Starbucks to Invade Colombia, Home of Juan Valdez, the Iconic Coffee Man

  • Share
  • Read Later
Jose Miguel Gomez / Reuters

Customers sit in a Juan Valdez cafe north of Bogota, Aug. 28, 2013. The Juan Valdez cafe chain, owned by farmers and beloved by Colombians, expects the imminent arrival of Starbucks Corp to help it boost surprisingly low consumption of the beverage in a nation that grows much of the world's tastiest arabica.

Will the mermaid rescue Juan Valdez? Or will she send the mythical Colombian coffee farmer and his faithful donkey over an Andean mountain cliff? That’s the question Colombians are debating following the Aug. 26 announcement that Seattle-based Starbucks plans to bring its famous green sea nymph logo to Colombia by opening 50 coffee houses over the next five years.

Starbucks’ decision comes at a low point for Colombia’s coffee industry. Growers are struggling to recover from massive flooding, diseased trees, diminished yields, cratering international prices and an overvalued Colombian peso that reduces the value of coffee exports. At a Bogotá news conference, Starbucks CEO Howard Schultz portrayed his company as part of the solution and noted that Starbucks is already one of the largest buyers of Colombia’s premium washed Arabica beans.

But when the first stores open next year, Starbucks may put the squeeze on Colombia’s iconic Juan Valdez coffee shops. These are attractive Starbucks-like cafes featuring the image of the humble-yet-proud coffee farmer Juan Valdez, who was dreamed up by a New York ad agency in 1958. Juan Valdez grew in stature through innovative commercials — like the 1989 TV spot in which he and his faithful donkey coax a sleepy American couple out of bed with an aromatic pot of coffee — and the cafes baring his name are now looking to expand in Colombia and abroad. But there are only 217 Juan Valdez cafes compared to 19,000 Starbucks outlets in 62 countries.

“Starbucks can use economies of scale to reduce costs. They know what consumers like and do a lot of innovating,” said Carlos Rojas, president of the Colombian Coffee Exporters Association. “I think the people at Juan Valdez should be scared.”

Colombian social media were buzzing about the pending java wars with Starbucks detractors cracking wise about bringing coal to Newcastle. But Schultz said that all the coffee served in its Colombian stores would be purchased and roasted in-country. Rather than bankrupting competitors like Juan Valdez, he insisted that the arrival of Starbucks more often helps boost overall coffee retail sales by promoting high-end cafe culture. “We hope we can coexist in a way that helps all ships rise,” Schultz said.

For now, Colombian coffee farmers are floundering. Last year’s output of 7.7 million 132-pound bags of coffee was a three-decade low, equal to about half of Colombia’s 1992 total. As a result, Colombia has fallen from third to fourth place among coffee exporters, behind Brazil, Vietnam and Indonesia.

The problems began in 2010 with heavy rains that damaged coffee trees and washed out roads and bridges making it harder to get the crop to market. The wet weather also helped spread a blight known as coffee rust, which is especially harmful to Arabica beans and is also wreaking havoc on Central American plantations. All of this comes amid a 35 percent drop in international coffee prices over the past year, which is partly due to an expected bumper crop in Brazil, the world’s largest grower.

But maintaining a level of stability on Colombian coffee farms is key. The sector is dominated by small growers who employ about one-third of the nation’s agricultural workforce, said Luis Fernando Samper, a spokesman for the Colombian Coffee Growers Federation. Over the years, prosperous farms have boosted living standards in the mountainous coffee regions and have helped to discourage local youths from joining Marxist guerrillas or getting involved in the illegal drug trade.

With the help of massive subsidies, growers have been scrambling to renovate their coffee farms by planting 2 billion trees resistant to coffee rust. But the new bushes require 24 months to start producing. In the meantime, coffee farmers are demanding more government help. Thousands of growers blocked roads and clashed with anti-riot police in February. Others have joined a nationwide farm strike that began last month and forced President Juan Manuel Santos to call out the army to restore order amid violent protests in Bogotá last week.

“This is a wakeup call,” Samper said. “Colombian society has suddenly realized that the agricultural sector is in deep trouble.”

Still, Samper claims the coffee industry is starting to come back. After the lag period, the new rust-resistant trees are expected to produce higher yields with production this year edging back up to 10 million bags. Samper considers Starbucks as a partner in this recovery. The company has been buying Colombian coffee since it was founded in 1971 and annual purchases could double to about 1 million bags with the opening of local Starbucks stores. In addition, Starbucks and the U.S. Agency for International Development have pledged $3 million for a new farmer support center to help Colombian coffee growers coax higher yields from their plots.

It may also turn out that there’s room for both Starbucks and Juan Valdez cafes. For years, Colombians drank second-rate coffee because the best beans were exported. Even today, the average pot of coffee brewed in Colombia is made with cheaper blends that often include Ecuadorian and Peruvian beans. But Colombians are at last developing a taste for high-quality lattes and espressos

“Colombians got used to consuming not-very-good coffee,” said Rojas, who said his first trip to Starbucks was a revelation. “It was amazing to go abroad and order Colombian coffee. You would be charged ten times more but would realize: ‘That’s not the coffee I’m used to drinking.’”