Final group project microeconomics topic the tea market in vietnam

This exploration endeavors to traverse the verdant fields of Vietnam's tea industry, examining the factors that influence the market namely buyers, consumers, new competitors of tea firm

NATIONAL ECONOMICS UNIVERSITY

NEU BUSINESS SCHOOL

FINAL GROUP PROJECT MICROECONOMICS

TOPIC

THE TEA MARKET IN VIETNAM

Members : Nguyễn Văn Nghĩa 11230713

Bùi Đình ThiênHải 11230682 Ngô Thu Hiền 11230688

Lê Thị Thùy Dương 11230675

Ha Noi — 12/2023

CONTENTS

TL INTRODUCTION 1 - 2

In 80/7 .-a4 3

1 Coffee industry ïs closer to competfition than monopoly - 3 1.1 Identify and explain the mar ket - 2 2222122221123 2 1322 xxxessze 3 1.2, Eactors affecting the market L0 1 2201222211111 11 1522221111 tren 5

2.1 Supply and factors affected to supply 0 0Q 222 eerre 8 2.2 The demand - - 22 1121111111 111111111111111 1111111110111 11116190 1 11g xkg II

TH, CONCLUSION 0000 e 14 I2 0)0.307 100.1 15

I INTRODUCTION

Nestled among the lush landscapes of Southeast Asia, Vietnam boasts a tea culture as vibrant and diverse as its scenic terrains The Vietnamese tea market, characterized by its rich heritage and an increasing global presence, is experiencing

a noteworthy evolution

This exploration endeavors to traverse the verdant fields of Vietnam's tea industry, examining the factors that influence the market namely buyers, consumers, new competitors of tea firms and many others that will be listed and analyzed in our study Moreover, we will invite readers to look into the market through an economist's insight, by providing clear definitions of basic economic terms, detailed information together with accurate statistics about the Vietnamese tea market in general and the elements affecting the demand and supply of the Vietnamese tea market in recent years

Join us on this expedition through the verdant plantations and bustling tea markets of Vietnam as we uncover the stories, challenges, and opportunities that shape the Vietnamese tea industry This analysis - “THE TEA MARKET IN VIETNAM” - serves as a compass for stakeholders, investors, and enthusiasts, offering valuable insights into a market that blends tradition with mnovation and stands poised for a future steeped in possibilities

This analysis is divided into the following parts, each part will be performed

by one person:

Conclusion

4 Supply and factors affecting to supply - Hoang Khanh Linh

5 Demand and factors affecting todemand - Bùi Đình Thiên Hải

Due to limited time and knowledge, our group's exercises will inevitably make mistakes We hope to receive enthusiastic guidance, feedback from teacher and other classmates

Sincerely thanks!

Il MAIN IDEA

1 Coffee industry is closer to competition than monopoly

1.1 Identify and explain the market 1.1.1 Identify the market

From a microeconomics perspective, the monopolistic competition market structure is identified by five simple factors: the wide variety of sellers, product features, market power, barriers of entry and non-price competition Additionally, monopolistic competition exists between a monopoly and perfect competition, combines elements of each, and includes companies with similar, but not identical,

high market power and the firms must have an | “4

tea market has all factors that identify the

- Product features: The different cultures in the world harbor their tea history In Viet Nam, the origin of tea history was established in the Hung Kings Dynasty and has found traces of fossilized leaves and tea plants in Phu Tho Province The benefits of tea to the entire body are both short and long term Tea is

a nearly calorie-free beverage that quenches thirst, keeps you hydrated, and provides a subtle caffeine boost Therefore, it can support oral health and digestion heart health, bone health and cancer prevention Currently, The market has many tea products such as green tea, Oolong Tea, Lotus tea, Black tea, etc and the firms always compete with each other to stimulate demand, thus it creates a monopolistic competition market

- The wide variety of sellers: Tea is considered one of the popular drinks in Vietnam, so the production and quality of tea is gradually improving in this country The tea market distribution process will usually have two main distribution channels:

+ Production group: Tea is often grown in high mountainous and highland areas such as Thai Nguyen, Tuyen Quang, Lam Dong, Da Lat., and people will harvest and dry the tea and then sell it to factories

+ Agent and business group: This organization frequently works as a production facility or as a partner with one They are always the top businesses in

3

the nation for the distribution and manufacture of smart devices and supplies That includes a chain of both large and small coffee shop, a supermarket, and a shopping center, etc Some famous tea distributors in Vietnam: Thai Nguyen Tan Cuong Tea, Thai Neuyen Mai Suong Tea, Thien Thanh Tra and many other companies

- The barriers of entry: Each company makes slightly different products and tries to stand out in the minds of consumers Entry to the market is not blocked According to statistics from the Vietnam Tea Association, as of 2020, our country has 34 provinces and cities growing tea with a total area of 123 thousand hectares, average productivity reaching nearly 95 tons/ha, output reaching 1.02 tons million tons of fresh tea buds’ With a large amount of tea produced, it is easy for sellers to import; however, the cost of preserving and forming the product is quite large The firms need to be careful of barriers to entry

- Advertising in the monopolistically competitive industries: Advertising fits into the differentiation story in two different ways One role advertising plays is to inform people about the real differences that exist among products Advertising can also create or contribute to product differentiation, creating a brand image for a product that has little to do with its physical characteristics

There are many brands running ads on different platforms to introduce the differences of their products; for example, advertising Dr Thanh, Oolong Tea, C2 Tea, companies want to introduce the unique flavors and characteristics of their

TUT _

6IẢI ĐỘC, 6IẢI NGỨA

company's products Hence, they will increase the quantity of demand on the firm's side, creating monopolistic competition for each product

! Bài 1: Thực trạng ngành sản xuất chè Việt

- Market power: Currently, large companies have their own websites and social media platforms to update products and prices so that customers can track and compare Ordinary tea consumers can directly understand the price, because tea products are very popular and interesting to many consumers.Futhermore, there are many firms that produce a type of different tea, so the price and quantity is competitive This table demonstrates the different price of other products in the Lunar

New Year 2023”

STT Sản phẩm Tên sản phẩm Giá thành

(VNĐ)

1 Trà khô, túi Cozy Ice Tea đào hộp 270g (18 gói x 159g) 31.000

2 lọc Lipton các vị (16 gói x 14g) 38.500

3 Ô long Cầu Tre hộp 50g (25 gói x 2g) 34.000

4 Nestea vị vải hoa lài hộp 144g (12 gói x 12g) 30.000

5 Trà xanh Thái Nguyên loại thượng hạng 100g 60.000

6 Trà nhài Hany hộp 35g 22.400

7 Tra xanh organic Vherbs Shan Tuyét C6 Thu hép 79.000

49g (7 gói x 7g)

8 Trà Blendy matcha gạo rang hộp 170g (10 gói x 31.000

179)

9 Trà xanh Cozy hộp 50g (25 gói x 2g) 28.900

10 Trà Atiso 100g các thương hiệu 59.200 ~

70.000

1.2 Factors affecting the market 1.2.1 Supplier influence

Suppliers with potential influence can control product quality and availability, know how to limit the competition and make profit.?

The total area for tea production in the past 5 years has remained at around 130,000 ha According to the Food and Agriculture Organization of the United Nations (FAO), Vietnam's tea growing area ranked Sth in the world in 2018, after China, India, Kenya and Sri Lanka According to the plan to develop the agriculture sector to 2020, with a vision to 2030, approved by the MARD, the tea growing area 1s expected to remain stable at 140,000 ha from 2020 onwards

? Bảng giá các loại tra va ca phé dip Tét Quy Mão 2023

3 OVERVIEW OF VIETNAM’S TEA INDUSTRY

Growth of cultivated

area of tea trees in Vietnam, 2015-2019

In recent years, the Ministry of Agriculture and Rural Development of the Socialist Republic Vietnam has published many policies and methods to upgrade and enhance the tea market power and quality For example, the department announced that agrochemical substances are allowed or banned in growing tea plants Many tea companies and operators in Vietnam have imported the tea processing machinery from India — one of the biggest tea manufacturers in the world

Furthermore the Vietnamese tea industry has tried their own best to upgrade the image We’ve been improving our processing technologies, and then, we obtain certifications such as the Rainforest Alliance, VietGAP - a Vietnamese tea production standard We not only have commodity tea types but also specialty tea

According to data announced by the General Department of Customs, Vietnam exports totaled roughly 137.4 thousand tons, equivalent to 236 million USD in 2019 However, in 2020, due to the Covid-19 pandemic, tea exports decreased 1.8% compared to 2019, reaching 135 thousand tons As a result, the value of tea exports was 218 million USD, down 7.8% Green tea contributed 48%

of the total (including flavored green tea and Oolong)’

1.2.2 Buyer influence

The way that customers react to the producer’s goods can determine and offer their price strategies and overall market demand for products and services

“ Green tea market in Vietnam — The past, present, and future

> `

-^- 2.7 Number of tri; 4.0~

157 spend per trip index 100

1.2.3 New competitors

The ease or difficulty to enter the market for the new participants, especially for the nearly substitute products When the newcomer and participants bring along new versions of products which can easily substitute products related to tea This situation will affect negatively to the tea market

- Low entry costs: \t is much easier for new start-up entrants to access and participate in the market without any significant investments on account of low capital requirements and reduced financial barriers

- Absence of significant barriers: Without any strict legal, regulatory, policy

or technological processing obstacles required in the market, the new entrants can enter more effortlessly

- Favorable government policies: Government initiattves and policies that promote competition, reduce regulations, or offer incentives to new entrants facilitate easier market entry Government always tries their best to support and encourage more companies with their own subcultures to enter the market to reduce the market power of the only one department, which helps to balance the market and set the equilibrium price

- Accessible distribution channels: Availability of open and accessible distribution channels, such as online platforms or partnerships All of these necessary figures will broaden the entry process for new competitors

1.2.4 Alternative offers

The substitute market with better quality products with the nearly similar function, always available, cheaper, easier to approach with, which will bring to

7

customers better experience and nearly similar feelings when trying Therefore, this situation will definitely affect the tea market

1.2.5 Rivalry competitiveness

In case, if the new competitors that own the higher power in the market with the better products bringing the similar feelings for the consumers Moreover, they might be more competitive than the tea market, they will attract more customers and earn more from it For instance, if the coffee market wants to spread their market more, it will definitely affect the way how the tea market can operate effectively.’ 1.2.6 Economic conditions

Economic conditions, such as income levels and disposable income, can affect the tea market During periods of economic growth, consumers will have more opportunities and chances to buy and purchase goods In contrast, if there are some economic damages they cannot participate in with full of their potential and economic power

1.2.7 Marketing and promotional activities

Marketing efforts, including advertising, branding, and promotions, can influence consumer perceptions, the way how they react to our products and drive demand for specific tea products or brands Effective marketing strategies can help create awareness, build brand loyalty, and ultimately impact market performance 1.2.8 Global events

Global events such as geopolitical tensions, natural disasters, or economic crises in other countries can affect the market Especially, in covid 19 pandemic period, tea market was affected seriously

2 THE SUPPLY AND DEMAND

2.1 Supply and factors affected to supply 2.1.1 Supply of tea

Beginning with talking about tea supply in the world, there are many countries capable of exporting tea in a large quantity We can mention one of the world's leading export names such as China, Kenya, Sri Lanka, India, Japan, and our Vietnam is also one of them Vietnam is one of the cradles of tea trees and the 5th largest tea exporter in the world’ Tea sector in Vietnam is export oriented with about 80% of its annual total output supplying foreign markets Up to now,

° The 5 Factors Affecting the Market’s Competitiveness

° Green tea market in Vietnam — The past, present, and future

tea products have made their presence in more than 100 countries and terrltorles worldwide with annual export value of 200 million U.S dollars’

Vietnam€recit

Ha Giang

Thai Nguyen

(21,000 ha) 7 : 1 500 had £1, UU Na)

Phu Tho ⁄

(16,200 ha)

Tuyen Quang (8,500 ha)

Yen Bai Ị Lam Dong (7,800 ha) (12,600 ha)

In Vietnam, thanks to the climate and suitable terrain, those things have helped our country's tea production to be higher and higher Tea growing areas are located mainly in the Northern Midlands and Mountains, then scattered in areas such as the Central Highlands, Northern Delta and North Central Some large tea growing provinces in Vietnam are Thai Nguyen (21,500 ha), Ha Giang (21,000 ha), Phu Tho (16,200 ha), Lam Dong (12,600 ha), Tuyen Quang (8,500 ha) and Yen Bai (7,800 ha) Besides, there are several of Vietnam's notable tea growing areas such as Tuyen Quang, Yen Bai, Son La, Bac Kan, Nghe An, and Ha Tinh

Data from the General Department of Customs showed that in 2018, the amount of tea export reached more than 127 thousand tons, dropping sharply by 8.7% compared to 2017 despites its increasing trend since 2015 The tea export turnover was at nearly 218 million USD, down 4.4% against the last year Tea exports increased again in 2019, reaching nearly 137.4 thousand tons, an increase of 8% compared to 2018 Accordingly, tea export value was estimated at 236 million

USD, growing by 8.8 %.°

7 Vietnam Tea Industry: An Analysis from Value Chain Approach

8S OVERVIEW OF VIETNAM’S TEA INDUSTRY

° OVERVIEW OF VIETNAM’S TEA INDUSTRY