Essay on Growing Inclusive Markets

Submitted By angelmar0580uk
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Pages: 28
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Latin America & the Caribbean • Colombia

Juan Valdez® Coffee Shops: Fair
Trade as an Inclusive and
Sustainable Business
Prepared by • Luis Felipe Avella Villegas (Colombia) & Loretta
Serrano (Mexico)
Sector • Agriculture
Enterprise Class • Southern MNC

Summary
“We’re moving forward at full speed, towards coffee production which is sustainable and profitable for everyone…”

Gabriel Silva, NFC Manager
Colombia is a major coffee producing country, third only to Brazil and Vietnam in terms of volume. As a consequence, coffee represents a way of life for more than 566,000 Colombian farmers associated with the National Federation of Coffee Growers of Colombia (NFC), 1 which was founded in 1927. About 95 percent of the NFC’s coffee growers are small-scale with coffee plantations of less than five hectares, and there are an estimated two million inhabitants in coffee growing regions that directly depend on coffee production. For decades, the coffee market has experienced an international crisis of price instability with significant repercussions on the quality of life of small producers and their families.
The Juan Valdez® character was created in 1959 to position Colombian coffee globally, particularly in the United States. Later on, it was re-launched in 2002 as a brand name with the inauguration of the Juan Valdez® Coffee Shops. This was an initiative of NFC to increase coffee producers’ profits by incorporating direct sales into its commercial model. In order to develop this strategy, a company called Colombian Coffee Promotion (Procafecol) was created in order to lead the Coffee Shops’ development and operation. In 2006, Procafecol operated 57 Coffee Shops in Colombia, the United States and Spain, 2 with sales reaching
US$20 million and more than 12 million clients. The commercial activity of the Coffee Shops made it possible to pay producers 25 percent more than the standard Colombian price.
Moreover, producers have received multiple benefits from NFC, which is the major shareholder of Procafecol. In 2006, Procafecol put 15.75 percent of its shares up for exclusive sale to coffee producers.
This case explores the inclusive and sustainable business model of Juan Valdez® Coffee
Shops, a fair trade chain linking communities of producers (NFC and others), businesses
(Procafecol and other private partners), consumers (national and international) and catalyst organizations (government and international cooperation agencies). It analyses its main innovations, results and challenges, as well as its potential and required adaptations to scale up and consolidate the scheme.

1

www.cafedecolombia.com is the web page of FNC; it has links to other organizations and documents related to FNC. It was the source for all the details included in the case, which don’t include an explicit source. 2
This represents a 150% growth rate, compared with 2005.

Case Study • Juan Valdez®: Fair Trade as an Inclusive and Sustainable Business

2

Colombian Coffee
Coffee has been cultivated in Colombia since approximately 1736, and its national expansion occurred in 1850. It is principally grown along the mountain slopes, harvested manually, during two harvest seasons a year, and processed in an artisanal fashion. 3 Colombians take pride in their coffee, which is enjoyed by coffee drinkers worldwide. By 2006, coffee represented more than 20 percent of Colombia’s Agriculture 4 Gross
National Product (GNP) and accounted for seven percent of national exports. Coffee growing was present in 50 percent of Colombia’s departments 5 and 55 percent of its municipalities. There were about 566,000 coffee farmers, associated with four million inhabitants of coffee regions (or ten percent of the country’s population). The sector generated 27 percent of direct, rural employment and one million indirect jobs (eight percent of total employment). Most coffee farmers were small producers;
94 percent
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