Iconic brand tries to sip off Starbucks’ business

updated 6:32 p.m. ET Oct. 16, 2008

BOGOTA, Colombia - Starbucks may be struggling, but a Colombian cafe chain built on the fame of the world’s biggest coffee icon is determined to buck the trend with plans to expand worldwide despite the slowing economy that has forced others to scale back.

Even as cash-short consumers cut back on gourmet blends, the Juan Valdez Cafe is selling coffee at 101 stores across Colombia, as well as at outposts in New York, Seattle, Philadelphia, Santiago, and Spain. It plans to add 500 more shops across the U.S., Latin America and Europe by 2010.

The Bogota-based chain has a unique premise: Its shops are owned not by investors, but by 22,600 coffee-growing shareholders who opened them to advertise the beans they sell, not to make a profit.

The slick cafes — which are named for a fictional coffee grower invented as an advertising pitchman nearly 50 years ago — are meant to draw younger consumers, introducing them to Colombian coffee in hopes they’ll start requesting it at restaurants and grocery stores.

“What we’re doing is financing our promotion through a business” — using the stores as tasting shops for customers to sample the product, said Gabriel Silva, CEO of the National Federation of Colombian Coffee Growers. The group created the chain in 2002 and now helps oversee it.

Colombia — the world’s third-biggest coffee producer after Brazil and Vietnam — grows more washed Arabica beans than any other nation. Hand-picked on Andean hillsides, the fragrant beans are considered by many to brew the best coffee, said Rodrigo Alarcon, a professional coffee taster in Bogota.

Yet Colombian growers rely on more than flavor for their success. In 1927, they formed their own federation to stabilize markets by buying up crops when prices fall, guaranteeing demand and growers’ income. The National Federation of Colombian Coffee Growers now buys about 23 percent of its members’ beans, reselling them in grocery stores and cafes around the world and enforcing quality standards to protect the national brand.

Every four years, many of Colombia’s 4 million small coffee growers trek miles to vote for representatives to a National Coffee Congress that brings their concerns to federation leaders. The latest vote in 2006 drew a 64-percent turnout — a higher percentage than voted for U.S. president in 2004.

Responding to those concerns, the Federation has built roads and schools in remote coffee-growing regions underserved by the government, and has opened a research center to breed new kinds of coffee beans.

But marketing has been its biggest success. The Federation has spent hundreds of millions of dollars on advertisements since the 1950s — most starring Juan Valdez, the character created by the New York ad agency Doyle Dane Bernbach in 1959 to give Colombian coffee a distinctive face and separate it from other beans.

Over the years, two different men have appeared in TV spots playing the character. Bags of the gourmet coffee are stamped with a drawing of the mustachioed coffee grower and shipped to stores from New York to New Zealand. In 2005, Juan Valdez even beat Ronald McDonald and the Energizer Bunny to be named to Advertising Week’s Madison Avenue Walk of Fame in New York, a top public relations prize.

And Juan Valdez Cafes are now giving Colombian growers a new way to get the word out.

Although some of its drinks cost the same as those sold by other high-end retailers, many cost less: the chain charges $1.57 for a single espresso at its stores in New York City — about 17 percent less than Starbucks — while a small cappuccino and medium drip coffee sell for 6 percent and 7 percent below Starbucks’ prices.

MORE FROM FOOD INC.

Food Inc. Section Front

McDonald’s rolling out ‘green’ logo in Europe Tyson Foods profit drops, but sales rise Rain may put pumpkin pie in peril McDonald's redesign aims for European lounge Kellogg warns: Brace for an Eggo shortage Coca-Cola changing look of juice packaging Coca-Cola sees massive global sales growth Starbucks Via stirring discontent CNBC: Coke looking for the next real thing Burger King franchisees sue over $1 promotion Food Inc. Section Front   Add Food Inc. headlines to your news reader: