Juan Valdez to challenge Starbucks

BOGOTA, Colombia — When coffee giant Starbucks recently announced it was bringing its frappuccinos and skinny lattes to Colombia — where a cup of coffee is better known as a tinto — it sparked jokes about selling ice to Eskimos and captured global headlines. But it also obscured a growing contender in the global caffeine war, Colombia’s Juan Valdez coffee shops.

The high-end java retailer is already in eight countries — including the United States, where it has stores in Washington, D.C.; New York; and Miami International Airport — but it has far more ambitious plans.

In the next year or so, it will be opening locations in Central America, South Korea, Malaysia and throughout the Middle East.

Starting early next year, Juan Valdez expects to open the first of 50 or 60 locations in southern Florida, said Hernan Mendez, chief executive of Procafecol, which operates the Juan Valdez chain.

The company that will lead Juan Valdez’s incursion into the heartland of Cafe Cubano is JVC Franco LLC.

“Juan Valdez is a high-quality brand and product and we’re confident that it will be successful in Florida,” said Rafael Belloso with JVC Franco, who is also a longtime Burger King franchisee through his company Beboca. “This is a niche where Juan Valdez can develop into a global brand.”

When the coffee shops were launched in 2002, Juan Valdez was already a household name. The mustachioed farmer and his mule Conchita are the personification of Colombian coffee and they have been promoting it around the globe ever since the 1950s, when the characters were hatched by a Manhattan ad firm.

The coffee chain, owned by the National Federation of Colombian Coffee Growers, simply capitalized on the name.

But you won’t find many farmers in ponchos at the cafes. In many ways the Juan Valdez chain is Colombia’s answer to Starbucks: It sells high-end brew to urbanites willing to pay a premium for their black fantastic. And for the most part, it has gone unchallenged on its home turf.

At the Procafecol headquarters in a trendy area of Bogota, Mendez admits Starbucks’ arrival is a game-changer. But he also thinks Juan Valdez has home-field advantage.

“We don’t feel a threat seeing them here and I think it would be good for people to really compare and see what the difference is,” he said. “We think we have an edge on quality. And we have (169) stores with great locations. That’s a very big asset.”

Even so, Juan Valdez has struggled to turn a profit until recently. The company operated in the red until 2012, when it eked out a net profit of about $762,000. It’s on track to more than double that number this year.

In countries where the two companies are competing, such as Mexico and Aruba, Juan Valdez is holding its own, Mendez said. Chile is a prime example. There, Juan Valdez has 13 stores, many of which are close to the 50 stores that Starbucks operates.

“We monitor perceptions and what our (Chilean) clients say,” Mendez explained. “What they always bring out is the quality of the coffee. There is a very big base of consumers who would prefer the 100 percent Colombian coffee that we serve in our stores versus blends that Starbucks might have.”

In Colombia, at least, Starbucks seems sensitive to the issue.

Unlike its operations elsewhere in the world, the company will only be serving Colombian coffee at its stores here.

“Colombia is special,” said Rich Nelson, vice president and general manager for Starbucks’ Latin America operations. “We wanted to celebrate their heritage and the high-quality coffee that Colombia produces.”

Colombia was an obvious target for Starbucks. The country is seeing strong growth and a burgeoning middle class. In addition, Starbucks has been buying Colombian beans for more than 40 years, when it was just a little shop in Seattle. Finally, the company has been in Peru and Chile for more than a decade, Nelson said.

While many coffee chains tout their fair-trade status and brag about what they give back to famers, Juan Valdez is the only international chain of its size that actually belongs to coffee producers. The store has given back about $20 million in royalties to farmers since it started, Mendez said.

Colombians, for one, will appreciate that, he said.

“Colombians have a very deep emotional connection with Juan Valdez, and there’s a sense of national pride,” he said. “That gives us a very big loyal customer base, and that will help with the competition.”

But Juan Valdez’s reliance on its home-grown product might hurt its U.S. expansion efforts, said Christian Wolthers of Wolthers America, an importer and supplier of coffee from Latin America.

“Starbucks obviously has a wide range of products from different origins with different flavors,” he said. “They work like a Blockbuster video store. They have new releases every week or month.”

Starbucks has trained U.S. consumers to crave novelty, he said. “The client wants to taste something new from time to time.”

Belloso, the South Florida franchisee, thinks quality will trump variety. Asked if the Juan Valdez experience will be tweaked for Florida he said: “We’re not going to change a thing.”

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