Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Move Over Starbucks, Juan Valdez Is Coming
The New York Times ^ | November 29, 2003 | SHERRI DAY

Posted on 11/30/2003 10:42:04 AM PST by Jacob Kell

How about a nice large cup of coffee, light on the guilt?

The Colombian Coffee Federation, which represents more than 500,000 Colombian coffee growers, is planning to open its first coffee shops - all bearing the name Juan Valdez, after the federation's signature character - in the United States by early 2004. Gabriel Silva, the president of the federation, which is based in Bogotá, says the coffee growers have been "too passive" in claiming a larger piece of the $8.4 billion specialty coffee industry."In a cup of coffee that you get at a coffee shop, between 1 and 2 cents goes back to the farmer," Mr. Silva said, referring to Colombian growers. "We need to build our own solutions and take the destiny in our hands and really fight for our share of the industry."

Coffee growers are facing a difficult market. Per-capita consumption has been in decline since 1963 with the only growth area the specialty coffee shops, led by Starbucks, according to the International Coffee Organization in London. The price of coffee beans has also declined significantly from a high of about $1.20 a pound five years ago because of a global oversupply of coffee beans from countries like Vietnam and Brazil. In Colombia today, the average coffee grower gets only about 68 cents for a pound of coffee, Mr. Silva said.

Industry trade groups have tried to stem coffee farmers' losses by encouraging coffee producers to destroy oversupply and raise prices. They have also encouraged food companies to buy so-called fair trade coffee, which aims to guarantee what its advocates say is a living wage to poor coffee farmers in developing countries.

But even with Starbucks buying fair-trade coffee at an average of $1.20 a pound, Colombian coffee growers make only about a penny from each cup of coffee sold, Mr. Silva said. The average Starbucks' latte costs $2.25 to $3 a cup; a mocha costs $2.45 to $3.25.

By selling its own coffee at its own coffee shops, the federation, which represents both small and large coffee growers, plans to return 4 to 5 cents for each cup of coffee sold. Each of the federation's 560,000 farmers will also have an ownership stake in the shops, Mr. Silva said. The profits from the retail operation will go back to the federation, which said it would put marketing dollars behind the Juan Valdez brand and work to improve Colombia's coffee-growing regions by building roads, schools, health centers and housing.

"It's certainly interesting," John Glass, a restaurant analyst at CIBC World Markets, said of the coffee growers' plan. "I'm sure they can capture, to some degree, some more integrated profit if they vertically integrate it. The example would be Exxon Mobil. They own gas stations. They take it out of the ground, and they sell it."

The first Juan Valdez coffee shop is scheduled to open in New York, where the federation owns property on 57th Street and Lexington Avenue. The federation also plans to open three more flagship stores in Boston, Washington and Seattle.

The Juan Valdez trademark, which was created by DDB Worldwide Marketing in 1960's, is probably most familiar from a series of television commercials featuring the character standing in American supermarket aisles. The character was suspended in 2001, after coffee bean prices dropped significantly and the federation could no longer bankroll the ad budget for Juan Valdez.

But last summer, Juan Valdez made a comeback. The federation paid $1.5 million to buy him a cameo appearance in the Jim Carrey movie "Bruce Almighty." The federation plans to spend about $20 million on its coffee shops, but did not say how much of that would go for advertising and marketing. It will spend another $9 million this year and next to promote its marketing program for 100 percent Colombian coffee. The Sawyer Miller unit of the IPG Group is spearheading the federation's marketing campaign. Future Brands, another IPG unit, will work with the company on branding.

The stores will largely be modeled after five coffee shops that the federation operates in Colombia. There, they are testing product mix, pricing and the intricacies of running a retail operation. The stores, which are relatively spartan, serve nine different blends of coffee and are decorated in neutral browns and beiges, accented with wooden chairs that do not encourage patrons to linger. Although prices of the Colombian coffee have yet to be set for stores in the United States, Mr. Silva said he expected them to be lower than Starbucks'.

"Starbucks sells an experience," Mr. Silva said. "It's almost like a social place where you go there and meet your friends and read the paper and have some milk with coffee. They are not maximizing the potential of the pure coffee experience. Our stores are going to be much more down to earth - less opportunities for social interaction. It's not going to be a gathering place; it's going to be a place to get superior coffee, the best coffee in the world."

The federation's plan promises to be a delicate balancing act, as the group will be directly competing with its primary consumers, packaged-goods companies that market 100 percent Colombian coffee as an ingredient in brands like Folgers and coffee shops, especially Starbucks, which controls 38 percent of the domestic specialty coffee shop market.

Officials at Starbucks, which has recorded 12 consecutive years of same-store sales growth despite the slumping economy, said they supported the Colombian coffee growers' efforts and would continue to buy coffee beans from them. Starbucks officials said the company was a "significant buyer" of Colombian coffee, but they declined to say how much coffee they purchased from Colombia, which is the second-largest coffee-producing nation in the world, after Brazil.

"We're not worried," said Dub Hay, Starbucks' senior vice president for coffee. "We're well aware of what they're going to do; we think there's room for everyone."

A representative of Dunkin' Donuts, which says it sells more cups of coffee a day than any other retailer, expressed support for the growers' efforts, along with a little confusion about the identity of the coffee shops' namesake. "Is that the guy with the horse?" asked Jon Luther, the chief executive of the restaurant division of Allied Domecq, which owns Dunkin' Donuts.

The federation has enlisted McKinsey & Company, a management consulting firm, to help develop its retail plan for its United States stores. McKinsey has been advising the federation on the creation of its coffee shop business model and the rollout of the stores.

But the federation's learning curve will be steep as the group will have to figure out how to transfer its skills as coffee growers to retail sales, analysts said.

"There's so much more to it," said Mitchell J. Speiser, a restaurant and food service analyst at Lehman Brothers, about the federation's plans. "It's site location; it's branding. It's the right management team. It's hiring the right people. Just on paper, having real Colombian coffee and creating a retail shop around it, they do win the authenticity factor, but it takes a lot more than that to create a successful brand and a successful retail chain."


TOPICS: Business/Economy; Culture/Society; Miscellaneous
KEYWORDS: coffee; coffeegrowers; coffeehouse; colombia; juanvaldez; latinamerica
Navigation: use the links below to view more comments.
first 1-2021-33 next last

1 posted on 11/30/2003 10:42:05 AM PST by Jacob Kell
[ Post Reply | Private Reply | View Replies]

To: Jacob Kell
Juan Valsez. another Illegal Immigrant!
2 posted on 11/30/2003 10:44:56 AM PST by chicagolady (I stuff my turkey with refried beans)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Jacob Kell
The average Starbucks' latte costs $2.25 to $3 a cup; a mocha costs $2.45 to $3.25.

And on top of that, it just doesn't taste good, certainly not that good. Just what the hell are people thinking?

3 posted on 11/30/2003 10:49:24 AM PST by Petronski (Living life in a minor key.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Jacob Kell
And speaking of coffee, Madison Square Garden has now made Starbucks the official coffee for all Knicks games, meaning that perennial fan Spike Lee's big mouth will now be available with foam.
4 posted on 11/30/2003 10:50:55 AM PST by Petronski (Living life in a minor key.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Jacob Kell
The federation paid $1.5 million to buy him a cameo appearance in the Jim Carrey movie "Bruce Almighty."

Dang that's a lot of money, how long was the appearance?

Juan Valdez is forgetting that the reason they get 1 cent per cup is that its expensive to operate retail stores. Plus where is Juan going to open a store that doesn't already have a Starbucks on the same corner?
5 posted on 11/30/2003 10:51:07 AM PST by lelio
[ Post Reply | Private Reply | To 1 | View Replies]

To: Jacob Kell
There must be some upper limit of the ratio (fancy coffee dens/person). Surely it is less than unity.

Me, I buy my coffee from The Flying Bean and I am my own Starbucks for less bucks.

--Boris

6 posted on 11/30/2003 10:55:20 AM PST by boris (The deadliest Weapon of Mass Destruction in History is a Leftist With a Word Processor)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Jacob Kell
This also reminds me of one of Boris' Laws: the law of conservation of Italian restaurants. The number is constant; some go out of business, some start up, but the overall count remains roughly the same.

Probably true for any sort of ethnic cuisine.

--Boris

7 posted on 11/30/2003 10:56:38 AM PST by boris (The deadliest Weapon of Mass Destruction in History is a Leftist With a Word Processor)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Petronski
I agree as a former Starbucks customer
8 posted on 11/30/2003 10:59:20 AM PST by cyborg (mutt-american)
[ Post Reply | Private Reply | To 3 | View Replies]

To: boris
I will have a cup of Dunkin Donuts coffee anytime!
9 posted on 11/30/2003 10:59:57 AM PST by chicagolady (I stuff my turkey with refried beans)
[ Post Reply | Private Reply | To 6 | View Replies]

To: boris
Notice how a pound isn't 16 ounces anymore? A pound is now 10 ouces... how did they weave that magic?
10 posted on 11/30/2003 11:00:14 AM PST by cyborg (mutt-american)
[ Post Reply | Private Reply | To 6 | View Replies]

To: boris
I always marvel at how many Asian-designed buildings house Mexican restaurants and how many Mexican motif buildings house Asian restaurants. Heheheh.
11 posted on 11/30/2003 11:01:47 AM PST by EggsAckley (..................."Dean's got Tom McClintock Eyes".........................)
[ Post Reply | Private Reply | To 7 | View Replies]

To: chicagolady
I will have a cup of Dunkin Donuts coffee anytime!

I never thought I'd see the day when I'd go to a dunkin donuts but I have to say they make a fine cup of coffee!

12 posted on 11/30/2003 11:04:43 AM PST by mylife
[ Post Reply | Private Reply | To 9 | View Replies]

To: mylife
The Police who sit in thier shops think so too!
13 posted on 11/30/2003 11:05:51 AM PST by chicagolady (I stuff my turkey with refried beans)
[ Post Reply | Private Reply | To 12 | View Replies]

To: Jacob Kell
Just on paper, having real Colombian coffee and creating a retail shop around it, they do win the authenticity factor

People that buy higher end coffee aren't going to be swayed by this authenticity. They're selling the same stuff as Starbucks, minus the other brands (Kenyan, etc).
14 posted on 11/30/2003 11:09:49 AM PST by lelio
[ Post Reply | Private Reply | To 1 | View Replies]

To: EggsAckley
I agree. When I take Amtrak up to Vermont late at night I have learned to finesse the Amtrak coffee and wait until I can stop by a Dunkin Donuts just up the hill from the station where I get off. At that time of the evening it saves a lot of heartburn.
15 posted on 11/30/2003 11:10:10 AM PST by Cicero (Marcus Tullius)
[ Post Reply | Private Reply | To 11 | View Replies]

To: cyborg
volume versus weight I'm guessing.
16 posted on 11/30/2003 11:11:13 AM PST by Bogey78O (No! Don't throw me in the briar patch!!!!!)
[ Post Reply | Private Reply | To 10 | View Replies]

To: Jacob Kell
well I'm just an ole country boy but the suggestion
in the piece to destroy the surplus and raise prices
on the new yield implies exceess bean(o')s and
probably means always......heck grind the excess
thow it in the back yard , add the egg shells and raise fishin' worms...say for a buck ten a bucket...just
more do rey me on the table.....hehe
17 posted on 11/30/2003 11:16:26 AM PST by cars for sale
[ Post Reply | Private Reply | To 1 | View Replies]

To: cars for sale
......heck grind the excess thow it in the back yard , add the egg shells and raise fishin' worms

Jittery wide awake fishing worms.

18 posted on 11/30/2003 11:50:33 AM PST by KarlInOhio (Global warming=fresh picked Ohio bananas. Yummy!)
[ Post Reply | Private Reply | To 17 | View Replies]

To: Jacob Kell
Juan Valdez is coming

The way I see it, the s.o.b. is everywhere in the US already.

19 posted on 11/30/2003 11:53:59 AM PST by vetvetdoug
[ Post Reply | Private Reply | To 1 | View Replies]

To: vetvetdoug
Don't be down on old Juan. He represents the Columbian farmers raising legal crops while their neighbors have given into the lucrative (and violent) drug markets. "Juan" doesn't even want to move here. Recieving a bit more profit from his work helps him defend against the pressures to join the dark side (or at least pay the S.O.B.'s off to leave him alone).
20 posted on 11/30/2003 12:11:56 PM PST by NewRomeTacitus (Starbucks: Where people in a hurry pay for the privilege of enforced waiting. Rhymes with sucks.)
[ Post Reply | Private Reply | To 19 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-33 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson