Starbucks In Colombia: Divided Reaction From A Nation Where Coffee Is One-Tenth Of Economy

The announcement that Starbucks (NASDAQ:SBUX), the world's biggest coffee chain, was planning to open its first store in Colombia could not have come at a messier time. Farmers in Colombia including coffee producers have been on strike for over ten days, asking for, among other things, tighter control of imports.

Colombia is the largest producer of quality coffee in the world, and the third-largest exporter. According to UNDP data, coffee accounts for one third of Colombia's agricultural production by value ,and as much as 12 percent of the economy.

Starbucks has been the biggest buyer of Colombian coffee for years, and now wants to bring the brew back to the country. CEO Howard Schultz promised in a presentation in Bogotá on Monday that the U.S.-based company would use exclusively Colombian coffee, toasted locally.

The reaction to the news within the Latin American country has been divided. The spokesman for Colombia's National Federation of Coffee Producers, Luis Fernando Samper, said that Starbucks announcement was good news. “[Starbucks] has been using Colombian beans for a while, they like the product, and also they ensure the producers get the most for their coffee,” he said. Samper added that Starbucks would pay up to a 15 percent more than what producers are currently earning.

Starbucks currently buys a million bags of coffee a year from Colombian producers, at roughly 150 pounds (75 kilos) per bag, and the expectation is that it will double that amount once it is in Colombia.

Samper also sounded confident that the U.S. company would not edge out the current, locally based coffee businesses, such as Juan Valdez. “Valdez is a mature business, it can welcome a new player in the game with no problems,” he told Colombian newspaper El Tiempo.

Not everybody is that enthusiastic. Óscar Gutiérrez, coordinator for the Movement for the Defense and Dignity of Coffee Producers in Colombia, said that the workers are not likely to benefit from the deal: “Unless national consumption spikes, there will be no improvement for us.”

Senator Jorge Enrique Robledo agreed, saying that sales of pure coffee from Starbucks are negligible.

Colombia’s export numbers are currently in decline. According to national statistics institution DANE, Colombia exported $912 million worth of coffee in the first half of 2013, down from $1.4 billion in the first semester of last year.