Columbia Coffee Study Juan Valdez

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1. Procafecol S.A. Basic information
1.1. Development and History
CH2. Participants in international business – Say if Procafecol is Multinational enterprise (MNE), Small and medium-sized enterprise, or the born global firm CH1. Why Colombia trade coffee? Theories advantages, etc.

Coffee was introduced in Colombia in the late 1700s and the first commercial production began in the early 1800s. Despite these early developments, the consolidation of coffee as a Colombian export did not come about until the second half of the 19th century. The great expansion that the world economy underwent at that time allowed Colombian landowners to find attractive opportunities in international markets. Little by little, the United States became the most important consumer of coffee in the world, while Germany and France became the most important markets in Europe. In 1927 the National Federation of Coffee Growers of Colombia (FNC) was created to help the Colombian coffee growers on structuring a very traditional and atomized sector. In 1959, during a crisis that came about due to instability of the coffee trading price, the FNC decided to work with Doyle Bernback, an advertising agency (ex DDB) with the goal of building a strong symbol, highly identifiable, that would allow them to promote the specificities of the Colombian Coffee and sell the production at a higher price than the current market price. Presently, Colombia is the second largest coffee producer in the world (after Brazil). It accounts for almost 12% of the world’s total production. Coffee accounts for 8% of Colombia’s GDP. A personified brand since its creation

Following the advice of the advertising agency, Juan Valdez was personified since its creation. He would be the symbol of a Colombian coffee grower worldwide. A mere six months after the launch of the campaign, 87% of the American people associated Juan Valdez with Colombian coffee. In 1961, Juan Valdez was launched on the European market with similar success. Since then, a limited number of actors have personified the emblematic coffee grower focused on protecting the traditions that make his coffee the “best in the world”. Between 1959 and 2000 more than 750 million dollars were allocated to develop the image of Juan Valdez and to promote the Colombian coffee. Transformation into a commercial icon

After a particularly difficult political and social period it was really important for the FNC to help the Colombian coffee growers in both economic and social aspects. Procafecol SA was created in 2002 by Fedecafé Federación Nacional de Cafeteros de Colombia, being the major shareholder along with Colombian coffee growers which own 13,000 shares. Since 2004, the company has been fully responsible for the operation of Juan Valdez® stores in the country and in 2006 began the distribution of packaged coffee in retail and horeca (hotels, restaurants, catering) channels. Juan Valdez is also offered to passengers of Avianca, the most important airline in Colombia. In a coffee market where prices and margins are really low, a diversification strategy is indeed really pertinent considering the gross margins of gourmet coffee houses (Starbucks, Colombus Café...) and even more if we consider its direct relation with coffee growers as a strong competitive advantage.

Positioned as Gourmet
Since the beginning of the project it was made clear that the Tiendas Juan Valdez® are a chain of coffee houses focused on selling coffee products to the consumers. These coffee houses were created to be a part of the coffee supply-chain and to strengthen the awareness of the Colombian coffee. This would gradually increase the incomes of Colombian coffee growers, historical mission of the FNC. Since their launch, the Tiendas Juan Valdez® was designed to reach the up-market, with an ambiance mixing the Starbucks standards and the touch...
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