June 10th, 2014.

STARBUCKS OPENING COFFEE SHOPS IN COLOMBIA !!!

Information supplied by Starbucks Press Office, May 2014

Quick Facts:
Starbucks is located in 64 Countries, worldwide.
20,519 retail stores worldwide (as of April 24th, 2014)
More than 740 stores across 22 Countries in Latin America.
Starbucks has over 10,000 partners across the Latin American region.
Starbucks served more than 100 million customers in Latin America in 2013
Starbucks has been purchasing coffee from Latin America for more than 40 years and operating stores in the region for more than 10 years.
Mission: The Starbucks Mission is to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time,

Starbucks opening coffee shops in Colombia ? Controversial. Yes, very controversial. The multinational Goliath, Starbucks, will be pitted against the Colombian favorite, the diminutive Juan Valdez. Actually, what both Juan Valdez and Starbucks have in common is that they are both Coffee shops, but with very different personalities

Ask this question a different way: Why has it taken Starbucks so long to open their first coffee shop in Colombia ? They already have 740 stores in twelve countries across Latin America. Why not Colombia, where Starbucks is the major buyer of Colombian export grade coffee ?

Coffee is an integral part of the Colombian economy, not only because it brings in foreign currency, but because it employs a huge number of agricultural workers and they and their families are dependent on the coffee farms for their livelihood. It has been a difficult last five years for the growers, suffering floods with washed away roads making it difficult to get the harvest to market, over production and a rust fungus that wiped out about seventy five percent of the harvest in 2012. At the same time, the price of coffee has been bouncing around on the low end, with other countries such as Brazil and Africa eating into their market share, while the Colombian Peso has gained in strength making Colombian exports more expensive. To keep the foreign currency coming in from the coffee harvest, ninety percent of the good coffee is exported, the balance of ten percent being mixed with less expensive brands imported from other countries to be used for the local market. With Starbucks opening up its retail stores, this will change, as Howard Schultz, President and CEO of Starbucks, has publicly undertaken that they will only serve Colombian grown and roasted Coffee in their coffee shops in Colombia.

To prove Starbucks commitment to the Coffee Growers, it has formed a pact with the US Agency of International Development to invest $3M to improve the quality and supply of Coffee in certain regions of Colombia. More significant is the fact that Starbucks have opened a Farmers Support Center in Manizales in the Coffee growing triangle, copying what they have already done in Costa Rica, Tanzania and Ruanda, which aims to improve the lives of the farmers and their families, by offering technical know how, soil testing and ways to improve the agronomy that will produce better yields with less risk,

Juan Valdez is the most recognized brand of Coffee and Coffee shops in Colombia with 170 shops and 68 in other countries. After going through ups and downs, especially overseas, Juan Valdez is now poised for an expansion program and intend going public in two years. Their logo is the Iconic Farmer, Juan Valdez, and his faithful Donkey Conchita, carrying bags of coffee, a logo that was dreamed up by a Madison Avenue advertising agency in New York in 1959.

Enter Starbucks, a multinational, global company with 20,519 retail stores in 64 countries. (These numbers were supplied by Starbucks, dated May 2014). Starbucks has a long history with Colombia. In 1971, a young man named Howard Schultz, who had a dream and a passion to serve the best coffee possible came to Colombia in search of the finest Arabica coffee beans for a small coffee business he owned in Pike Place Market, Seattle, Washington State. The Company prospered and his coffee buyers have been coming to Colombia ever since, learning the local coffee culture, developing strong relationships and mutual respect with the Coffee Growers and continuing to buy coffee. Today, Starbucks is the biggest buyer of Colombian Coffee in the World. After forty two years of exporting coffee from Colombia, Starbucks decided it was time to turn Colombians into consumers of their coffee. Howard Schultz, President and CEO of Starbucks has publicly undertaken to serve exclusively Colombian harvested and roasted coffee in his Colombian chain. Guess who this will benefit the most ? The entire coffee industry. His brand is already well known in Colombia, because many Colombians know Starbucks from other countries they have visited. Surely this is a welcome development.

In rolling out the Colombian operations, Starbucks is partnering with two enormously successful companies, Grupo Nutresa, a household name and the fourth largest Food Company in Latin America in terms of market cap and Alsea, being Starbucks licensed partner in Latin America for the last ten years, covering more than 500 Starbucks stores in Mexico, Argentina and Chile. Both of these companies have been expanding and have shown accelerated returns and know this market well..

Location, location, location – it means the same in any language, in any country. The opening of the first Starbucks in Colombia is imminent and will take place in Bogota, a teeming City of ten million people and the commercial center of the country. It is to be located in a new ten store development in an upscale neighborhood with high density traffic. The Store will be 600 square meters (about 6,000 square feet) with space for a large terrace. I believe initially, there will be a rush to check out the Starbucks Coffee Shop, but when the first rush is over, it will depend on customer service, innovation, quality of the product and the best possible coffee that is served. I feel sure the opening will be impressive with well trained barristas in green aprons, confident and personality driven. with the double tail mermaid logo dating from 1972 emblazoned on the windows and the paper cups and napkins. I expect there will be a black board written in Starbucks own “language”” offering: ‘white chocolate moccachinos, venti pumpkin spiced latte’s, Cookie Crumble Frappuchinos as well as the coffees – what are those strange sounding beverages ? They are unique revenue producing drinks, designed by Starbucks for their patrons, part of the Starbucks heritage. I hope they offer their boxed lunches, including healthy sandwiches on good bread, as nothing like that is available in Colombia. Maybe people will resent this globalization and multiplication of American brands, but this is the way of the world and there is no turning back. There is still room for Juan Valdez and any other local coffee company in this expanding market. What Starbucks has recognized is that the United States is overpopulated with coffee shops whereas there is enormous growth potential in other markets. The opening of this store could not have been timed more perfectly, with an emerging middle class who can now afford to buy a cup of good coffee and a pastry or have the time to meet their friends in their favorite coffee shop.

Colombians are still divided as to whether the Global Starbucks Company is good for them, or not. I discuss this subject with anyone I can and generally there is defensiveness and resistance, the answer being: “What do Starbucks know about Our Coffee Culture ?” I asked Rodrigo, a tour operator in Bogota what he thought and this was his reply:

“I heard the Starbucks news! I don’t know how successful they will be. We are very proud and faithful to our coffee. We will see how it goes.”

I asked the Colombian Family with whom I spent a month last year and their response was similar

Starbucks plan to open five stores in the first year and have fifty in Colombia within five years. Knowing what I do about Starbucks, their commitment to the coffee growers of Colombia and their success in other Latin American Countries, I see this as a positive move. Even though there is resistance from the local population, It can only be good for everyone in the long run. It is a win win situation because it means more demand for higher quality coffee, more jobs, motivation for the growers and a heightened interest in coffee all round. Having Starbucks arrive on the scene, can only shake up the Industry in a good way. The Starbucks logo, the Mermaid with two tails was born of humble beginnings in the early 1970’s, but she has multiplied many times over as Starbucks have successfully extended their brand worldwide.

( Bolivia is due to open its first Starbucks in Santa Cruz this year and Panama City, Panama can expect to see its first Starbucks store in 2015.)

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