Iconic brand tries to sip off Starbucks’ business

But CEO Silva says getting fat profit margins isn’t his goal: he just wants a way to bring beans straight from the fields to coffee-drinkers — even if they then brew them for cheaper at home.

“We’ve integrated between the field and the coffee shop,” cutting out the middle man, he said.

That gives the chain something of an insurance policy amid the current financial crisis. Consumers may be cutting back on cafe-made lattes, but they still want coffee, said Judith Ganes-Chase, a coffee analyst at J. Ganes Consulting in the New York City suburb of Katonah, New York.

And as long they buy Colombian beans — in a swanky cafe or at the supermarket — the Federation still gains.

But with plans to open 500 new shops in the U.S., Spain, Scandinavia, Ecuador, Chile and across Colombia by 2010, some analysts wonder if Juan Valdez Cafe is moving too fast.

The biggest risk to the chain, and the Federation’s Procafecol subsidiary that runs it, “is not having the infrastructure to handle what they’ve built,” said Patricia Edwards, a Seattle-based retail analyst for investment advisers Wentworth, Hauser and Violich. “Do they have the expertise?”

For now at least, they do have the cash: While Seattle-based Starbucks reported its first net loss earlier this year, revealing plans to close more than 600 stores, Procafecol posted a small profit, with an 80 percent gain in first-quarter sales, the most recent figure available.

Juan Valdez Cafe isn’t likely to compete with giants like Starbucks, which has more than 15,000 stores worldwide. But thanks to its business model — branding — it doesn’t have to.

While promoting Colombian beans abroad, the chain has also changed consumer habits in Colombia. Selling European steamed-milk specialties alongside traditional Colombian brews, the cafes are drawing a new generation of coffee fans with lattes, cappuccinos, and icy frappes.

Juan Valdez sweat shirts have even become a symbol of national cool, popping up across the country in the last five years.

Many Colombian coffee drinkers are proud of the chain — including Santiago Baron, 18, who said he thinks it’s changing the way foreigners see Colombia, a country more often associated with drugs or violence.

“It’s our national product — coffee,” said Baron, who sat with friends at a Juan Valdez Cafe in Bogota’s trendy Park 93 neighborhood. And, equally important, he added, “It’s a good place to chill out.”

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