Yesterday, Starbucks officially arrived in Colombia.
After years of keeping the multinational specialty coffee powerhouse at bay, Juan Valdez will no longer be able to avoid battling Starbucks in its native market of Colombia. Starbucks, after being challenged by Juan Valdez in the US market in the early 2000s, and trying its own marketing foray into now defunct specialty coffee concept (15th Avenue Coffee), has launched its first retail coffee bar in Bogota, Colombia.
Instead of running from what many perceive as its strongest asset, the Starbucks brand, Starbucks is fully featuring its logo outside of this centrally located destination. Perhaps after completing decent market research, Starbucks realized that many in the growing global middle class aspire to an affluent lifestyle characterized by iPhone ownership, Starbucks specialty drinks, Coach products, and other premium brands. One of the most attainable products accessible to any income bracket is a simple cup of coffee and a snack. Juan Valdez, with its elegantly designed retails stores, has long taken advantage of growing wealth and a cultural disposition towards public life –of which the coffee shop culture plays a role. Since 2002, Juan Valdez retail locations have represented a place where folks can meet for business, for spending time with old friends and family, or on a date. It is seen as hip for younger generations while also as respectable and safe by older generations. It is also a source of national pride.
In reality, Colombia has been ripe for the arrival of Starbucks for a decade, but the terms of that arrival have constantly evolved. This is emphasized in the version of Starbucks launched in Bogota, which is clearly meant to improve upon the Juan Valdez concept. They are aiming higher in terms of premium status, and likely want to differentiate Starbucks from Juan Valdez along those lines. In the short-term, it is likely that Starbucks will focus its Colombia expansion on only the most desirable, high-end, urban locations in order to solidly establish the luxury brand concept. It remains to be seen whether they creep down the price continuum to “Starbucks Express” and kiosk locations in a market that is already saturated with Oma and Juan Valdez competitors. There is nothing economical or middle class feeling about the Parque de la 93 location of the new Starbucks. Although a fairly small, quaint and stylish area, it is essentially a mashup of Georgetown DC and Central Park West NY (Embassy Row clientele mixed with the wealthiest from the nearby financial district).
No doubt, there may some Starbucks clients that struggle internally with whether to support their homegrown hero, Juan Valdez. Although, in the end, it appears that the Federation (Federación Nacional de Cafeteros) ensured local growers would benefit regardless of the new competitor– Starbucks in Colombia claims to source 100% of the coffee used in Colombia from Colombian growers. Starbucks’ unambiguous strategy to rapidly expand in Colombia, Brazil and throughout the region, could negatively impact the bottom line for Procafecol S.A., the parent company of Juan Valdez stores. In fact it could be devastating for an enterprise that claims to be preparing for an IPO and has struggled in its attempts to expand in the US and abroad.
For more pictures and the official press release from Starbucks, click here.