet Nam is very high and it also attracted some of big coffee distributor come to Viet Nam such as Starbucks and Coffee Bean and Tea Leaf.

http://www2.hcmuaf.edu.vn/contents.php?ids=8334&ur=hoainam

c) Elasticity in Supply

The growth of Vietnam coffee productivity has entered the world market and became the second largest coffee producer, after Brazil. Beside the growth of production, Vietnam’s coffee culture is also well known with the unique brewing style. More important, coffee is the daily need of Vietnamese people, because they need coffee to make them stay awake and gain energy to focus on work. Even though price of coffee is change due to price change, coffee it self will not decrease the quantity of coffee supply.

Base on the Hallam research, Vietnam coffee production is a strong producer, which can expand from 60 578 hectares to 463 450 hectares and coffee bean output increased from 96 000 tones to 800 000 tones, making Viet Nam the largest Robusta producer and second largest coffee producer in the world. This result the increase of income of employment and decline the hunger rate. However, price of Robusta coffee has fallen because of the Arabica coffee had also fallen. Against this background, the coffee price elasticity of supply is very low, which is only 0.13 in short run and 0.24 in the long run . Supply responses to price incentives are not balanced: periods of rising prices stimulate new plantings and other fixed asset investments, which does not change when price fall, it can not be replaced when it reach to the end of production. Supply responses to falling prices have also been slowed in some cases by national efforts to assist producers, for example through price supports and debt relief. In the short-term adjustments can be made to reduce inputs including labor, but creating unemployment and stimulating migration. Reduced labor input through makes the coffee are less care, which lowered the quality of coffee and also create a pressure on price. ( Hallam,