Many are predicting that Colombia's Juan Valdez coffee brand is the top contender to take on and dethrone Starbucks. The brand and name are iconic, the product many argue is better, and it seems to be making all the right moves. Its first coffee shop was established in 2002 in Bogota's El Dorado International Airport and is the culmination of a joint effort of over 500,000 coffee producers and growers who wanted also to participate in the refining and selling of end products from the beans they produce. 80% of the stores to be opened in 2024 will be international which indicates where the brand is looking for its future market share.
In an interview with Valora Analitik, Camila Escobar, the President of the holding company that holds Juan Valdez (Procafecol), discussed the brand's international expansion plans.
[translated from Spanish] "One of our objectives is to reach the most relevant coffee consumption markets in the world and that is how in recent years we have deepened our trade mission in geographies such as North America, Europe, and recently in Africa with the store in Cairo. Our arrival in the United Arab Emirates continues to consolidate that intention to conquer spaces where we see that coffee is going to have a significant growth"
Mexico is high on the radar for future expansion. Previous attempts to enter the country failed due to the local franchisee failing to execute the business plan and now the only exposure most Mexicans have to the coffee brand is purchasing bags of beans in supermarkets. The new push will begin in the south of the country, and as to timing, she says "soon".
In 2024, the plan is to add 100 stores in total with 80 percent of those outside of Colombia where it already has a dominant market share. Look for more stores to open in America, Turkey, Spain, and other Latin American markets. 2023 saw a robust year for sales with sales soaring 20% and that was in a tough inflationary environment where customers have fewer and fewer dollars (and pesos) in their pockets to spend.
Procafecol was founded 21 years ago and is majority-owned by the National Federation of Coffee Growers. The other shareholders include a variety of individuals and companies including 18,000 coffee grower shareholders. The management structures have wide discretion regarding how to use the brand "Juan Valdez" and expand the company. Itpays a royalty to the federation through a National Coffee fund which is distributed to the shareholders. Around $50 million has been paid in royalties to the fund in the last two decades.
When expanding internationally, Juan Valdez prefers the franchise model given the local knowledge, and ability to mobilize capital quicker locally. Contrast that to Colombia where 80% of the stores are owned by the company itself.
Colombia has a number of interesting advantages. Its climate and soil produce a unique brand of coffee that is characterized by a strong aroma, full body, and a high acidity level. It has a fantastic logo, brand, and wordmark. As the dominant player in Colombia has a strong base to springboard from into other countries. Every tourist who visits Colombia tries a cup of the coffee and will bring that brand recognition back with them to their respective homes. Juan Valdez offers coffee to end users generally at a 17% discount to Starbucks which is another competitive advantage.
One risk not often discussed is the murky connection between Colombia's cocaine industry, which is the nation's number one export surpassing oil in 2023, and coffee. Both products are grown in similar conditions, locations, and similar manners. Competitors would perhaps see value in linking the two and the best thing Colombia can do is to finally eradicate cocaine production and export of the poisonous product. The inability to stop cocaine exportation is probably the number one thing holding the country back from reaching its potential. When you think Colombia, you think Cocaine, and for very good reason.
