Cinnamon Value Chain in Lao Cai Province

This issue brief discusses the Vietnam Sustainable Forest Management Activity’s support towards local businesses and farmers in Lao Cai province.

Key Issues of Vietnam’s Cinnamon Industry

The Project conducted a rapid literature review and field assessment to initially identify seven main issues:

• The quality of cinnamon seedlings has not been seriously considered, especially with limited research and development on leading varieties and certified cinnamon seedlings. Low quality of seedling leads to low productivity in cinnamon bark, leaves (essential oils), and timber (logs). However, most local cinnamon growers do not tend to purchase certified cinnamon seedlings for several reasons, including: (i) price barriers, (ii) limited availability in local areas; or (iii) traditional practices collecting cinnamon seeds from their old high-density tree plots to sow and produce seedlings.
• To some extent, chemical residue, glyphosate (in herbicides) and active substance, chlorpyrifos (in pesticides) as well as metal content (lead and mercury) are found above the required standards, preventing cinnamon producers from exporting to high-end markets, like the U.S. or Europe.
• While the area of organic cinnamon has begun to develop, it is still on a small scale, the cost for certification is high (beyond farmers’ reach), and farmers produce limited (non-diverse) cinnamon products.
• Producers lack the technology and capital to invest in in-depth processing to improve product value. Due to a lack of competent experts, the intensive technical capacity of agro-forestry extension has not met actual requirements or market potential.
• Pests and diseases occur with cinnamon trees and many areas are over-exploited, such as: exploiting areas of young cinnamon trees; technically incorrect pruning, etc.
• Collaboration between processing and exporting enterprises and cinnamon growers is not well established, although Vietnam has more than 600 companies operating in the spice industry, mainly through trade. The supply chain has not been effectively implemented, especially to form cooperatives that can connect with businesses.
• There are very limited studies evaluating the potential of cinnamon trees and products’ potential for carbon sequestration.

The Project’s Interventions

In Lao Cai, the Project is contributing to addressing the following issues:

1. Conducting assessment on seedlings and supporting cinnamon forest owners to obtain cinnamon “mother tree” forest certification – In early 2023, the Project conducted a survey and identified 25 ha of 15-year-old cinnamon trees owned by 33 households in Nam Det commune (Bac Ha district) and Nam Tha commune (Van Ban district) to be transformed into a cinnamon “mother tree forest” (i.e., an area of mature trees and dense enough to produce adequate high-quality seeds for seedlings). The Project provided technical assistance to create boundaries, select and save the best trees, and thin the rest. As a result, the current standardized density is about 600 trees per ha. This practice helps increase productivity and produce better seed quality. In the next season, these 25-ha of mother tree forest will provide around 37.5 tons of seeds, which will produce more than 70 million good-quality seedlings for plantation for 21,000 ha of cinnamon. This will contribute to enhancing the CO2 sequestration of cinnamon forests in the province and generate income.
2. Setting up farmer interest groups (FIG) for readiness to develop organic plantations – From October 2022 to July 2023, the Project helped establish 15 cinnamon FIGs in seven communes of Van Ban, Bac Ha and Bao Thang districts. Each group consists of 50-70 members led by a management board. The Project organized consultation meetings with these groups to discuss and agree on the working principles and a benefit-sharing mechanism, that were approved by the relevant Commune People’s Committees. The Project connected and facilitated purchasing agreements between cinnamon producers/ lead firms with 814 local cinnamon farmers; most of which are Dao minority ethnic people, and owners of about 1,722 ha of cinnamon.
3. Providing training on organic farming and pre-processing skills – The Project conducted 15 trainings on cinnamon organic farming for 814 farmers (41% females and 65% ethnic minorities) to raise awareness on buying certified cinnamon seedlings and to eliminate their practice of using chemical fertilizers, pesticides, and herbicides. The Project guided them on keeping a cultivation logbook to track data on seedlings, nutrition for soil, pruning, thinning, etc. This will enable farmers and conservation friendly enterprises (CFEs) to register for organic plantation. The Project is also collaborating with CFEs to train farmers on the collection of cinnamon bark and pre-processing techniques to ensure their products meet product processing requirements, market demands and required standards from CFEs.
4. Improving organizational performance for CFEs – The Project organized trainings on business planning, market access, and financial access for two CFEs (Tam Hoi Cooperative and Thai Tuan Cinnamon Ltd.) to help them understand consumer behavior, market segments for different products, and sales predictions for inventory management. As a result, Thai Tuan Cinnamon Ltd. decided to diversify their products to produce cinnamon sticks, which resulted in an agreement between the company and farmers to purchase both cinnamon branches and leaves for essential oil production and bark for cinnamon sticks. The Project advised Thai Tuan Cinnamon Ltd. on the conditions and procedures for obtaining a Certificate of Eligibility for Pharmacy Business so the company can officially export cinnamon oil to China.
5. Creating long-term impact for local people and the environment – The Project has been providing technical assistance on cinnamon for farmers to improve their livelihoods, leading to reduced deforestation threats of natural forests. With the Project’s support, approximately 2,640 local people (from 660 households) received benefits and at least 1,722 ha of cinnamon will be grown organically, contributing to better sustainable forest management and biodiversity conservation. Once these cinnamon plantations receive organic certification, the associated cinnamon producers will have more opportunities to export their certified products to the international market, especially to European and U.S. markets. This will not only help improve livelihoods of local people, but it will also lead to sequestering more than 100,000 tons of CO2 annually, contributing to addressing the impacts of climate change in Vietnam and beyond.