The entrepreneur leading Vietnam's pepper export market sums up his secret to success: “Sales pitches + Quality + Tools + Hard work! Go and ‘play’ with small and medium-sized partners!”
As numerous small and medium-sized Vietnamese businesses face difficulties forcing them to close or scale back operations, many people would surely regard the above utterly confident assertion as… a joke.
But these are precisely the heartfelt words of Phan Minh Thông, the young CEO of Phúc Sinh Joint Stock Company. Though seemingly tiny, it has led Vietnam’s pepper-export market share for the past 5 years and now holds 6% of global pepper exports and 15–17% of Vietnam’s pepper exports worldwide.
What enabled Phúc Sinh to achieve that success and gave entrepreneur Phan Minh Thông such confidence?
Entrepreneur Phan Minh Thông was born in 1975. He graduated from Hanoi's Foreign Trade University and began his career as a “desk runner” at a Japanese wastewater treatment company. A year later, he “headed south” and applied for a position in the pepper export department at Pitco, a business founded just 3 months earlier under Petrolimex. After setting up Pitco's pepper export system, he left the state-owned company and officially started his own business with entirely borrowed initial capital. He says his “strengths” are sales experience from age 10 at his family's dry-goods store, an entrepreneurial spirit rooted since childhood in Hải Phòng—a land of commerce and trade—along with hard work, eagerness to learn, and soft skills.
Phan Minh Thông
Business Formula: 4C
* First, could you briefly introduce Phúc Sinh's history?
– I founded Phúc Sinh in 2001, initially as a limited liability company. For around 5 years after its establishment, Phúc Sinh specialized in pepper exports. During those 5 years, we learned many lessons that enabled us, 6 years later, to climb to the number 1 position in Vietnam's pepper export market. What makes us proud is that Phúc Sinh was very small, with initial charter capital of only VND 800 million, later increased to VND 26 billion and now VND 45 billion. Yet that is still tiny compared with other businesses in the sector: state-owned enterprises with capital and credit limits of trillions of dong, or the many foreign companies operating in this field in Vietnam.
* What did you learn that helped Phúc Sinh reach number 1?
– We learned many things, especially how to sell. I believe the main secret lies in marketing and making sales offers. Marketing does not simply mean sending out a group of people to constantly promote your product. I realized that to enter foreign markets, sellers must understand buyers’ culture and needs. We have also invested very seriously in improving product quality. This greatly supports promotion and wholesale distribution to customers.
* Everyone talks about improving product quality. How, specifically, does Phúc Sinh improve agricultural product quality?
– At Phúc Sinh, we invested in 4 factories and carefully select incoming goods and oversee every stage of production, ready to meet customers' needs with the best quality. We supply different quality levels and prices according to customers' wishes: ‘you get what you pay for.’ We have a laboratory and apply the 17025 quality management system, while our factories operate under ISO 22000 standards. We also have a coffee cupping room, and I myself had to learn to taste coffee like a professional coffee trader. Sometimes, when I travel abroad, customers unexpectedly test whether I ‘know my trade’ through coffee cupping.
Phúc Sinh is currently also one of four companies in Vietnam with a sterilized pepper processing plant. Two of the others belong to Dutch and American businesses, and the remaining one to a Singaporean group. During inspections and assessments by global corporations, we always ensure we achieve the highest score.
* Why did Phúc Sinh move into coffee when it was so firmly established in pepper?
– Of course. Once we had usefully grasped and mastered our business formula, we wanted to add other products. Coffee is a large market, with annual exports reaching millions of tonnes. Vietnam also has more international representative offices operating in coffee exports. Moreover, Vietnam has the world’s largest Robusta output, so overlooking coffee would be a significant missed opportunity for any Vietnamese agricultural trading business.
* I still don't understand why Phúc Sinh's coffee exports have gone so smoothly, even as the global economy worsens and Vietnam's leading coffee companies suffer heavy losses. Are you hiding another secret?
– Over the last two years, we exported more than 20 thousand tonnes of coffee annually. We use tools to support and secure favorable prices. Of course, we must combine them with other resources such as capital and knowledge of trading physical commodities and on international exchanges. Usually, no organization teaches these tools in detail; businesses must seek them out, gain experience and develop their own ways of using them. I worked hard to learn, wearing out my trousers sitting in dozens of cafés, refreshment shops and drinking establishments with partners and customers who were masters of price leadership in international markets, learning their techniques.
* Can your business formula be summarized from that?
– It is simple: Sales pitches + Quality + Tools + Hard work! Go and ‘play’ alongside small and medium-sized partners!
“Break through the wall” to enter the world
* What are the current challenges for Vietnamese coffee exports in general?
– Many businesses know about tools for securing favorable trading prices, but using them at the right time and place and managing cash flow, risk and one’s own greed is another matter. More importantly, our businesses tend to… sit still. I believe we must go out and reach the world ourselves, without intermediaries. In Phúc Sinh’s first year in coffee, many predicted bankruptcy. Representative offices ‘built walls’ around us. We declared: We will break through those walls and step into the world. And we did.
* Did your experience, network, and relationships in pepper also help you expand coffee exports?
– Coffee is a huge market and involves only coffee, whereas pepper can be accompanied by other spices such as star anise and cinnamon… Even if Phúc Sinh wanted to invest in coffee, we could not make use of the existing network. Moreover, being number 1 in pepper does not guarantee survival in coffee. We quickly understood that selling only to representative offices in Vietnam would lead the business to a dead end. As with pepper, when selling coffee I sought small and medium-sized producers worldwide. They place small but regular, continuous orders, can offer much better prices than large corporations and are more flexible in payment. This is truly a broad path to follow. Overall, if Vietnamese SMEs take this approach, I believe the road to global markets remains wide open!
* Did Phúc Sinh pay any price for its “very quick understanding” when entering green coffee exports?
– In the first year, we lost USD 500,000, equivalent to 10 billion. But we remained determined. As we kept working, things became clearer. The key is to keep learning throughout the process. At the same time, we must not become dependent on risk management tools, especially when managing and coordinating coffee trading. They should not be regarded as magical tools.
* Whatever the case, the pepper market still seems competitive compared with coffee, doesn't it?
– Absolutely. More precisely, competition had already forced numerous foreign pepper representative offices in Vietnam into bankruptcy. Coffee prices fluctuate by USD 400–500 per tonne in a year, while pepper fluctuated by as much as USD 3,800 per tonne last year. What would the losses be after a miscalculation? Still, although competition is fierce by nature, Phúc Sinh has never feared it at any stage or treated other businesses as enemies. Our motto is always to cooperate with Vietnamese businesses and advance together!
* How do you find small and medium-sized business customers worldwide?
– I regularly register for specialized trade fairs. Dozens take place worldwide each year, bringing together large numbers of small and medium-sized businesses. Participation is usually quite expensive. Previously, many Vietnamese businesses did not register because they lacked information, and few wanted to invest in attending. Since last year, through the Vietnam Pepper Association, I have shared all the information I have about specialized trade fairs worldwide. Phúc Sinh's annual expenditure on trade fairs is estimated at around USD 200,000 and continues to rise with export sales. Perhaps thanks to this, in 2010 Phúc Sinh became the first Vietnamese business selected by the international pepper exporters' association as an Outstanding Exporter of Pepper and Value-Added Pepper Products.
* One final question: what is your destination and greatest hope in entering the coffee market?
– For pepper, we aim to retain the number 1 position we have established over the past 5 years. For coffee, Phúc Sinh's target next year is to increase exports to around 40,000 tons/year. We also hope the Vietnam coffee exporters' association will take the initiative and advocate through every possible means for the world's largest coffee trading centers to consider establishing Robusta coffee warehouses in Vietnam. When warehouses are not located in Vietnam, Vietnamese businesses lose many advantages.
I am also thinking about and aiming to open and expand a school specializing in agricultural commodity trading, based on real trading practice rather than books, as some commodity trading organizations have done. It is absurd that we have the world's largest Robusta output and export enormous volumes annually to international markets, yet have not built these basic foundations!
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