October 25, 2014
Starbucks in Colombia: make room Juan Valdez
Starbucks Corp opened its first shop in Colombia, 43 years after the world's biggest coffee chain first started buying beans from the country famous for its premium arabica coffee named after fictional coffee farmer Juan Valdez.
The first of 50 Starbucks stores planned for the coming five years will be in Bogota's Parque de la 93, one of the city's most exclusive neighborhoods. This store and all other Starbucks locations in Colombia will be the Seattle-based company's first to serve only locally sourced coffee.
Starbucks is the world's largest buyer of Colombia high-grade arabica coffee in the world, Starbucks Chief Executive Officer Howard Schultz told reporters.
Its new stores will compete with the roughly 200-unit Juan Valdez coffee-shop chain owned by the National Federation of Coffee Growers of Colombia. In addition, Nestle SA's Nespresso plans to begin selling home brewers this fall and open a boutique coffee shop in Colombia sometime this year.
"We think we can exist in a very complementary way," said Schultz, noting that his company's arrival often expands a market and improves business for competitors.
The Colombia business is run by a joint venture between Starbucks and two of its long-time business partners in Latin America, Alsea SAB de CV of Mexico and Grupo Nutresa SA of Colombia.
Colombia is the world's biggest producer of high-quality arabica coffee. The last few years, though, have been rocky.
Heavy rains and a replanting program that took many trees out of production drastically cut Colombia's coffee crop in 2008. That was followed by four more crop years that were well below average, in part because of an outbreak of a leaf rust disease. As a result, many US dealers were forced to look elsewhere for their high-quality arabica beans, causing Colombia to lose some of its loyal customers.
Two years ago, Starbucks opened a Farmer Support Center in Manizales, Colombia. Last summer, the company announced a public-private partnership with the US Agency for International Development that is investing $3 million to increase Colombian coffee yields.
More than half of the 400 million pounds of coffee purchased by Starbucks last year came from Latin America, where the chain has more than 700 stores.
Starbucks' other major coffee suppliers include Brazil, Indonesia and Africa.