Starbucks, Nespresso set up shop in Colombia amid country's economic momentum, increase in number of foreigners coming to nation

Nevin Barich

BOGOTA, Colombia , July 9, 2014 (Agence France-Presse) – Colombia is one of the world's top producers and exporters of coffee, but two international brands are nevertheless aiming to gain a foothold in the key Latin American market.

Within a few weeks of each other, two of the biggest names in the business -- Starbucks and Nespresso -- set up shop in the country of 47 million.

Attracted by Colombia's strong economic growth -- 6.4 percent in the first quarter of 2014 -- the two companies hope to find a new market for customers eager to spend a little extra on a grande latte.

"The economic momentum, the increase in both the number of Colombians traveling abroad and foreigners coming to Colombia -- all that means that Colombia is more exposed than ever to globally-known brands," said Monica Acosta, local marketing executive for Nestle, which owns Nespresso.

It's a "big opportunity," Acosta said, while acknowledging that success is far from guaranteed, given that local brands dominate the market.

Colombia is -- along with Brazil and Vietnam -- one of the world's largest exporters of coffee. Last year, the country produced 11.5 million bags, each weighing about 60 kilos (132 pounds), the vast majority of it for export.

Consumption of the brew has also been on the rise -- up 2.7 percent between 2010 and 2013, according to the Drink Coffee initiative, financed by Colombian producers and retail brands.

The rise has mainly been seen among the middle class, who take their coffee black or milky first thing in the morning, but then come back in the afternoon for frappes, cappuccinos and other new drinks, said Ana Maria Sierra, of the Drink Coffee program.

- Local loyalty -

Hoping to stem criticism of their outsider status -- and wary of angering the powerful local coffee producers -- both Starbucks and Nespresso have pledged to source their beans locally.

"One hundred percent of filtered coffee, espresso, and packaged coffee served and sold in Colombia will be roasted in Colombia," Starbucks said in a statement.

Nespresso stated that "80 percent of its capsules are filled with coffee that comes from Colombia."

But the two newcomers will have to take on an institution: the Juan Valdez chain, which boasts nearly 200 storefronts in Colombia.

The local brand is celebrated for its logo sporting the face of a mustachioed "cafetero" accompanied by his mule Conchita.

The character, created in the 1950s, has become a national symbol as well as a brand used to promote Colombian coffee -- known for its rich flavor -- overseas.

Consumers "see Juan Valdez as their flag. It's a brand that generates a lot of emotion and a strong link," explained Alejandra Londono, international vice president of Procafecol, which owns Juan Valdez.

However, with the arrival of Starbucks and Nespresso, the Colombian company "will see a loss of market share, which was going to happen sooner or later," said Eduardo Sarmiento, director of the Center for Economic Studies at Colombia's Julio Garavito School of Engineering in Bogota.

Although Juan Valdez profits have totaled $20 million since the company opened its first store in 2002, the Colombian company doesn't earn its greatest profits from selling the prepared beverage.

The main activity is "the production of beans", and the revenues "that come from selling coffee... directly to the public are very weak," Sarmiento said.

While exports last year surpassed 10 million bags of coffee, according to the national federation of producers, the sale for domestic consumption only amounted to about 1.5 million bags.

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(c) 2014 Agence France-Presse

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