Juan Valdez Looks for Starbucks Fight

Dec 01, 2003

By George Anderson

The Colombian Coffee Federation has decided it can not wait on others to sell its coffee so it’s going to do it on its own.

The federation, representing 560,000 coffee growers in Colombia, is planning to open coffee shops in the U.S. under the Juan Valdez brand.

Gabriel Silva, the president of the federation, told the New York Times, “We need to build our own solutions and take the destiny in our hands and really fight for our
share of the industry.”

John Glass, a restaurant analyst at CIBC World Markets said of the coffee growers’ plan, “I’m sure they (the federation) 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.”

Mr. Silva drew a comparison between what the federation is trying to accomplish with its Juan Valdez coffee shops and what Starbucks does.

“Starbucks sells an experience,” he 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.”

Mitchell J. Speiser, a Lehman Brothers analyst said “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.”

Moderator’s Comment: Is the Colombian Coffee Federation headed in the right direction with its Juan Valdez coffee shops?

According to the Times piece, Starbucks isn’t concerned.

Based on Gabriel Silva’s own words, we don’t see any reason for the folks in Seattle to worry.

Perhaps the most interesting quote in the entire article was attributed to Jon Luther, chief executive of the restaurant division of Allied Domecg. Speaking
about the Juan Valdez branding approach, he asked the reporter, “Is that the guy with the horse?”

No John. It’s a burro, but your point is well taken. [George
Anderson – Moderator

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