Globalization is no news but the way it works sometimes is. Colombian largest producer of Arabica coffee Juan Valdez has recently opened its first store in Kuwait, one of the countries located in the Arabian Peninsula bordering the Persian Gulf –or as it has also been controversially named by some Arab countries, the Arabian Gulf.
Expansion of a multi-Latina company is also common these days but this opening is just the first in an effort by Procafecol, the company managing the Juan Valdez® Café brand, to conquer markets in the Middle East and Northern Africa (MENA) where Coffea Arabica originated. The plan was launched in 2013.
Although Procafecol’s strategy has been on the making for quite some time, the announcement came last year on the hills of another interesting development, the Seattle-based Starbucks’ decision to enter the Colombian market, opening 50 stores over the next five years.
Is it wise for Juan Valdez to ride the donkey outside Colombia when the largest coffeehouses chain in the world will be landing its fierce competition aboard a Concord?
Coffea Arabica, the preferred gourmet coffee
Due to its geography and stable climate, Colombia is one of the world’s largest coffee producers but, as Colombians affirm, the first in terms of its quality.
Colombia produces mostly Arabica, preferred over other varieties by gourmet drinkers and baristas because of its intense flavor but smooth taste. It is also naturally less caffeinated –about 1.1 percent compared to the stronger Robusta at 2.2 percent.
The variety has been called the “Adam and Eve” of coffee, originated in Ethiopia about the year1000 B.C. but now, Coffea Arabica is scarcely found in its native region due to changes in variety and crops.
The bean traveled to America in the late seventeenth century and found its home in the higher altitudes of the Andean countries. Jesuits are believed to have introduced the crop in Colombia.
The company’s goal is to bring the Coffea Arabica experience back to its original region, and reach additional markets in the Middle East, Northern Africa and even Asia where the packaged product is already sold. The stores’ successful franchising model has caught the attention of Harvard University School of Business.
According to Hernán Méndez, president of Procafecol, the goal is to open a second store in Dubai within a month and the South Korean, Singapore and Brunei markets in the first quarter of 2014. The plan is to launch 60 new outlets in the Middle East within five years, a goal just a little more ambitious than the one Starbucks proposed in Colombia.
Mendez, who was appointed to the company in 2010 to resuscitate the brand that was once a number one favorite in the U.S. markets, believes it is a good step for Juan Valdez. 2012 was a profitable year for the coffee retailer at $65M in revenues and it is expected to reach almost $80M in 2013, after expanding several stores in other countries in Latin America.
Colombian coffee farmers, Starbucks or Juan Valdez?
While Juan Valdez Café sells 100 percent Colombian coffee, Starbucks is known for buying coffee beans from all over the world. Starbucks has pledged to buy only from Colombian farmers for its local stores and announced a public-private partnership with the U.S. Agency for International Development (USAID) to “increase coffee yields and improve livelihoods for 25,000 farmers in support of Colombia’s rural development.”
However, the U.S. company has made other pledges before related to Fair Trade and its ownC.A.F.E. Practices, seen by many as more of marketing fluff than real aid to farmers.
The company has also faced international controversy and lawsuits over its labor and farmer practices.
The Federación Nacional de Cafeteros de Colombia (Fedecafé) or National Federation of Coffee Growers of Colombia, on the other hand, is a non-profit business association founded in 1927 as a business cooperative to promote production and export of Colombian coffee.
Most of its over 500,000 producers are small family-owned farms. It became world known in 2002 through its international marketing campaign for Juan Valdez cafes to promote fair trade coffee.
The Colombian coffee industry represents over 8 percent of the country’s GDP and it provides sources of income for more than a million people working on coffee farms.
The industry has faced greater difficulties since 2010 due to climate changes, flooded areas and “coffee rust,” a fungus attacking the weak Arabica variety, which diminished its export output to a three-decade low.
International prices plunged 35 percent drop over the past year, partly due to increasing competition from Brazil, the world’s largest grower, and other countries such as Indonesia, Vietnam and the Ivory Coast.
For now, Colombian farmers can only be hopeful that more outlets would mean more business, no matter who buys the coffee. However, only time will tell if the green mermaid would keep its promises or would just be another song of the sirens.
Originally published on VOXXI as Juan Valdez, riding a donkey from Colombia to the Arabian Gulf