We’re heading for a serious case of coffee whiplash.
Global coffee prices may be falling for now, but poor harvests in Vietnam threaten to send costs surging again – leaving manufacturers and consumers worldwide with bitter price rises to swallow.
Last year was worrying enough for global coffee markets, with international prices breaking records and stock running low. Factors like crop failure and failing harvests caused by the impact of climate change are affecting coffee growing countries around the world and disrupting supply chains.
At the same time, demand is unbelievably high: around 80% of the world’s population consumes caffeine in some form daily – mostly from coffee. Around 11 million metric tonnes of coffee is produced annually and the Western world in particular is hooked, making it the most widely used psychoactive drug in the world.
So, if prices are settling, why is there a need to worry?
The world’s largest producer of the Robusta
Vietnam plays a key role in the global market, with only Brazil producing more coffee – an average of 2.68 million metric tonnes – each year. According to Hung Khuat, head of corporate affairs for Nestlé Vietnam: “Vietnam is the second largest coffee producer in the world and one of the largest coffee origins for Nestlé”.
Vietnam, which is followed in coffee production levels by Colombia, Indonesia and Honduras, exports over 1.5 million metric tons of coffee a year. The country is the world’s largest producer of the Robusta coffee bean, contributing over 40% of the world’s overall production.
“In 2025, Vietnam’s coffee industry exported a total of $8.92bn, a 58.8% increase compared to 2024,” continues Khuat. This was primarily driven by global Robusta prices. At the same time, Vietnam’s coffee industry is undergoing a clear shift, with coffee emerging as a key growth engine.”
Robusta is known for its bitterness and low acidity, which make it ideal for well-rounded coffee blends sold by manufacturers like Nestlé and seen on supermarket shelves around the world.
Perfect storm of problems
Severe floods last Autumn and heavy, persistent rain in Vietnam’s coffee-growing central highlands area reduced yields and significantly increased wholesale coffee prices. Because of Vietnam’s status as the largest producer of Robusta in the world, any disruption to the harvest worries traders due to the major impact on supply.
At the same time, land prices in Vietnam’s Central Highlands are increasing due to new infrastructure and planning, shifting investment away from big cities and booming agriculture (especially coffee, durian, pepper and rubber…).
Also, land prices in Vietnam’s major cities, including Ho Chi Minh City, Hanoi, Da Nang and Nha Trang have steeply increased recently. So investors are looking to lower priced alternative areas including rural regions like the Central Highlands.
As a result some coffee farmers are cashing in and selling their land, driven as well by an inability to make a healthy profit. These combined factors are already reducing supply – set to continue – which will inevitably push up wholesale coffee prices.
“Today, a coffee farmer in Vietnam must manage climate, land pressure and finance simultaneously. Farming alone is no longer enough,” says Kaldi Tai, a Vietnamese coffee farmer who founded The Coffee Farmer Project in Lam Dong, Vietnam. The project is a coalition of high-quality coffee-processing farmers that aims to raise standards, share best practice and grow a fair trade model in Vietnam.
“From the ground, the pressure is very real,” he continues. “Land prices in coffee regions have risen sharply, while climate risks have become more extreme and less predictable. For farmers, this means higher fixed costs and greater uncertainty at the same time.
“Flooding, drought and irregular rainfall no longer feel like ‘bad seasons’ – they are structural risks. This forces farmers to invest more in irrigation, drainage, replanting and labour, just to maintain stable yields.”
VAT issues are taxing
The unwelcome introduction of VAT on semi-processed agricultural products including coffee beans in 2025 added more grist to the mill. The laws, ushered in last year, have since been scrapped, but not after presenting a major economic challenge.
Nestlé’s Khuat says: “Given the challenges particularly felt by the agricultural export processing sector, in mid-December 2025, Vietnam’s National Assembly amended the VAT Law, with effect from January 1 2026. One of the most important changes concerns the VAT treatment of semi‑processed agricultural products at the commercial stage."
Under this law, companies and cooperatives purchasing and reselling unprocessed or semi-processed agricultural products needn’t declare or pay output VAT, Khuat says. “But they are still entitled to deduct input VAT incurred on related goods and services. This restores the long‑standing VAT mechanism that applied for many years before the VAT law took effect in July 2025.”
For Tai, scrapping the VAT increase was a welcome move and has alleviated at least one unwelcome headache. “The 5% VAT applied from July 2025 created serious operational friction,” he says. “Since green coffee exports are zero-rated, exporters had to prepay VAT and then apply for refunds.
“In practice, this tied up cash, increased paperwork and slowed down trading activities, especially for cooperatives and origin-based exporters. The policy was officially removed from January 1 2026 because it generated high administrative costs while most coffee was still exported as raw material.”
Price rises set to filter through slowly
According to Tai, the markets and manufacturers set to feel the greatest impact from Vietnam’s current market stresses first are smaller ones.
“Those relying on stable, low-cost green coffee supplies,” he says, “are smaller and mid-sized roasters, especially in Europe, Australia and Asia, feel the pressure faster than large multinationals. Markets dependent on Robusta for blends and industrial use are particularly exposed to climate-driven supply volatility.”
But, it will spread, taking a year or two before bigger makers and then consumers feel the price impact.
“Consumers will gradually see higher coffee prices,” he says. “Price increases usually take 12 to 24 months to reach consumers, with premium and specialty segments reacting first, while mass-market products follow later.”
Technology can help to control price increases over time, but only when combined with farming discipline and long-term sourcing. Controlled fermentation, better drying systems and post-harvest management can significantly improve quality without dramatically increasing cost.
However, technology cannot replace relationships. Cost pressure is better managed through closer cooperation between roasters and origin, rather than constant supplier switching.
Transition phase
Although the future for Vietnam’s coffee manufacturers looks challenging, the ability to adapt, modernise and build long-term partnerships with exporters, roasters and manufacturers can help ease the situation.
“Over the next five to ten years,” Khuat says. “Vietnam’s coffee farmers are likely to face climate change and rising production costs, but also strong incentives to invest and modernise to sustain the global demand for Robusta.
“For roasters and manufacturers, this could translate into potential price volatility, tighter sustainability requirements, and increasing strategic value of long‑term farmer partnerships.”
Thus more Vietnamese coffee farmers could turn to roasting coffee themselves to help increase their profits, if they are given the right support.
“If regulatory and cost structures support it, Vietnam could move further into roasting and semi-finished products,” Tai believes. “This would not immediately disrupt global giants like Nestlé, but it would diversify supply chains and reduce dependency on raw exports.”
He also sees a greater focus on quality and resilience as key driving factors for future growth in Vietnam’s coffee market. “Vietnamese coffee is entering a transition phase. Expansion through volume is reaching its limits due to climate and land constraints. The future lies in quality, traceability and resilience.
“At the same time, Fine Robusta is gaining global attention as specialty Arabica becomes more expensive and fragile under climate stress. Fine Robusta is no longer about competing with Arabica. It is about offering roasters a stable, climate-resilient alternative with real quality and identity.”
Strengthening the supply chain
At the same time, major manufacturers like Nestlé are investing heavily in Vietnam’s coffee industry to strengthen their supply chain and fulfil their corporate social responsibility.
As Khuat says: “We continuously invest in upgrading technology and manufacturing facilities, boosting production capacity, and advancing regenerative agriculture practices, with a focus on sustainable coffee farming.
“In addition, we have continued to support Vietnamese coffee farmers’ transition to regenerative agriculture because we believe that it will help improve farmers’ productivity and livelihoods, reduce carbon emissions, and support the sustainable development of Vietnam’s coffee industry.”
The business is doing this particularly through the Nescafé Plan, which it says promotes sustainable farming practices, climate resilience and improved farmer livelihoods.
Some 21,000 farming households in the Central Highlands have been positively impacted, resulting in the distribution of 100 million drought and disease resistant coffee plantlets. This has then rejuvenated 100,000 hectares of aging coffee farms and boosted farmer incomes.
But, is that enough? While the global industry celebrates coffee price reductions, the next battle is inevitably around the corner.