Trouble is brewing in the Colombian coffee industry. Production collapsed in 2012, after blights and adverse weather killed a large percentage of the nation’s coffee plants, and a strong peso has made the exportation of coffee increasingly unprofitable. These conditions are disastrous in a nation with little domestic coffee consumption and a large domestic coffee industry. Meanwhile, global competition is growing. Innovative mass farming has made planting coffee increasingly easy in nations such as Vietnam and Brazil, allowing these industries to slash prices and reduce manual labor. Honduras, Indonesia and India all logged larger coffee crops than Colombia in 2012, leaving the once-dominant nation in a meager sixth place. In Manizales, Colombia’s coffee hub, and Bogotá, its capital, the prevailing attitude is that only a miracle can save the fleeting industry. The miracle might just be Starbucks, whose announcement that it will open shop in Colombia this year has been met with excitement from many Colombians.
As other coffee-growing countries improve their practices and quality, mismanagement and antiquated practices still characterize the industry’s business model in Colombia. Old, low-yield crops dominate the country’s coffee-growing regions, and the effort to engineer new seeds has lagged in comparison to developments in countries like Brazil. Perhaps more significantly, local efforts have failed to increase domestic consumption, even as Colombian-harvested coffee is among the best quality in the world. Starbucks is about to step in and do what others could not: get Colombians to drink their own coffee. This seemingly simple change would effectively shield Colombian farmers from the plummeting international price of coffee by establishing a stable domestic market.
Starbucks plans to work toward this goal by setting up shops across the country and replacing its current international collection with an exclusively Colombian product, making Colombia’s the coffee to beat. The company will also pump cash into the struggling coffee sector by paying growers above-average prices — a compromise they made with the National Federation of Coffee Growers of Colombia (FNC) in exchange for lobbying assistance. Starbucks is unlikely to single-handedly turn this troubled industry around, but the company has been lauded as an ally in improving the brand appeal of Colombian coffee. Meanwhile, growers hope that Starbucks’ introduction will help revitalize an industry that faces numerous structural problems, many created by the growers themselves.
The FNC originated in 1927 with the aim of “strengthening and developing the coffee industry, while securing the wellbeing of its producers through a democratic and collaborative organization.” In its earlier years, it unified the hordes of small coffee producers scattered around Southeastern Colombia. The federation’s landmark achievements included not only regulation and policy efforts, but also a major branding initiative, giving the unique flavor and quality of Colombian coffee a name internationally. In 1960, the federation created the marketing icon “Juan Valdez,” a paunchy persona who provided Colombian-produced coffee with a likeable face. Valdez marked one of the industry’s last efforts to raise the price and consumption of coffee beans without seeking massive state subsidies and assistance.
The industry’s history since their lovable rebranding has been one of slow stagnation, owing more to an industry-wide aversion to innovation rather than actual malignant policies. An initiative to make coffee plants resistant to the roya (rust-colored) blight — a goal of the FNC up to the 1980s — fell by the wayside when the organization began to focus its efforts instead on increasing the Colombian government’s responsibility for coffee growers’ well-being. Extensive lobbying by the FNC even pressured Colombia’s Ministry of Agriculture and Development to guarantee a set income for growers when sales fell short. Similarly, the FNC introduced measures that required the state to buy a portion of the nation’s coffee at a price dictated by the federation itself. This provides a stable income for growers, but for the most part, forces the government to resell the product at a loss.
Such measures were originally invoked as an emergency response to reduce hardship among farmers, but the federation did not scale down its arrangement during better times. Industry losses were cushioned with government coffers, creating a false sense of sustainability that has further hampered innovation. Only when farm workers staged a nationwide protest in March and blocked major highways for 12 days did the reality of these problematic policies gain national attention. Pointing to record-low prices for coffee internationally, the protestors demanded even more government support for struggling agricultural industries. The administration of President Juan Manuel Santos subsequently pledged an additional $470 million in relief aid, pushing coffee subsidies up to 30 percent of the product’s domestic price.
While the comparatively high cost of growing coffee in the country is a roadblock for the industry, a Colombian coffee renaissance will hinge on more than just reducing costs. Most of the terrain where coffee is grown in Colombia is hilly and uneven, meaning that the mass production techniques favored in nations like Brazil are impossible. Instead, coffee cherries have to be picked by hand, a laborious method that comes with a large price tag. But this procedure also means that only ripe cherries are picked, giving the coffee Colombia’s signature sweet, uniform blend. As a result, premium-grade Colombian coffee can cost 10 cents more per pound than mass-produced varieties grown in countries such as Vietnam. This distinction means that the target market for Colombian coffee is not in low-grade or powdered coffee, but the more lucrative value-added sector. The coffee’s niche includes everything from single-origin and heirloom blends to special espressos and other high-end beverages. The cornerstone of this approach is marketing. Colombia must convince consumers that its premium, local coffee really does beat similar products from growers in Guatemala or Ethiopia. The FNC’s initial foray into this type of branding was Juan Valdez, which has had some success in the small domestic market, but suffers from insignificant international recognition compared to all-around premium purveyors such as Starbucks and high-end producers like the company Illy.
In short, Colombia needs to fill the niche with its own Starbucks to sell the country’s premium coffee. The FNC tried its hand at this model in 2003, utilizing the Juan Valdez brand to start a brick-and-mortar business. The initiative’s early domestic success was not reflected abroad, however, and the company’s U.S. and Spanish branches failed to justify the vast sums that were invested in them. The only international stores to survive the 2011 restructuring of the brand were in Ecuador and Chile. The brand’s failure should not have come as a surprise — even a corporate mammoth like Starbucks is reliant on partnerships to stay viable in certain markets. For example, the Spanish company Grupo Vips manages Starbucks’ Iberian operations.
The FNC’s lone-wolf approach demonstrated endemic shortsightedness — both the fault of FNC bumbling and also a failure of Colombia’s diplomatic network to lend a hand. While the nation’s embassies and consulates usually will bend over backwards to promote Colombian brands, their inability to establish strong local partnerships for the Juan Valdez beverage business demonstrated a lack of focus and little communication between Colombia’s Foreign Ministry and the FNC. Some blame has also been placed on the rigid management structure at the FNC, where the last president has held his post for more than 40 years — a reflection of the organization’s larger inability to follow new trends, innovations and opportunities.
And yet the greatest change in perception needed is one from the Colombian people themselves. Starbucks’ Colombian venture has the potential to change the attitude toward coffee in a nation where 80 percent of the coffee is imported from low-end producers in Ecuador and Peru. The average Colombian also drinks 2.5 to 4.5 kg less than their compatriots do in the United States and Brazil. Starbucks has made similar miracles happen in other developing nations like China and India. In these nations with close to no tradition of coffee drinking, the feel-good atmosphere pioneered by the Seattle-based chain, accompanied by some local flavor (like the expanded line of Hindustani blends in Starbucks’ Indian division), achieved startling success. Its proven ability to effortlessly raise a nation of coffee-drinkers stands in stark contrast with the historically chaotic efforts of the Colombian government and the FNC. As journalists and business leaders celebrate Starbucks’ promise to independently promote coffee consumption, they should look back at what went wrong in the FNC’s similar efforts. If the integrity of the FNC’s mission is not in question, it should at least face some accountability for its lack of strategic success despite ample state funding.
How much can coffee help Columbia? It’s possible that reviving its coffee industry would help Colombia and growers wield a greater degree of soft power abroad. For the FNC and its partners, it would mean having a stronger ability to define global coffee trends, allowing it to replace the current burnt-beans coffee standard that is pejoratively referred to as “charbucks.” In a time when Colombia is trying to prove to the world that it’s a place of “solutions for the world’s needs,” the nation faces an indispensable opportunity to demonstrate that local industries make excellent partners to outside investors. A success story with Starbucks would be high-profile proof that Colombia’s ambitions match its capacities.
There is little debate over whether Starbucks could potentially turn around the failing business model of Colombian coffee growers. The current administration and the FNC both seem to recognize that nothing less than national pride is at stake. While plagued by problems, the labor-intensive coffee industry is still a centerpiece of Colombian trade, one that has provided a livelihood for hundreds of thousands of families in historically impoverished areas. Although traditional government-syndicate structures have failed to modernize coffee growing in Colombia, they do, at least, provide a viable alternative to the methods of nearby Ecuador and Peru — countries which sell significantly cheaper products, but often do so to the detriment of their farmers. With Starbucks entering the equation, Colombian coffee may finally get the jolt that it needs.
Art by Emily Reif