Bloomberg News

Starbucks to Open First Cafe in Supplier Colombia Next Year (1)

August 26, 2013

After buying coffee from Colombia for almost half a century, Starbucks Corp. (SBUX:US) is finally opening a cafe there, part of its accelerating expansion in Latin America.

The world’s largest coffee-shop operator will open a cafe in Bogota in the first half of next year and then five more locations later in 2014, Chief Executive Officer Howard Schultz said in a telephone interview. The stores will be operated through a joint venture between Alsea SAB (ALSEA*) and Grupo Nutresa SA (NUTRESA), and will sell locally sourced and roasted espresso and coffee.

“This is long overdue,” Schultz said. “There is tremendous enthusiasm as we talk to people and walk the streets -- most of these Colombian people we talked to have consumed Starbucks coffee somewhere else.”

It would be disappointing if Starbucks didn’t have 50 stores in Colombia in five years, Schultz said at a press event in Bogota today.

Starbucks is expanding to countries with growing middle classes to help boost sales. The Seattle-based company (SBUX:US), which has about 8,000 cafes outside the U.S., opened its first locations in India in 2012 and Vietnam this year. In Colombia, Starbucks will compete with chains such as Juan Valdez Cafe, whose parent company Procafecol SA was created in 2002 by the Colombian Coffee Growers Federation.

Alsea, based in Mexico City, earlier this year acquired parts of Starbucks Argentina and Chile that it didn’t already own. Alsea, which operates Domino’s Pizza Inc. (DPZ:US) and Burger King Worldwide Inc. (BKW:US) stores in Latin America, will have a 70 percent stake in Starbucks operations in Colombia. Grupo Nutresa, based in Medellin, Colombia, is the nation’s largest publicly traded food company.

USAID Agreement

Starbucks also is forming a pact with the U.S. Agency for International Development to invest $3 million to secure coffee quality and supply in certain regions of Colombia. Starbucks and USAID are each investing $1.5 million during the next three years for research to help small-plot coffee farmers in Colombia. The money will go to Starbucks’s farmer support center in Manizales to pay for agronomists to analyze soil and advise growers on factors that affect yield, such as climate, pests and fertilizers.

Colombia has been Starbucks’s largest or second-largest coffee-bean supplier in its 42-year history, Schultz said during an earlier interview. In 2012, Starbucks bought about 545 million pounds of coffee from 29 countries, about 27 percent more than it bought the previous year, according to the company’s annual global responsibility report.

Recently, the company has invested in countries where it buys beans to help secure supply and consistent quality as it opens more locations. Earlier this year, Starbucks bought a farm in Costa Rica to experiment with coffee varieties and expand its grower-support program.

Farmer Support

Starbucks opened its first farmer support center in 2004 in Costa Rica. Last year, it opened branches in Colombia and China for agronomists to help local coffee growers improve the quality and size of their harvests. The cafe operator has said it wants to sell all ethically sourced coffee by 2015.

USAID has initiated other projects to help areas in Colombia affected by internal conflict, drug trafficking and violence. Last year, the government agency began working on a program to increase access to renewable energy in the South American nation.

Starbucks, which has about 19,200 stores worldwide, has gained (SBUX:US) 34 percent this year. The Standard & Poor’s 500 Index has advanced 16 percent.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • SBUX
    (Starbucks Corp)
    • $76.07 USD
    • 0.34
    • 0.45%
  • DPZ
    (Domino's Pizza Inc)
    • $77.0 USD
    • 0.26
    • 0.34%
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