Competitive Intelligence

Juan Valdez vs. Starbucks: Colombian Coffee Growers Expanding Direct Channel to American Consumers

Colombia's President Alvaro Uribe is shown here serving coffee during the inauguration of a new Juan Valdez coffee shop in Bogotá, yesterday. The Colombian Coffee Federation, representing half a million coffee growers, inaugurated its flagship coffee shop with plans to open 10 others in the United States and elsewhere to compete with companies like Starbucks. The shops are a part of the federation's efforts to alleviate the suffering of coffee farmers devastated by the continuing collapse in global coffee prices, which has forced many growers to turn to cultivating of illicit crops, such as heroin or cocaine, to survive.

Here's an excerpt from the AP story:

In a bold attempt at saving small-scale coffee growers who have been hit by a collapse in coffee prices on worldwide markets, the Colombian Coffee Federation is selling its coffee and other goods at its own shops bearing the name and image of Juan Valdez, its signature character. On Wednesday, the group inaugurated its flagship coffeeshop, and plans to expand into the United States and beyond.

While prices for a latte or espresso top $2 at most of the world's trendy java retailers, coffee growers see only a few pennies of the profits, as much of it goes to middlemen or vendors. By eliminating some of the intermediaries, the federation hopes to ensure a larger part of the income for its members. The first Juan Valdez coffeeshops abroad are scheduled to open in New York and Panama by mid-2004, offering Colombian coffee in various forms, coffee beans, cakes and Juan Valdez accessories like T-shirts and bags. Ten are planned for the first phase.

Colombian President Alvaro Uribe helped open the sleek, spacious flagship shop in Bogotá’s financial district Wednesday by serving the first cups of coffee from a silver tray. It is the ninth store to open in Colombia in the past year bearing the name of Juan Valdez, the smiling, mustachioed coffee farmer sporting a straw hat and brown poncho who has appeared worldwide in numerous Colombian coffee ads.

Juan Valdez's shops in Colombia have quickly gained popularity since the first one opened at Bogotá’s international airport in December 2002, with $3.7 million dollars in coffee sales, the federation said. In trendy coffee bars in the United States, only one or two cents from the sale of each cup of coffee makes its way back to the farmers, the Colombian Coffee Federation said. The federation wants to ensure that Juan Valdez shops will generate returns of between four and five cents per cup to the farmers. Colombian coffee farmers each own a stake in the shops, whose profits are also being used to build schools, roads and hospitals in Colombia's coffee-growing region. "With this program, we are creating one of the most efficient mechanisms to transfer value from quality coffee straight to the growers," the coffee federation said in a statement.

However, Juan Valdez will likely face stiff competition abroad from the likes of Starbucks and other major coffee competitors, and the global coffee crisis shows no sign of easing. But Juan Valdez could prove popular with customers aware of the plight of coffee growers. Starbucks spokeswoman Audrey Lincoff brushed off fears of competition. "We have said always that we believe there's room for many different coffee houses," she said.

However, all other variables being equal, I think I would probably cross the street to get my mocha-frap from a J.V. shop, versus a Starbucks... the belief alone that I'm not exploiting coffee growers or forcing them into the cocaine or heroin business, is reason enough for me.

- Arik

P.S. - So, who is Juan Valdez, anyhow? Here's a history, plus biosketch on Carlos Sánchez, who protrays J.V.:

In 1959, the National Federation of Coffee Growers of Colombia selected the advertising agency Doyle Dane Bernbach to launch a campaign for Colombian Coffee. The agency then created the fictitious character Juan Valdez, to symbolize and personify the more than 300,000 hardworking and dedicated Colombian "cafeteros" (coffee farmers) that depend on coffee for their livelihood. In 1969, Carlos Sánchez of Medellín, Colombia, was chosen to replace José F. Duval, a New York based actor, who had until then portrayed Juan Valdez. Mr. Sánchez has been Juan ever since and is now one of the longest living fictitious characters for any advertising product. A coffee farmer himself, Carlos Sánchez was born in Fredonia, a small town which lies in the largest coffee producing region of Colombia, Antioquia. He currently resides in Medellín, where, when not portraying Juan Valdez, he makes silkscreens in his Graphic design studio and continues to maintain a small coffee farm, where many weekends are spent with his family.