LongBench v2 / 66f39aa7821e116aacb2da76 / In analyzing the performance of Juan Valdez Cafés in the U.S. and Colombian…

Juan Valdez: Innovation in Caffeination 
 
The meeting had run longer than expected, and the coffee server—or señora del tinto—had just 
made her third appearance bearing a tray of small cups. Catalina Crane was initially inclined to beg 
off the third cup, but thought better of it. That kind of thing was rarely done in the halls of the 
organization that guided the coffee industry of the country of Colombia. 
Crane and her team at Promotora de Cafe Colombia (Procafecol) were the stewards of the famous 
Juan Valdez brand. While Juan Valdez had been used to endorse other giant coffee brands for 
decades, in recent years Procafecol had rolled out its own product lines and even a chain of cafes—
and Juan was finally front and center. 
Procafecol had experienced many successes since its creation in 2002, but a few dark clouds were 
looming by the late summer of 2009. Crane was preparing her presentation to Gabriel Silva, the CEO 
of the Federcación Nacional de Cafeteros (mostly referred to as the “Colombian Coffee Growers 
Federation” in English-language publications). Silva, the main architect of the brand expansion 
strategy that had led to the creation of Procafecol, served as the chairman of the board of the 
organization. The numbers from many of the U.S. locations of the Juan Valdez Café were running 
behind projections, and the Procafecol team was considering a significant retrenchment. Given the 
implications for the high-profile Juan Valdez brand and the coffee industry of Colombia, Crane knew 
that the caffeine from that third cup might come in handy as she nailed down the numbers.  
Establishing a Federation and Building a Character 
In the late 19th and early 20th centuries, Colombia’s coffee sector was dominated by large 
plantations (see Exhibit 1 for background information on Colombia). Instability in the global coffee 
market, however, wounded many of these large players. During the 1920s and 1930s, smaller farms 
controlled by resident planters came to dominate Colombia’s coffee industry, a structure that proved 
more capable of adjusting to the vagaries of the international coffee market.1 Still, leaders in 
government and business felt that they needed to invest even more in the stability and growth of this 
sector, which was critical to the economy of Colombia yet vulnerable to the effects of weather, plant 
disease, changing tastes and wild swings in commodity markets.  
In 1927, the Federacion Nacional de Cafeteros (FNC) was established to promote the interests of 
coffee growers, conduct scientific research in disciplines affecting the cultivation of coffee, and 
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disseminate information on effective agricultural and business practices. Exporters at the time paid a 
tax of 10 cents on each 60-kilogram bag of Colombian coffee beans to support the federation.  
In the following decades, the FNC promoted quality standards for exported coffee, attempting to 
enhance the image of Colombia’s coffee in an international market dominated by Brazil. Though 
coffee was viewed largely as a commodity in important markets like the United States, consumers 
were beginning to develop views on the quality levels of coffee from different regions. In 1959, due in 
part to early promotional efforts by Brazil, 71% of Americans believed Brazil produced the highest-
quality coffee in the world, with only 3.7% citing Colombia.2  
The FNC formulated a strategy to boost the demand levels for Colombian coffee while positioning 
it as a superior product worthy of a price premium in key markets. They created marketing programs 
that attempted to deepen relationships with coffee roasters3 that would emphasize “100% 
Colombian” brands, products with coffee beans solely from Colombia. As part of its promotional 
campaign, the FNC sought to develop a character to represent Colombia’s coffee producers. The 
American advertising firm, Doyle Dane Bernbach (DDB), created a fictional Colombian farmer to 
serve this purpose. Adorned with an aguadeño hat and a satchel known as a carriel—accessories 
commonly worn by farmers in the country’s coffee growing regions—the new character was meant to 
convey a sense of pride, humility and hard work. Thus was born Juan Valdez. 
“Colombia was in the midst of yet another coffee industry crisis in the late 50’s, so we needed this 
differentiation strategy. But there was intense debate within the federation, as some asked, ‘How can 
we sell our industry to the world by projecting ourselves with the image of a peasant?’,” said Silva. 
“A lot of people wanted to sell our industry to the world by showing we were modern and 
sophisticated.” Others within the FNC felt that it was risky to raise the profile of Colombian coffee 
through such a campaign given its potential to create conflict with major coffee brands – the buyers 
of Colombia’s beans.  
But the FNC began to reap major benefits from the awareness generated by the advertising 
campaign built around the humble campesino, or farmer. In 1959, only one minor American coffee 
brand was tagged with a Colombian origin. By 1963, 26 brands boasted a label of “100% Colombian” 
and by 1970 that number had jumped to 53.4 Within just a few years of the launch of the Juan Valdez 
TV and print campaign, 21% of Americans viewed Colombian coffee as the best in the world.5 
Becoming an “Ingredient Brand” 
In the 1970s, coffee consumption was on the rise in many countries around the world and 
Colombia responded with increased production. One important country ran counter to the general 
consumptions trends: the United States, the most important market for Colombian coffee. Soft drinks 
had supplanted coffee in many occasions for beverage consumption, and they were the drink of 
choice for consumers in younger demographic segments.  
But the era also presented opportunities for the FNC. During the “Me Decade” of the 1980s, 
conspicuous consumption of high quality offerings was all the rage—and buyers were willing to 
spend more for these products. In order to deepen its relationships with top-selling brands in the U.S. 
and to support price premiums for products containing Colombian coffee, the FNC introduced a new 
element to the marketing program built around the now-iconic Juan Valdez. The character’s 
mustachioed face had become ubiquitous on television and in print advertisements in the U.S. and 
other selected markets, generating high awareness levels (see Exhibit 2 for 1980s promotion and 
advertising expenditures by country). The image of Juan Valdez (along with that of his trusty mule, 
Conchita) would now be incorporated into a new logo that coffee brands could place on their 
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packaging to denote that their products contained 100% Colombian beans. Some in Colombia’s coffee 
industry were worried that the new “ingredient brand” program might sow the seeds of conflict with 
large customers. “In our archives, I’ve seen the letters from the head of Maxwell House [one of the 
largest U.S. brands] from the 1980s saying, ‘We will never use this 100% Colombian brand’,” said 
Luis Samper, director of the FNC’s Intellectual Property group. 
The ingredient brand program significantly impacted several parts of the FNC’s marketing 
program. By 1989, 66% of American consumers stated that Colombia produced the best coffee, while 
16% cited Brazil.6 (See Exhibit 3 for historical statistics on the recognition of Colombian coffee in the 
United States.) When compared with competitive products from South and Central America, the 
price premium enjoyed by Colombia’s standard export green coffee beans—referred to as “Usual 
Good Quality” (UGQ)—was significant, but varied by year depending on market conditions.7 “The 
ingredient brand strategy was a major success, but it was really limited to the big cans of coffee that 
were sold in the supermarkets,” said Silva. “That kind of product represents one mode of 
consumption. The program was not as conducive to capitalizing on growth in other, newly emerging 
forms of coffee consumption.”8 
The New Coffee Revolution 
Almost 4,100 miles to the north, in Seattle, Washington, another rising coffee brand began to 
impact the fortunes of Juan Valdez, the FNC and the world coffee industry as a whole. Throughout 
the 1990s, Howard Schultz worked to transform Starbucks, for years a local haunt near Seattle’s Pike 
Place market, into a national and then global coffee powerhouse. Schultz sought to reinterpret the 
Italian coffee bar experience for the modern consumer. Though most Americans seemed content for 
decades with drip-brewed coffees in a very limited variety of flavors, Schultz banked on the notion 
that people would pay double or triple normal coffee shop prices for high quality espresso-based 
drinks served in a welcoming environment.  
In the course of a decade and a half, Starbucks essentially created a “coffee culture” in the United 
States and transformed coffee purchase and consumption patterns in dozens of countries. After going 
public in 1992 with 165 stores, Starbucks grew to over 6,400 locations by 2003 and around 16,000 
stores by 2009, reaching sales of $9.8 billion.9 The ubiquitous cafes were where the action was in the 
coffee industry—and Juan Valdez was on the outside, looking in. Starbucks educated consumers 
about coffee from other regions in Latin America, Africa, and elsewhere, even featuring premium 
blends that connoisseurs could take home to brew in their own kitchens. “Starbucks left Colombia an 
origin relevant for the ‘mainstream’ segment of the coffee market and not for the specialty segment, 
but it was obvious that the profitable segments of the market were specialty and gourmet,” said 
Samper. “Our coffee seemed less exotic and fashionable.” 
The changing demand-side of the burgeoning specialty coffee market had some surprising effects 
on the supply-side of the industry. With the expansion of Starbucks and other high-end chains, 
coffee-growing countries increased the amount of land under cultivation for both the bulk beans and 
the specialty varieties needed to serve the growing base of aficionados. Starbucks could be selective 
about which varieties it featured on its menu since its brand had become the main endorser of taste 
and quality. “Our industry and our coffee farmers became less important parts of the value chain in 
coffee,” commented Alejandra Londono, Marketing Director for Procafecol. “In 1997, coffee was sold 
at retail for $4.80 per pound and producers received 28% of that price and roasters got 61%. By 2003, 
coffee was selling for $3.70; producers got 13% and roasters made 76%. This was not a good trend for 
Colombian coffee farmers.” 
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Another Crisis, Another Opportunity 
Colombia’s coffee federation had built a dominant ingredient brand and partner network in 
market segments that were stagnant at best and showing signs of contraction. Though their beans 
were viewed as the highest quality for decades, hundreds of thousands of Colombia’s farmers were 
growing coffee varieties that were approaching commodity status. In the early 2000s, these new 
industry dynamics—combined with the lowest green coffee prices on record—were inflicting pain 
throughout the coffee-growing, processing and marketing sectors in Colombia. The FNC, and indeed, 
the country, needed a new approach. 
In 2001, the Colombian government assembled a commission composed of leaders from the public 
and private sectors to examine the competitive situation of the coffee industry and map out new 
potential strategies. Gabriel Silva, a former presidential advisor, a former Ambassador to the U.S. 
and, at the time, a private equity investor, was asked to serve on the commission. “We had a 
collection of people with close relationships to the industry, but no one with interests in the 
industry,” stated Silva. “Over a period of six months, we had beautiful debates . . . wonderful 
discussions. The process was quite convergent. In the end, our recommendations were quite precise. 
We didn’t just assemble general views of a mission or a vision.” 
The group’s strategy was captured in “The Green Book,” an expansive strategic analysis and 
action plan that called for a significant revamp of the FNC and the entire Colombian coffee industry. 
Some major tenets of the plan included capitalizing further on the Juan Valdez brand, seeking out 
opportunities to create new value-added products, and taking a role in parts of the value chain and 
distribution channel traditionally left to other players. 
Even though the commission had developed a strong consensus on the federation’s strategic 
direction, it remained to be seen who would lead the FNC as it executed its new plan. “The previous 
CEO had resigned. No one wanted the position because the crisis was so big. The only one ready, 
willing, and motivated—and convinced we could implement this vision effectively—was myself,” 
said Silva. By the time Silva assumed the helm of the FNC, many of the board members and officers 
of the organization had also departed. Silva wanted to test the commitment of the managers and 
staffers who remained. “I used a little trick to measure people’s capacity to change. I immediately cut 
my pay by 10% and then asked others to take a similar pay cut to show their belief in the future of the 
organization. It was a good indicator of the depth of their commitment,” he recalled. “I had to ask 
three of the top 15 executives to leave because I didn’t fully believe the sincerity of their willingness 
to change and innovate.” Before Silva arrived, the average service time for executives in the top tiers 
of the federation was almost 30 years. Within a few years, the average tenure of managers in the top 
ranks had decreased by nearly two decades, with new leaders such as Crane (who had previously 
served as a Vice-Minister of Finance in Colombia’s government) and Samper occupying key posts. 
Silva also streamlined the FNC by selling businesses he viewed as not core to the mission and 
strategy laid out in “The Green Book.” Over a few decades, the FNC had channeled resources into 
purchasing and/or developing an airline, a shipping company, ports, insurance companies and 
banks. Though they kept a small investment in port operations, Silva and his team profitably 
disposed of the other ventures within a few years, focusing the FNC onto the evermore-challenging 
tasks of creating and marketing coffee products within the international marketplace. 
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Up to the Challenge? The FNC and Colombia’s Coffee Industry 
Part industry association, part marketing company, part public works organization, the FNC was 
a unique not-for-profit hybrid (see Exhibit 4 for the FNC’s income statement). The FNC at times 
collaborated with and at times competed against the likes of roaster/retailers such as Starbucks and 
consumer products giants like Sara Lee and Nestle. Its roots in Colombia were deep, without 
question, but leaders in the coffee industry and government hoped the organization could extend its 
reach as well. 
The Grassroots Level: Serving the Coffee Farmers 
In the midst of the FNC’s sales of non-core assets, Silva tried to drive home his philosophy to any 
within or outside the organization who had forgotten about the key mission of the federation. Said 
Silva, “We created a lot of goodwill with our constituency by simply saying, ‘First come the coffee 
growers’.” Samper emphasized why this simple mantra was so critical to the FNC’s organizational 
values, branding and strategy. “Of course, you want to be great at innovation, distribution and brand 
creation in the coffee industry, but there is one thing we can’t get away from: we represent 
Colombian coffee growers. They are the ‘manufacturers’ and they have to be the ‘manufacturers.’ You 
can’t outsource the growing of coffee to China. It will be done on our small farms by our farmers.” 
Well over half a million cafeteros were engaged in the cultivation of coffee in Colombia, a country 
of 44 million. Most Colombian coffee farms were small scale; 95% of plots under cultivation were 
below five hectares (around 12.5 acres) and were usually developed on hillsides, making them not 
very conducive to modern, mechanized agricultural techniques. “Only 4,000 of our growers have 
more than 10 hectares in coffee. In some areas of Brazil, the plantations have 10 hectares in their 
backyards and then the farm starts,” quipped Samper. Almost all of Colombia’s cafeteros picked their 
coffee beans by hand. The proximity of Colombia’s coffee growing zones to the equator meant that 
the country experienced optimal growing conditions—in terms of temperature, hours of sunlight and 
precipitation—twice a year, according to the FNC. One branch of a coffee plant might have ready-to-
harvest coffee “berries,” immature berries, flowers and buds simultaneously. A Colombian farmer 
might have to pick from an individual plant eight or more times throughout the year in order to 
maximize production. Coffee plantations in countries located in tropical latitudes a few thousand 
miles north or south of the equator experienced one main growing season. Large, flat plantations 
were prevalent and mechanized harvesting was much more common in leading exporting nations 
than it was in Colombia (see Exhibit 5 for coffee production by country). 
Once a Colombian farmer had harvested the ripe berries from his fields, he would process them 
on his property in a machine that removed the reddish skin and thin layer of fruity pulp from the 
hidden bean. The beans were then dried—usually in the sun—and another thin layer of material 
called “parchment” was stripped away from the bean, at this point in the production cycle called 
“green coffee.” Though experienced cafeteros would often spot and discard in the field coffee berries 
that had been compromised by pests, they would also conduct a quality check of the dried product 
and separate out any disfigured beans (which might be roasted in a farm family’s oven for personal 
consumption). The FNC enforced stringent quality standards on any green coffee meant for export. 
Once they had dried their beans, farmers would transport their products to the nearest city or 
town. Large operators might make this trek with many 60-kilogram bags, but small farmers might 
journey to the market with less than one bag, especially if they needed cash urgently. “Once they are 
down the hill and in town, the farmers are price-takers. This is a cash business for them and most 
need to sell their products quickly,” said Juan Restrepo, the Federation’s Commercial Manager. “That 
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is why it is so critical that the FNC be a credible market actor and set a predictable floor for the 
pricing.” The FNC operated in around 500 locations for raw coffee bean sales scattered throughout 
the country. The federation purchased approximately 30% of the country’s coffee to deliver a 
“minimum price signal” to farmers and private purchasers alike.  
The FNC had 15 regional offices in the major coffee growing zones. These offices supervised a 
1,500-person agricultural extension service—through which experienced farmers and other educators 
would pass on farming and environmental management techniques to cafeteros—and administer 
other aid, service and infrastructure programs supported by the FNC and government agencies. For 
example, Pereira, a city of 576,000 located 109 miles west of Bogota, hosted the FNC office that 
supported Colombia’s seventh largest coffee-growing region, accounting for around $170 million in 
green coffee sales. The Pereira office represented approximately 21,000 coffee-growing families with 
its staff of 80, including 50 field-based extensionists. The Pereira office utilized $2.9 million in FNC 
funds, but also received the equivalent of several million dollars in additional resources from national 
and local government entities as well as international non-governmental organizations in order to 
help administer other programs. 
The Politics of Coffee 
Though on one hand the FNC aimed to be a nimble and sophisticated player in the competitive 
coffee market, at its base it was still a democratic institution composed of over half a million coffee 
farmers. And whether the farmer measured his production by the ton or by the bag, the FNC adhered 
strictly to its values of “one man, one vote.” Indeed, a 2005 promotional video geared toward 
attracting new roasters to the “100% Colombian” program trumpeted the role of the FNC as a 
“democratic stronghold” for all of Colombia.  
Farmers elected representatives to local and regional boards that oversaw on-the-ground 
programs such as coops, extension services and aid programs. The cafeteros also voted for candidates 
to represent them in the National Coffee Growers Congress, a 90-member body charged with 
selecting the FNC’s CEO, approving strategic plans and reviewing yearly budgets. The Board of 
Directors of the FNC was composed of individuals submitted by the local boards of each coffee-
growing region and then approved by the Congress. While most Board members were coffee farmers, 
some were esteemed individuals from the region—such as former cabinet ministers—whom the 
members of the regional board thought would best represent the interests of growers in that area. The 
Board of Directors was responsible for overseeing most of the outward-facing aspects of the 
Colombian coffee industry, including international sales, partnerships with leading coffee roasters 
and the Juan Valdez branding campaign. 
The Board also oversaw the Fondo, a reserve of monies collected via a six-cent fee on every pound 
of Colombian coffee shipped overseas. The FNC administered the Fondo, investing a portion of it on 
behalf of the cafeteros and also using it to support its coffee bean purchase operations and rural 
development programs. Over the last several decades, these funds had enabled significant 
environmental, road-building and electrification projects in rural areas. The FNC also supported 
educational programs for the children of cafeteros and the spread of information technology into the 
hinterlands of the coffee-growing zones. The tens of millions of dollars allocated by the FNC were 
further leveraged by additional contributions by the Colombian government, private foundations 
and NGOs. 
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Selling the Beans 
The FNC played various roles in the marketing of Colombia’s green coffee all over the world. It 
operated offices in cities including New York, Amsterdam, Tokyo and Beijing. For instance, FNC 
representatives would encourage major coffee brands to participate in the “100% Colombian” 
program and develop local marketing campaigns. Restrepo’s group brokered deals with major coffee 
players around the world for beans procured by the FNC through the purchase guarantee program. 
Trends such as the rise of Starbucks had made end-consumers more discerning, and roasters needed 
new tailored solutions to please them. “We used to sell coffee by the shipping container, now we 
often have to sell it by the bag,” said Restrepo. Brands around the world sought certain taste profiles 
for their proprietary blends, balancing levels of acidity, robustness and flavor undertones to create 
distinctive products. Some roasters sought beans grown via certified organic methods or from a 
certain region of the country to differentiate their brands within the “100% Colombian” program. In 
2002, around 4,000 Colombian coffee farms had received some sort of environmental or other 
certification; by 2009, the number was nearly 80,000. Restrepo and his team used their expansive 
knowledge of the country’s coffee-growing regions and even individual farms in order to help buyers 
develop unique blends and build marketing programs.  
Even though these efforts led to price premiums for Colombian green coffee and deeper 
relationships with roasters, these tailored marketing and sales programs were not without their 
detractors within the FNC. “Our board was used to a simple concept: ‘100% Colombian Coffee.’ 
Period. It was difficult for some to acknowledge that there was more value to capture,” said Restrepo. 
“We had a successful, unified marketing message for decades. But, some thought that if Colombia 
was touted as a ‘land of coffees’ rather than a ‘land of coffee’ we risked the effort we had already 
exerted on branding.” 
The Art and Science of the Coffee Industry 
Though the average consumer might not know it, there was a great deal of science behind a cup of 
Colombian coffee. The FNC had supported research into agricultural best practices and 
environmental trends since its earliest years. Its Cenicafe research complex near Pereira managed 
dozens of programs on the science of growing and processing coffee. The 12,500 square-meter 
complex housed over 180 professionals, including biologists, chemists, agronomists, meteorologists 
and geologists—and even a few “cuppers,” coffee tasters with some of the most discerning palates in 
the world. Since protecting the value of the “100% Colombian” mark was so critical to the federation, 
a number of researchers focused on analyzing the distinctiveness of Colombian coffee. Cenicafe 
scientists employed chromatographs to break down the chemical composition of beans from around 
the world and genetic research tools to analyze the genome of Colombian coffee plants. 
Environmental issues were also of paramount concern to Cenicafe researchers. Climatic changes had 
already impacted the Colombian coffee industry, turning some traditional growing regions into 
zones of marginal productivity. Cenicafe investigated new strains of coffee that were more tolerant of 
the evolving climatic conditions and studied how the environment affected pests, plant diseases and 
other flora and fauna in coffee-cultivating zones. 
The FNC’s Intellectual Property group also spearheaded many research projects designed to 
showcase “our profound knowledge of our product,” according to Samper, the leader of the group. 
The FNC had created “bean track” software that helped roaster clients and consumers ensure that 
they were getting coffee from the Colombian regions or communities they intended to buy from. 
Consumers, for instance, could type a code from a package into an FNC website and learn more 
about the beans that went into their coffee. For some of the coffee-growing regions, Samper’s group 
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had commissioned multimedia virtual tours that allowed coffee connoisseurs to see working farms 
and learn more about growing practices in those areas. “Viewing this kind of content would appeal 
to people in the same way learning about the wine-growing regions of France or Napa Valley is 
interesting to wine-lovers,” commented Samper. He envisioned a network of terminals that would 
allow consumers to view these vignettes in cafes and gourmet food shops. The Intellectual Property 
group also investigated issues such as the carbon footprint of the Colombian coffee industry and 
studied strategic trends in the global coffee industry.  
As a part of its attempt to add value to Colombia’s coffee exports, in the 1960s the FNC developed 
a facility to freeze dry coffee. Expanded many times in succeeding decades, the facility, in Caldas 
province west of Bogota, had become one of the largest producers of soluble coffees in the world and 
a leader in R&D on products and manufacturing techniques. Though the FNC did produce its own 
niche soluble coffee brand called Buendia, nearly all of the plant’s capacity was committed to export 
products, primarily private label coffees for retailers such as Walmart and other players in Europe, 
Russia and Asia.  
The New Juan Valdez 
In 2006, the man who had portrayed Juan Valdez for 37 years, Carlos Sanchez, handed over the 
Conchita’s reins to a new Juan. Sanchez had appeared in nearly 100 commercials and even made a 
cameo in the Jim Carrey movie Bruce Almighty, delivering the perfect cup of coffee to the God-like 
Bruce. During Sanchez’s tenure, Juan Valdez had become one of the most recognized brands in the 
world, receiving a citation in 2005 from Brandweek as the top U.S. advertising icon, sharing the honor 
with the Geico Gecko and beating out the likes of Ronald McDonald and the Energizer Bunny. Like 
Sanchez, the new Juan Valdez, Carlos Castaneda, was a real working cafetero before stepping into 
this role of a lifetime, representing his profession, an entire industry, and, indeed, his country (see 
Exhibit 6 for photos of portrayals of Juan Valdez). 
Procafecol: Raising Juan’s Profile 
The FNC had successfully managed one of the world’s iconic advertising characters for decades, 
but Silva felt even stronger marketing capabilities would be needed if Colombia were to achieve the 
ambitious goals laid out in “The Green Book.” In 2002, a new legal entity called Promotora de Cafe 
Colombia (Procafecol) was created to manage all consumer-facing branding and marketing activities 
internationally (see Exhibit 7 for financial information on Procafecol). Procafecol was initially staffed 
almost entirely by FNC veterans and was co-located in the office complex with the remaining 
elements of the FNC. Shares in Procafecol were offered to members of the federation in 2007; 22,567 
individual coffee growers bought stock in the new entity, raising a total of approximately $9 million 
at a valuation of around $60 million.10 The remaining shares were held by the World Bank’s 
International Finance Corporation and the FNC. 
Silva aimed to have Procafecol accelerate the evolution of the Juan Valdez brand. He hoped Juan 
Valdez would soon be a full-fledged product and service brand linked to offerings developed, owned 
and marketed by Procafecol. The expanded use of Juan Valdez products would allow Colombian 
coffee to “conquer every occasion,” according to Silva. “We can’t compete on price with other 
producers. We’ve needed differentiation and innovation. We recognized we had created a huge asset, 
one of the most well-regarded brands in the world,” he said. “But our differentiation was no longer 
sufficient to capture the margins we needed. Our ‘ingredient brand’ was associated with limited 
types of consumption in the middle tiers of the market.” By owning a larger portfolio of products and 
services, Colombia would participate in more parts of the industry’s value chain. Samper 
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commented, “Our coffee growers need to benefit more from the use of their coffees. We need to 
combat what we call ‘The Cartagena Syndrome,’ where our coffees suddenly command huge margins 
once some other industry player has bought the beans from us and shipped them out of the Port of 
Cartagena.”  
Creating Cafes 
The familiar face of Juan Valdez was about to become even more familiar to coffee lovers in key 
markets. In 2002, Procafecol opened the first “Juan Valdez Café” at a location in Bogota’s 
international airport. At the ribbon-cutting ceremony, Alvaro Uribe, the President of Colombia, 
announced to “Juan” (Carlos Sanchez) and an assemblage of Procafecol and FNC officials, “Juan, you 
thought that you had left a legacy . . . [but] now you have to start growing again.” President Uribe 
also expressed a hope that the cafes would become a huge business opportunity for the Colombian 
Diaspora all over the world. “We received about 4,000 applications from Colombian expatriates after 
that,” said Londono. 
Procafecol planned to site Juan Valdez Cafes primarily in developed, western nations with 
entrenched coffee-drinking cultures. Markets that had been exposed to Juan Valdez through 
significant advertising campaigns, such as the United States and Spain, would be at the top of the 
priority list. Though most consumers in Colombia were not familiar with the Juan Valdez brand—the 
character had not been used in major domestic marketing campaigns—the team planned to develop 
the first ten cafes in Colombian cities in order to test and refine the concept. 
Executives within Procafecol believed that though they had much of the expertise needed to make 
the Juan Valdez Café successful, they would have to partner with outsiders to bring in key 
capabilities. “We knew how to sell green coffee, but we didn’t know how to sell cappuccinos,” said 
Crane, who transitioned from being the CFO of the FNC to the CEO of Procafecol in 2008 upon the 
departure of the previous CEO, who had come from the Colombian beer industry. An experienced 
international retail consulting and architecture firm designed the identity and floor plans for the early 
stores. Procafecol also planned to partner with retail and restaurant operators in international 
markets who knew the economics of food and drink operations and also possessed specific 
knowledge of local regulations, culture and tastes.  
Juan Valdez Cafes would be “American-style cafes,” which meant they would emphasize speedy, 
dependable service and deliver their products in convenient paper cups that could be taken on-the-
go. They would be situated mainly in high-traffic, prestige commercial and retail districts, sometimes 
incorporated into existing developments and sometimes built as standalone facilities (see Exhibit 8 
for photos of early locations). Commenting on the design of the cafes, Londono said: “We wanted 
repeat consumers, so we had to avoid a decor that would be perceived as ethnic, a type of ‘poncho 
and sombrero ambiance’ that would justify only a one-time visit. We had to be modern, but at the 
same time we wanted to show consumers our roots, that this is the Colombian coffee growers’ 
business owned by the growers themselves.”  
The menu for a Juan Valdez Cafe was similar to that of a Starbucks, though a bit more focused. 
The Juan Valdez Cafe would offer several varieties of distinctive Colombian coffees and other drinks 
like cappuccinos, mochas and hot chocolate, but not teas. The stores also offered a limited food menu, 
including some hot breakfast sandwiches. 
The drink menu utilized only beans grown in Colombia, which required a bit of tweaking to 
traditional barista techniques and recipes. Colombia’s coffees were exclusively of the mild Arabica 
varietal, while espresso was customarily brewed from the stronger Robusta family of coffee beans. 
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Since drinks like cappuccinos, mochas and macchiatos were traditionally based on espresso, Juan 
Valdez baristas needed to take some special measures in order to have the milder Arabica grind 
emulate regular espresso in these drink recipes. 
Everybody Loves Juan 
The rollout of the initial Juan Valdez Cafes in Colombia was very successful, surpassing the 
projections of Procafecol management. The average ticket in the stores was higher than anticipated, 
with robust levels of food orders and impressive sales for Juan Valdez branded merchandise such as 
T-shirts and mugs. “Even though Colombians weren’t very familiar with the Juan Valdez brand 
previously, they really came to view these cafes as a source of national pride,” said Crane. The 
positive results encouraged Procafecol to dramatically bolster their domestic expansion plans even as 
they laid the groundwork for their international thrust.  
Going it alone in the café business had not always been the plan for the Colombian coffee 
industry. Before the advent of the Juan Valdez Cafes, some within FNC had hoped that Starbucks 
would be the venue to promote Colombian coffees at the retail level in major markets. “I went to 
Starbucks and offered them an alliance, a ‘Colombia Corner’ in their stores,” recalled Silva. “We 
needed to get the message about coffees of Colombian origin to this new consumer without 
intermediaries.” The talks with Starbucks proved unfruitful. 
Procafecol launched its first stores in the United States in 2004. It planned to develop around 50 
cafes in a three-year period, capitalizing on Americans’ familiarity with, and affinity for, the Juan 
Valdez brand. Times Square was selected as the site for the U.S. flagship store. The café contained 20 
tables and was built with premium fixtures and materials, contributing to a build-out expense that 
was probably 20% higher than that of a prestige Starbucks location, according to Crane. Other early 
U.S. locations—including Philadelphia, Washington DC, Miami, and Seattle—also featured premium 
décor and fixtures. 
In Spain, another large, high-income market with a great deal of familiarity with the Juan Valdez 
marketing program, Procafecol assessed several interested candidates and eventually decided on an 
operating partner that ran quick-service restaurants throughout the country. Latin America also 
emerged as fertile ground for cultivating the cafes. In Chile and Ecuador, Procafecol decided to 
opportunistically launch Juan Valdez Cafes after experienced partner candidates approached them. 
In Chile, the owner of a chain of department stores became the local operating partner. Ecuador, 
though not a high-income country, presented an intriguing opportunity because of the interest of a 
particularly capable local operating partner, a firm that ran dozens of KFC franchises. “Our early 
Latin American expansion opportunities presented unique challenges because consumers in those 
countries were not familiar with the character. The Juan Valdez brand was born there as a cafe, not 
through an ad campaign,” commented Londono. 
The cafes not only provided a venue to earn revenues via the direct sale of prepared drinks, food, 
packaged coffee and other merchandise, they also afforded the opportunity to promote Colombia and 
its unique coffee industry. “Each location was like a billboard for our industry. Even more than that, 
we saw real opportunities to educate customers about the importance of knowing the place of origin 
of the coffees they consume and the growing practices of the farmers,” said Samper. “We could really 
use the cafes to disseminate information through point of purchase displays, point of sale 
publications or even interactive, Internet-enabled kiosks.”  
In the early years of the Juan Valdez Cafes, Silva was pleased with the growth trajectory and the 
halo effects of the shops. “If you measure from the time Schultz took over Starbucks, Juan Valdez 
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cafes actually grew faster. But, our goals are stated in terms of numbers of stores, not profit. We want 
a sustainable operation, but most of all, we want a ‘footprint.’ We have to combine a business mission 
with an origin-branding mission,” Silva commented. The FNC’s Fondo received a direct financial 
benefit from the cafes: a five percent royalty on all products sold. According to Silva, the FNC also 
attributed several beneficial spillover effects to visibility created by the expansion of the cafes. All 
told, according to the FNC, interest in premium Colombia coffees grew and exports of specialty 
coffee beans increased nearly fivefold in five years, leading to millions of dollars in incremental 
revenue for growers.  
Coming to a Supermarket near You . . . 
With its café development strategy underway, Procafecol launched a line of Juan Valdez-branded 
ground coffees to be sold within the outlets. Though the face of Juan Valdez had been a part of the 
“100% Colombian” mark for years, this would be the first time that a coffee product would bear the 
familiar visage in large form on the front of the package and employ the popular character’s name as 
the product brand (see Exhibit 9 for branding elements utilized by FNC and Procafecol). Three and a 
half years after its launch, the “Juan Valdez Signature” brand of premium coffees also started to 
appear on supermarket shelves in select countries, next to brands from consumer product companies 
that were major purchasers of Colombian coffee beans. 
Though television commercials featuring the character Juan Valdez were ubiquitous in the 1970s 
and 1980s (see Exhibit 10 for advertising spending levels on the Juan Valdez character/brand and 
Café de Colombia as a whole), Procafecol needed to count on a different kind of promotional plan to 
support the new Juan Valdez Signature line of packaged coffee. “We plan on developing a feedback 
loop to create demand for the coffees. Our coffee shops will drive awareness for the brand and for 
our packaged products, and vice versa,” said Crane. 
In 2007, Walmart, the largest retailer in the world, approached Procafecol about placing the 
product on the shelves of some of its stores. “The line we launched for them is doing reasonably well, 
but it frankly does not help the positioning as a premium brand,” stated Crane. “It’s difficult for us to 
maintain the right price level in the Walmart system.” By 2009, roughly 2,300 outlets in eight 
countries carried the Juan Valdez Signature line of packaged coffees. 
Procafecol experimented with another beverage product in their cafes and other retail channels in 
2006. A line of coffee-based colas seemed like it would be a strong fit with the brand and resonate 
with customers, given the growth of both ready-to-drink coffee products and energy drinks such as 
Red Bull. However, Juan Valdez Cola did not take off like expected in Colombia. “This was a ‘baby’ 
that I really loved a lot, but it had to be sacrificed,” said Silva. “I was enamored with the idea of 
taking part of the market from major soft drink brands. We played with it for about three years, but 
couldn’t make it work.” 
Two main issues surrounding the future of the Juan Valdez Signature brand concerned some 
within Procafecol and the FNC. First, some felt that if the Juan Valdez brand and the 100% Colombian 
coffee program both continued to expand, consumers might experience a great deal of confusion. The 
brand symbol for the Procafecol-controlled product was very similar to the mark employed by 
dozens of coffee companies around the world to show that their offerings contained only Colombian 
beans. Samper’s IP Group issued a style book to all participants in the 100% Colombian program, 
guiding them on the use of the mark, including size, color and placement in packaging, displays and 
advertisements. However, the FNC tried to be as flexible as possible since allied brands often spent 
millions of dollars to support sales of products containing Colombian beans. Some brands’ labels 
featured renderings of Juan Valdez almost as large as that on the Signature line’s packaging. “You 
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may see a premium brand like Juan Valdez being sold for $7–10,andthennearbyamass−marketbrandwithalargepictureofJuan,butitsellsfor3. This is a challenge we need to sort out,” 
commented Londono. Samper echoed that the 100% Colombian program made positioning in the 
premium market more difficult. “Our research shows that our 100% Colombian descriptor plus the 
small Juan Valdez mark boosts customers’ views of quality by 17% in the mainstream market,” he 
stated. “However, at the high end, it lowers that perception. People say, ‘This makes me think of a 
normal supermarket brand.’” 
A second complicating factor with the rollout of the packaged coffee line was the reaction of some 
of the partners in FNC’s 100% Colombian program. Some roasters came to view the Juan Valdez 
Signature brand as a potential competitor for their own offerings. Restrepo recalled that some of the 
most difficult moments in his two years at the FNC had come when he was challenged by brands 
who saw Signature line’s packages encroaching on valuable territory: supermarket shelf space. 
“These are important customers of the FNC and they use much, much more coffee than does the Juan 
Valdez Signature brand,” he said. “I need to tell them that we are exercising our right and our 
mandate to move up the value chain. We believe coexistence is possible because it is a huge market 
with room for everybody. But we in Colombia cannot keep just keep being green coffee exporters.” 
Carlos Ignacio Velasco, a direct report to Restrepo in the commercial sales group, said that the 
introduction of Signature coffees makes dealing with some roasters a more difficult, but not 
impossible, task. “It is, I’ll say . . . ‘material for interesting conversations’ . . . right now. But, we 
haven’t lost any accounts, yet,” Ignacio Velasco said.  
The Coffee Harvest: Picking the Right Opportunities 
The notoriety of the Juan Valdez brand led to no shortage of interested partners approaching 
Procafecol about possible product development and distribution deals. As they assessed potential 
geographic expansion opportunities for both the cafes and the packaged coffee line, Crane and her 
Procafecol team needed to decide if they should stick closely to their well-researched prioritization 
plan or if they should pursue new partners and ideas opportunistically. 
Procafecol’s original plan for the rollout of the cafes, crafted about five years earlier, emphasized 
developing locations in rich countries with entrenched coffee drinking cultures and with significant 
exposure to the Juan Valdez and/or “100% Colombian” marketing programs. This list of markets 
included the United States, Canada, Spain, Germany and the Scandinavian countries. However, the 
early performance of the cafes in the United States and Spain had not met expectations, leaving some 
within Procafecol to question the opportunity prioritization schema as well as the tactics they 
employed for market entry.  
Expansion: Planned or Opportunistic? 
“Our original thinking was that it was best to develop cafes where Starbucks already had 
prepared the ground, so to speak,” commented Crane. “But now, some of our analysis says that it 
might be best to go where Starbucks isn’t.” Juan Valdez cafes dominated the Colombian coffee 
landscape and Procafecol’s very capable operating partner in Ecuador had built a successful 
operation in that country. “Now we are being flooded with all kinds of business proposals for café 
development in Latin American countries,” said Crane. 
Most Latin American countries could be classified as middle-income or developing nations; the 
majority of consumers in this region did not have the kind of disposable income typical of buyers of 
premium coffees in American-style cafes. Many countries were also cultivators of coffee themselves, 
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albeit on a smaller scale than Colombia. “These markets might not have the highest potential for 
packaged coffee sales, either via the Juan Valdez brand or the 100% Colombian program, so the FNC 
would not be as excited about the ‘billboard effect’,” Crane said.  
Crane’s team had recently received an inquiry about marketing packaged coffees from a country 
that could not be further off Procafecol’s strategic roadmap—almost literally. A major South Korean 
retailer wanted to carry Juan Valdez Signature coffees in nearly 1000 locations. While South Korean 
consumers did, indeed, possess among the highest recognition levels of Colombia as a country of 
origin for high quality coffee, they scored at zero in terms of their recognition of Juan Valdez. Still, 
among the countries with 20% or higher growth in annual coffee consumption—South Korea, Brazil, 
China, India, Indonesia, Mexico, Poland, and Russia—South Korea had by far the highest per capita 
GDP and disposable income. Procafecol officials wondered if this country—which possessed a fairly 
high concentration of Starbucks—should be elevated much higher on the list of territories for possible 
expansion of the Juan Valdez cafes. 
East Asia stood out as a tremendous potential market in the opinion of some in the FNC and 
Procafecol. “The big enemy of coffee in the future is the tea culture of Asia. Our next frontier is to 
really defeat the tea culture, as we did in Japan…as you may know Colombia is the largest provider 
of specialty coffees in Japan. People think that tea is so wonderful and healthy, but for us coffee 
growers, tea is evil,” Silva chuckled, tongue firmly in cheek. But there was no doubt that the rising 
incomes and huge populations of Asian countries could make them extremely attractive markets. 
Those managing Colombia’s coffee future debated how opportunities here and in other new markets 
would best be exploited. Procafecol could invest in developing the Juan Valdez brand or Procafecol 
and the FNC could seek out roaster and distribution partners via the 100% Colombian program, a 
much less resource-intensive path. Ignacio Velasco, for one, was dazzled by the potential for 
Colombian coffees in Asia. “In a place like China, we could make instant soluble coffee a priority 
since it is much more economical. I would say we should go it alone and build our own Juan Valdez 
brand there,” he said. Ignacio Velasco cited the huge impact two medium-sized players—California-
based Coffee Bean & Tea Leaf and the UK’s Costa Coffee—seemed to be having on the embryonic 
Chinese coffee market. “There’s plenty of room to develop a brand still. We could paint on a white 
canvas.” 
Procafecol was also assessing the potential of instituting a franchise model. To date, all expansion 
efforts outside of Colombia had been pursued in collaboration with local-market corporations with 
experience in restaurants and/or related industries. Some thought that opening opportunities for 
individual entrepreneurs to develop sites could accelerate the proliferation of the cafes and the 
growth of the Juan Valdez brand as a whole. But, as they discussed a possible change, planners 
within Procafecol knew they had to balance the potential of this strategy with the possibility that 
franchising might compromise the respect for the Juan Valdez brand and the quality of the café 
experience. 
New Product Development: Which Direction?  
Top executives in the ranks of both the FNC and Procafecol were almost unanimous in the view 
that the Juan Valdez brand should be affiliated with more coffee products of various types. But they 
sometimes emphasized different paths, both strategically and technologically, in the development of 
new offerings.  
Some favored an approach which would keep the Juan Valdez brand and FNC/Procafecol 
expansion projects closely tied to familiar food and beverage product segments. “There is so much 
room to grow…so many categories we could move into,” said Samper. He saw many opportunities 
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with products like coffee-flavored ice creams and liqueurs. “These could be developed under the 
Juan Valdez brand, or we could pursue co-branding deals in ways that could expand the prestige of 
Juan Valdez and the partner brand. Our pursuit of opportunities like these would also not be viewed 
as threatening to key partners in the coffee industry.”  
Others within FNC/Procafecol supported investing in different sorts of development initiatives—
projects that emphasized creating new technical competencies. “With resources like Cenicafe and 
others, we have such amazing knowledge of coffee, but, for the most part, it is on the growing and 
processing side,” Londono commented. “Why aren’t we leaders in new formulations for products or 
in innovative packaging or in new brewing technologies?” That sort of path had proven lucrative to 
other players in the industry. For example, over the previous decade, Nestle, the global consumer 
products giant, and Keurig, an American startup, had built successful businesses in portion-pack 
brewing for the home and office environments. The FNC entered this arena later when it decided to 
license the Juan Valdez brand to a mid-sized maker of portion pack brewers based in France for 
coffeemakers sold in Colombia and Chile. However, the possibility of being a leader in new 
technologies by creating more innovations in-house was intriguing to some within FNC and 
Procafecol. 
Flagship or Experiment? 
Most of the Juan Valdez Café locations in the United States and Spain had been struggling for 
nearly two years. Procafecol had opened the cafes only to see its first two high-income markets 
become mired in recession while prices for green coffee were spiking. The Juan Valdez Cafes were 
not alone in feeling the pinch of an economic downturn, global in scale. In 2009, Starbucks closed 
hundreds of locations around the world and reassessed its pricing levels. “Basically, the ‘out of home’ 
coffee industry has been hurt pretty badly everywhere,” said Samper. 
“We bet heavily on Spain, but with the economic crisis and high unemployment there, no one 
wants to spend a Euro more on any goods than they have to,” said Silva. Procafecol was considering 
closing down most of its six cafes in Spain and instead developing small kiosks within the floor plans 
of some of the restaurants run by their Spanish operating partner.  
Attempting to stem the flow of red ink in the U.S. market, Procafecol had already shuttered stores 
in Seattle and Philadelphia. Throughout their short history, the U.S. cafes had exhibited very different 
customer behavior and purchase patterns than the Colombian locations. The average ticket in the U.S. 
sites was significantly less than the purchase per visit in the Colombian outlets. Customers bought 
slightly less food and spent significantly less on clothing and other branded merchandise. Sales of 
packaged Juan Valdez branded coffees represented 18% of sales in the Colombian locations, but just 
5% in U.S. stores. In addition, the design scheme and theme of the cafes did not seem to resonate with 
Americans in the same they did with Colombians. “Colombians became familiar with the brand of 
Juan Valdez as a symbol of our country and a point of pride,” said Londono. “Americans had a very 
different experience; the brand equity there was rooted in a simple, hard-working cafetero. When they 
went to the cafes, they expected to see the mountains . . . the greenery . . . not a modern, hip place. 
They wanted the donkey.” 
Procafecol’s early experiences in the American market showed they might have missed an 
opportunity to increase the appeal of the stores by not focusing the theme more around the coffee 
growers—especially how the Juan Valdez cafes directly impact the livelihoods of hundreds of 
thousands of self-employed farmers. “U.S. consumers like to help; it’s a cultural thing. In Chile, they 
won’t care about the cafeteros. ‘Giving back’ is a big thing for the American buyer, it’s really 
rewarding for them, but it’s not the same with our Latin American consumers,” commented 
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Londono. “The story we’ve had thus far in Latin America has been about being the highest quality, 
the top brand in the world of coffee.” Procafecol managers were considering some adaptations of the 
U.S. strategy and store plan to take advantage of this insight. 
There was some good news on the American front, though; airport kiosks recently opened in 
Miami and New York’s JFK had performed relatively well in spite of the recession. Some in the 
organization felt that that an expanded franchising program might boost the growth prospects in the 
U.S. as well. Procafecol was assessing this possibility. But right now Crane and her team had to deal 
with a very pressing—and high-profile—matter in the American market. 
Juan Valdez’s global flagship store in New York’s Times Square was hemorrhaging cash. The café 
occupied expensive real estate in a neighborhood dominated by high-profile tourist attractions and 
the flagship outlets of firms many times the size of Procafecol and the FNC. Procafecol signed a 
multiyear lease to secure the location. “This store is very expensive to keep open, but it would also be 
very expensive to close,” lamented Crane. 
In spite of the uncertainty around the Times Square store, one thing was certain: the Colombian 
coffee industry was committed to and dependent on the U.S. market, historically by far the largest 
foreign market for Colombia’s coffees. Procafecol would develop a new plan for the Juan Valdez 
Cafes in the U.S., potentially concentrating on smaller formats. The Juan Valdez brand of packaged 
coffees would continue to expand its presence in the country’s retail food outlets. Should Procafecol 
seek to overhaul and streamline the Times Square operation, so that it could continue to serve as a 
center of learning about the U.S. market, as well as a “billboard” for the brand, Colombian coffees 
and Colombia as a whole? Or should they view the flagship store as an experiment that they needed 
to wrap up, having lost money, but having gained knowledge about local tastes and the economics of 
running a café in the world’s largest coffee market? 
Decisions to Make . . . 
After completing their analysis on the state of the international locations of the Juan Valdez Cafes, 
Crane and her team were among the last to leave the office complex that housed the FNC and 
Procafecol. As they exited the office, they passed the Juan Valdez Café just outside. For Crane, the 
sight of the café—bustling, as usual—was a welcome break from her work assessing the 
disappointing results from the U.S. market. She knew there were many pathways to growth open to 
the Juan Valdez brand—a point she would drive home in her meeting tomorrow with Silva on her 
turnaround strategy and growth plan for the Juan Valdez Cafes.  
 
 
 
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Exhibit 1
Colombia Fact Sheet 
 
Population: 44,205,293, ranked 28th in world (July 2010 est.) 
Urban population: 74% of total population (2008) 
Literacy: 90.4% 
Area: 1,138,914 sq km (roughly twice the size of the U.S. state of Texas) 
GDP (purchasing power parity): 401billion,ranked29thinworld(2009est.)GDPpercapita(purchasingpowerparity):9,200, ranked 110th in world (2009 est.) 
Exports: petroleum, coffee, coal, nickel, emeralds, apparel, bananas, cut flowers 
Exports–Partners: U.S. 38%, Venezuela 16.2%, Ecuador 4% (2008) 
Imports: industrial equipment, transportation equipment, consumer goods, chemicals, paper 
products, fuels, electricity 
Imports–Partners: U.S. 29.2%, China 11.5%, Mexico 7.9%, Brazil 5.9% (2008) 
 
Recent economic developments:  
Colombia experienced accelerating growth between 2002 and 2007, chiefly due to improve-
ments in domestic security, rising commodity prices, and to President URIBE's promarket 
economic policies. Foreign direct investment reached a record $10 billion in 2008. A series of 
policies enhanced Colombia's investment climate: President URIBE's pro-market measures; 
pro-business reforms in the oil and gas sectors; and export-led growth fueled mainly by the 
Andean Trade Promotion and Drug Eradication Act. Inequality, underemployment, and 
narcotrafficking remain significant challenges, and Colombia's infrastructure requires major 
improvements to sustain economic expansion. 
 
Source: 
https://www.cia.gov/library/publications/the-world-factbook/geos/co.html. 
 
 
 
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Exhibit 2
FNC Marketing Expenditures, 1985 
 Country 
Budget 
($US) 
Percent of 
Total Budget 
    
 
 
United States 
11,200,000 
52.8% 
West Germany 
2,865,000 
13.5% 
Spain 
1,500,000 
7.1% 
Canada 
1,050,000 
5.0% 
Japan 
1,000,000 
4.7% 
France 
747,000 
3.5% 
Argentina 
677,000 
3.2% 
Denmark 
545,000 
2.6% 
Scandinavia 
540,000 
2.5% 
Other 
1,080,500 
5.1% 
Total 
21,204,500 
100.0% 
    
 
 
Source: 
Juan Valdez: The Strategy Behind the Brand, FNC, 2008, p. 159. 
 
 
 
Exhibit 3
Historical Statistics on the Recognition of Colombian Coffees in the U.S. 
 
1959 
1960 
1961 
1993 
2005 
    
 
 
 
 
 
“Colombia grows the best coffee” 
4% 
11% 
21% 
59% 
53% 
Recognition of Colombia as a coffee origin 
45% 
64% 
75% 
96% 
92% 
    
 
 
 
 
 
Source: 
Juan Valdez: The Strategy Behind the Brand, FNC, 2008, p. 197. 
 
 
 
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Exhibit 4
FNC’s Profit and Loss Statement (in thousand $US) 
 
2009 
2008 
    
 
 
INCOME  
614,196 
646,654 
Coffee Grower Contributions and brand royalties  
63,397 
74,721 
Sales of Coffee and Services  
550,799 
571,933 
    
 
 
COST OF GOODS SOLD   
521,606 
489,081 
    
 
 
GENERAL EXPENSES AND CONTRIBUTIONS 
178,495 
176,790 
Administrative Expenses, legal and consulting fees 
37,368 
38,034 
Research and Others  
7,221 
6,659 
Coffee Grower Support and Social Development  
50,068 
53,063 
Promotion and advertisement 
6,172 
2,595 
Other Selling Expenses  
27,387 
28,506 
Quality control   
4,889 
6,003 
Taxes and Contributions paid  
18,576 
20,534 
Provisions and Depreciation  
21,363 
16,042 
Miscellaneous Expenses  
5,452 
5,354 
    
 
 
OPERATIONAL PROFIT 
-85,906 
-19,216 
    
 
 
OTHER NET INCOME (EXPENSES)  
28,829 
-25,931 
    
 
 
SURPLUS (DEFICIT) OF THE PERIOD  
-57,077 
-45,147 
    
 
 
Source: 
FNC. 
 
Exhibit 5
Global Coffee Exports 
Top Exporting Nations, June 2008–May 2009 
 
Exports by Variety, June 2009–May 2009 
Number of 60-kilo bags 
 
Number of 60-kilo bags 
    
 
 
 
 
Brazil 
30,933,256 
 
Colombian Milds 
11,093,696 
Vietnam 
17,615,741 
 
Other Milds 
22,255,849 
Colombia 
9,910,287 
 
Brazilian Naturals 
29,936,699 
Indonesia 
6,032,111 
 
Robustas 
35,225,687 
Peru 
3,827,398 
 
 
 
Guatemala 
3,574,598 
 
 
 
India 
3,256,217 
 
 
 
Uganda 
3,217,944 
 
 
 
Honduras 
3,109,634 
 
 
 
Ethiopia 
2,061,476 
 
 
 
 
 
 
 
 
Others 
14,973,269 
 
 
 
 
 
 
 
 
Total  
98,511,931 
 
 
 
    
 
 
 
 
Source: 
International Coffee Organization, http://www.ico.org/prices/m1.htm. 
 
 
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Exhibit 6
Juan Valdez in FNC/Procafecol Promotions 
 
Ads featuring Carlos Sanchez as Juan Valdez 
 
 
 
 
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Exhibit 6 (continued)
 
FNC promotional photos featuring Carlos Castaneda as Juan Valdez 
 
 
 
Source: 
FNC. 
 
 
 
Exhibit 7
Procafecol Profit and Loss Statement (in millions of $US) 
 
2006 
2007 
2008 
2009 
    
 
 
 
 
Net Sales 
10.35 
24.35 
38.47 
36.87 
COGS 
4.95 
11.65 
17.51 
15.95 
Gross Margin 
5.40 
12.70 
20.95 
20.91 
Operational Expenses 
3.85 
9.59 
14.52 
14.65 
Admin Expenses 
4.40 
6.66 
6.40 
5.13 
EBITDA 
-2.85 
-3.55 
0.04 
1.13 
    
 
 
 
 
Source: 
Procafecol. 
 
 
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Exhibit 8
Juan Valdez Cafes 
Bogota, Colombia 
Manizales, Colombia 
 
 
Interior of Juan Valdez Café, Washington, DC, USA 
Times Square, New York City, USA 
 
 
57th Street, New York City, USA 
 
Source: 
FNC. 
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Exhibit 9
Branding Elements Utilized by FNC and Procafecol 
 
100% Colombian ingredient brand employed by participating roasters 
 
 
 
 
Juan Valdez Café logo 
Juan Valdez signature soluble 
(instant) coffee 
 
Source: 
FNC. 
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Exhibit 10
Advertising Spending Levels 
 
Advertising for Juan Valdez brand and 100% Colombian Programs ($US million) 
 
Source: 
FNC. 
 
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Endnotes 
 
1 FNC, Juan Valdez: The Strategy Behind the Brand, p. 117. 
2FNC, p. 137. 
3 “Roaster” referred to the company or brand that processed raw coffee beans into the whole bean or ground 
product purchased by consumers. For decades, the most well-known roasters were brands such as Folgers, 
Maxwell House and Yuban, which were primarily sold in supermarkets. As the coffee industry in the U.S. 
evolved, café operators such as Starbucks began to be more prominent as roasters. Roasters usually created 
blends containing many different types of coffee beans, but as consumers became more informed about coffees, 
the companies would offer specialty products, often at premium prices. 
4 FNC, p. 145. 
5 FNC, p. 197. 
6 FNC, p. 162 
7 According to Luis Samper, in 1990, a surplus year on many global coffee exchanges, Colombian coffee sold 
for 96.57 U.S. cents per pound while other coffee averaged 90.21 cents. In 2009, when stocks of Colombian coffee 
were limited due to weather conditions, Colombian green coffee was valued at 177.28 cents while the selling 
price for other beans was 125.35 cents per pound.

Juan Valdez: Innovation in Caffeination 
 
The meeting had run longer than expected, and the coffee server—or señora del tinto—had just 
made her third appearance bearing a tray of small cups. Catalina Crane was initially inclined to beg 
off the third cup, but thought better of it. That kind of thing was rarely done in the halls of the 
organization that guided the coffee industry of the country of Colombia. 
Crane and her team at Promotora de Cafe Colombia (Procafecol) were the stewards of the famous 
Juan Valdez brand. While Juan Valdez had been used to endorse other giant coffee brands for 
decades, in recent years Procafecol had rolled out its own product lines and even a chain of cafes—
and Juan was finally front and center. 
Procafecol had experienced many successes since its creation in 2002, but a few dark clouds were 
looming by the late summer of 2009. Crane was preparing her presentation to Gabriel Silva, the CEO 
of the Federcación Nacional de Cafeteros (mostly referred to as the “Colombian Coffee Growers 
Federation” in English-language publications). Silva, the main architect of the brand expansion 
strategy that had led to the creation of Procafecol, served as the chairman of the board of the 
organization. The numbers from many of the U.S. locations of the Juan Valdez Café were running 
behind projections, and the Procafecol team was considering a significant retrenchment. Given the 
implications for the high-profile Juan Valdez brand and the coffee industry of Colombia, Crane knew 
that the caffeine from that third cup might come in handy as she nailed down the numbers.  
Establishing a Federation and Building a Character 
In the late 19th and early 20th centuries, Colombia’s coffee sector was dominated by large 
plantations (see Exhibit 1 for background information on Colombia). Instability in the global coffee 
market, however, wounded many of these large players. During the 1920s and 1930s, smaller farms 
controlled by resident planters came to dominate Colombia’s coffee industry, a structure that proved 
more capable of adjusting to the vagaries of the international coffee market.1 Still, leaders in 
government and business felt that they needed to invest even more in the stability and growth of this 
sector, which was critical to the economy of Colombia yet vulnerable to the effects of weather, plant 
disease, changing tastes and wild swings in commodity markets.  
In 1927, the Federacion Nacional de Cafeteros (FNC) was established to promote the interests of 
coffee growers, conduct scientific research in disciplines affecting the cultivation of coffee, and 
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disseminate information on effective agricultural and business practices. Exporters at the time paid a 
tax of 10 cents on each 60-kilogram bag of Colombian coffee beans to support the federation.  
In the following decades, the FNC promoted quality standards for exported coffee, attempting to 
enhance the image of Colombia’s coffee in an international market dominated by Brazil. Though 
coffee was viewed largely as a commodity in important markets like the United States, consumers 
were beginning to develop views on the quality levels of coffee from different regions. In 1959, due in 
part to early promotional efforts by Brazil, 71% of Americans believed Brazil produced the highest-
quality coffee in the world, with only 3.7% citing Colombia.2  
The FNC formulated a strategy to boost the demand levels for Colombian coffee while positioning 
it as a superior product worthy of a price premium in key markets. They created marketing programs 
that attempted to deepen relationships with coffee roasters3 that would emphasize “100% 
Colombian” brands, products with coffee beans solely from Colombia. As part of its promotional 
campaign, the FNC sought to develop a character to represent Colombia’s coffee producers. The 
American advertising firm, Doyle Dane Bernbach (DDB), created a fictional Colombian farmer to 
serve this purpose. Adorned with an aguadeño hat and a satchel known as a carriel—accessories 
commonly worn by farmers in the country’s coffee growing regions—the new character was meant to 
convey a sense of pride, humility and hard work. Thus was born Juan Valdez. 
“Colombia was in the midst of yet another coffee industry crisis in the late 50’s, so we needed this 
differentiation strategy. But there was intense debate within the federation, as some asked, ‘How can 
we sell our industry to the world by projecting ourselves with the image of a peasant?’,” said Silva. 
“A lot of people wanted to sell our industry to the world by showing we were modern and 
sophisticated.” Others within the FNC felt that it was risky to raise the profile of Colombian coffee 
through such a campaign given its potential to create conflict with major coffee brands – the buyers 
of Colombia’s beans.  
But the FNC began to reap major benefits from the awareness generated by the advertising 
campaign built around the humble campesino, or farmer. In 1959, only one minor American coffee 
brand was tagged with a Colombian origin. By 1963, 26 brands boasted a label of “100% Colombian” 
and by 1970 that number had jumped to 53.4 Within just a few years of the launch of the Juan Valdez 
TV and print campaign, 21% of Americans viewed Colombian coffee as the best in the world.5 
Becoming an “Ingredient Brand” 
In the 1970s, coffee consumption was on the rise in many countries around the world and 
Colombia responded with increased production. One important country ran counter to the general 
consumptions trends: the United States, the most important market for Colombian coffee. Soft drinks 
had supplanted coffee in many occasions for beverage consumption, and they were the drink of 
choice for consumers in younger demographic segments.  
But the era also presented opportunities for the FNC. During the “Me Decade” of the 1980s, 
conspicuous consumption of high quality offerings was all the rage—and buyers were willing to 
spend more for these products. In order to deepen its relationships with top-selling brands in the U.S. 
and to support price premiums for products containing Colombian coffee, the FNC introduced a new 
element to the marketing program built around the now-iconic Juan Valdez. The character’s 
mustachioed face had become ubiquitous on television and in print advertisements in the U.S. and 
other selected markets, generating high awareness levels (see Exhibit 2 for 1980s promotion and 
advertising expenditures by country). The image of Juan Valdez (along with that of his trusty mule, 
Conchita) would now be incorporated into a new logo that coffee brands could place on their 
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packaging to denote that their products contained 100% Colombian beans. Some in Colombia’s coffee 
industry were worried that the new “ingredient brand” program might sow the seeds of conflict with 
large customers. “In our archives, I’ve seen the letters from the head of Maxwell House [one of the 
largest U.S. brands] from the 1980s saying, ‘We will never use this 100% Colombian brand’,” said 
Luis Samper, director of the FNC’s Intellectual Property group. 
The ingredient brand program significantly impacted several parts of the FNC’s marketing 
program. By 1989, 66% of American consumers stated that Colombia produced the best coffee, while 
16% cited Brazil.6 (See Exhibit 3 for historical statistics on the recognition of Colombian coffee in the 
United States.) When compared with competitive products from South and Central America, the 
price premium enjoyed by Colombia’s standard export green coffee beans—referred to as “Usual 
Good Quality” (UGQ)—was significant, but varied by year depending on market conditions.7 “The 
ingredient brand strategy was a major success, but it was really limited to the big cans of coffee that 
were sold in the supermarkets,” said Silva. “That kind of product represents one mode of 
consumption. The program was not as conducive to capitalizing on growth in other, newly emerging 
forms of coffee consumption.”8 
The New Coffee Revolution 
Almost 4,100 miles to the north, in Seattle, Washington, another rising coffee brand began to 
impact the fortunes of Juan Valdez, the FNC and the world coffee industry as a whole. Throughout 
the 1990s, Howard Schultz worked to transform Starbucks, for years a local haunt near Seattle’s Pike 
Place market, into a national and then global coffee powerhouse. Schultz sought to reinterpret the 
Italian coffee bar experience for the modern consumer. Though most Americans seemed content for 
decades with drip-brewed coffees in a very limited variety of flavors, Schultz banked on the notion 
that people would pay double or triple normal coffee shop prices for high quality espresso-based 
drinks served in a welcoming environment.  
In the course of a decade and a half, Starbucks essentially created a “coffee culture” in the United 
States and transformed coffee purchase and consumption patterns in dozens of countries. After going 
public in 1992 with 165 stores, Starbucks grew to over 6,400 locations by 2003 and around 16,000 
stores by 2009, reaching sales of $9.8 billion.9 The ubiquitous cafes were where the action was in the 
coffee industry—and Juan Valdez was on the outside, looking in. Starbucks educated consumers 
about coffee from other regions in Latin America, Africa, and elsewhere, even featuring premium 
blends that connoisseurs could take home to brew in their own kitchens. “Starbucks left Colombia an 
origin relevant for the ‘mainstream’ segment of the coffee market and not for the specialty segment, 
but it was obvious that the profitable segments of the market were specialty and gourmet,” said 
Samper. “Our coffee seemed less exotic and fashionable.” 
The changing demand-side of the burgeoning specialty coffee market had some surprising effects 
on the supply-side of the industry. With the expansion of Starbucks and other high-end chains, 
coffee-growing countries increased the amount of land under cultivation for both the bulk beans and 
the specialty varieties needed to serve the growing base of aficionados. Starbucks could be selective 
about which varieties it featured on its menu since its brand had become the main endorser of taste 
and quality. “Our industry and our coffee farmers became less important parts of the value chain in 
coffee,” commented Alejandra Londono, Marketing Director for Procafecol. “In 1997, coffee was sold 
at retail for $4.80 per pound and producers received 28% of that price and roasters got 61%. By 2003, 
coffee was selling for $3.70; producers got 13% and roasters made 76%. This was not a good trend for 
Colombian coffee farmers.” 
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Another Crisis, Another Opportunity 
Colombia’s coffee federation had built a dominant ingredient brand and partner network in 
market segments that were stagnant at best and showing signs of contraction. Though their beans 
were viewed as the highest quality for decades, hundreds of thousands of Colombia’s farmers were 
growing coffee varieties that were approaching commodity status. In the early 2000s, these new 
industry dynamics—combined with the lowest green coffee prices on record—were inflicting pain 
throughout the coffee-growing, processing and marketing sectors in Colombia. The FNC, and indeed, 
the country, needed a new approach. 
In 2001, the Colombian government assembled a commission composed of leaders from the public 
and private sectors to examine the competitive situation of the coffee industry and map out new 
potential strategies. Gabriel Silva, a former presidential advisor, a former Ambassador to the U.S. 
and, at the time, a private equity investor, was asked to serve on the commission. “We had a 
collection of people with close relationships to the industry, but no one with interests in the 
industry,” stated Silva. “Over a period of six months, we had beautiful debates . . . wonderful 
discussions. The process was quite convergent. In the end, our recommendations were quite precise. 
We didn’t just assemble general views of a mission or a vision.” 
The group’s strategy was captured in “The Green Book,” an expansive strategic analysis and 
action plan that called for a significant revamp of the FNC and the entire Colombian coffee industry. 
Some major tenets of the plan included capitalizing further on the Juan Valdez brand, seeking out 
opportunities to create new value-added products, and taking a role in parts of the value chain and 
distribution channel traditionally left to other players. 
Even though the commission had developed a strong consensus on the federation’s strategic 
direction, it remained to be seen who would lead the FNC as it executed its new plan. “The previous 
CEO had resigned. No one wanted the position because the crisis was so big. The only one ready, 
willing, and motivated—and convinced we could implement this vision effectively—was myself,” 
said Silva. By the time Silva assumed the helm of the FNC, many of the board members and officers 
of the organization had also departed. Silva wanted to test the commitment of the managers and 
staffers who remained. “I used a little trick to measure people’s capacity to change. I immediately cut 
my pay by 10% and then asked others to take a similar pay cut to show their belief in the future of the 
organization. It was a good indicator of the depth of their commitment,” he recalled. “I had to ask 
three of the top 15 executives to leave because I didn’t fully believe the sincerity of their willingness 
to change and innovate.” Before Silva arrived, the average service time for executives in the top tiers 
of the federation was almost 30 years. Within a few years, the average tenure of managers in the top 
ranks had decreased by nearly two decades, with new leaders such as Crane (who had previously 
served as a Vice-Minister of Finance in Colombia’s government) and Samper occupying key posts. 
Silva also streamlined the FNC by selling businesses he viewed as not core to the mission and 
strategy laid out in “The Green Book.” Over a few decades, the FNC had channeled resources into 
purchasing and/or developing an airline, a shipping company, ports, insurance companies and 
banks. Though they kept a small investment in port operations, Silva and his team profitably 
disposed of the other ventures within a few years, focusing the FNC onto the evermore-challenging 
tasks of creating and marketing coffee products within the international marketplace. 
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Up to the Challenge? The FNC and Colombia’s Coffee Industry 
Part industry association, part marketing company, part public works organization, the FNC was 
a unique not-for-profit hybrid (see Exhibit 4 for the FNC’s income statement). The FNC at times 
collaborated with and at times competed against the likes of roaster/retailers such as Starbucks and 
consumer products giants like Sara Lee and Nestle. Its roots in Colombia were deep, without 
question, but leaders in the coffee industry and government hoped the organization could extend its 
reach as well. 
The Grassroots Level: Serving the Coffee Farmers 
In the midst of the FNC’s sales of non-core assets, Silva tried to drive home his philosophy to any 
within or outside the organization who had forgotten about the key mission of the federation. Said 
Silva, “We created a lot of goodwill with our constituency by simply saying, ‘First come the coffee 
growers’.” Samper emphasized why this simple mantra was so critical to the FNC’s organizational 
values, branding and strategy. “Of course, you want to be great at innovation, distribution and brand 
creation in the coffee industry, but there is one thing we can’t get away from: we represent 
Colombian coffee growers. They are the ‘manufacturers’ and they have to be the ‘manufacturers.’ You 
can’t outsource the growing of coffee to China. It will be done on our small farms by our farmers.” 
Well over half a million cafeteros were engaged in the cultivation of coffee in Colombia, a country 
of 44 million. Most Colombian coffee farms were small scale; 95% of plots under cultivation were 
below five hectares (around 12.5 acres) and were usually developed on hillsides, making them not 
very conducive to modern, mechanized agricultural techniques. “Only 4,000 of our growers have 
more than 10 hectares in coffee. In some areas of Brazil, the plantations have 10 hectares in their 
backyards and then the farm starts,” quipped Samper. Almost all of Colombia’s cafeteros picked their 
coffee beans by hand. The proximity of Colombia’s coffee growing zones to the equator meant that 
the country experienced optimal growing conditions—in terms of temperature, hours of sunlight and 
precipitation—twice a year, according to the FNC. One branch of a coffee plant might have ready-to-
harvest coffee “berries,” immature berries, flowers and buds simultaneously. A Colombian farmer 
might have to pick from an individual plant eight or more times throughout the year in order to 
maximize production. Coffee plantations in countries located in tropical latitudes a few thousand 
miles north or south of the equator experienced one main growing season. Large, flat plantations 
were prevalent and mechanized harvesting was much more common in leading exporting nations 
than it was in Colombia (see Exhibit 5 for coffee production by country). 
Once a Colombian farmer had harvested the ripe berries from his fields, he would process them 
on his property in a machine that removed the reddish skin and thin layer of fruity pulp from the 
hidden bean. The beans were then dried—usually in the sun—and another thin layer of material 
called “parchment” was stripped away from the bean, at this point in the production cycle called 
“green coffee.” Though experienced cafeteros would often spot and discard in the field coffee berries 
that had been compromised by pests, they would also conduct a quality check of the dried product 
and separate out any disfigured beans (which might be roasted in a farm family’s oven for personal 
consumption). The FNC enforced stringent quality standards on any green coffee meant for export. 
Once they had dried their beans, farmers would transport their products to the nearest city or 
town. Large operators might make this trek with many 60-kilogram bags, but small farmers might 
journey to the market with less than one bag, especially if they needed cash urgently. “Once they are 
down the hill and in town, the farmers are price-takers. This is a cash business for them and most 
need to sell their products quickly,” said Juan Restrepo, the Federation’s Commercial Manager. “That 
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is why it is so critical that the FNC be a credible market actor and set a predictable floor for the 
pricing.” The FNC operated in around 500 locations for raw coffee bean sales scattered throughout 
the country. The federation purchased approximately 30% of the country’s coffee to deliver a 
“minimum price signal” to farmers and private purchasers alike.  
The FNC had 15 regional offices in the major coffee growing zones. These offices supervised a 
1,500-person agricultural extension service—through which experienced farmers and other educators 
would pass on farming and environmental management techniques to cafeteros—and administer 
other aid, service and infrastructure programs supported by the FNC and government agencies. For 
example, Pereira, a city of 576,000 located 109 miles west of Bogota, hosted the FNC office that 
supported Colombia’s seventh largest coffee-growing region, accounting for around $170 million in 
green coffee sales. The Pereira office represented approximately 21,000 coffee-growing families with 
its staff of 80, including 50 field-based extensionists. The Pereira office utilized $2.9 million in FNC 
funds, but also received the equivalent of several million dollars in additional resources from national 
and local government entities as well as international non-governmental organizations in order to 
help administer other programs. 
The Politics of Coffee 
Though on one hand the FNC aimed to be a nimble and sophisticated player in the competitive 
coffee market, at its base it was still a democratic institution composed of over half a million coffee 
farmers. And whether the farmer measured his production by the ton or by the bag, the FNC adhered 
strictly to its values of “one man, one vote.” Indeed, a 2005 promotional video geared toward 
attracting new roasters to the “100% Colombian” program trumpeted the role of the FNC as a 
“democratic stronghold” for all of Colombia.  
Farmers elected representatives to local and regional boards that oversaw on-the-ground 
programs such as coops, extension services and aid programs. The cafeteros also voted for candidates 
to represent them in the National Coffee Growers Congress, a 90-member body charged with 
selecting the FNC’s CEO, approving strategic plans and reviewing yearly budgets. The Board of 
Directors of the FNC was composed of individuals submitted by the local boards of each coffee-
growing region and then approved by the Congress. While most Board members were coffee farmers, 
some were esteemed individuals from the region—such as former cabinet ministers—whom the 
members of the regional board thought would best represent the interests of growers in that area. The 
Board of Directors was responsible for overseeing most of the outward-facing aspects of the 
Colombian coffee industry, including international sales, partnerships with leading coffee roasters 
and the Juan Valdez branding campaign. 
The Board also oversaw the Fondo, a reserve of monies collected via a six-cent fee on every pound 
of Colombian coffee shipped overseas. The FNC administered the Fondo, investing a portion of it on 
behalf of the cafeteros and also using it to support its coffee bean purchase operations and rural 
development programs. Over the last several decades, these funds had enabled significant 
environmental, road-building and electrification projects in rural areas. The FNC also supported 
educational programs for the children of cafeteros and the spread of information technology into the 
hinterlands of the coffee-growing zones. The tens of millions of dollars allocated by the FNC were 
further leveraged by additional contributions by the Colombian government, private foundations 
and NGOs. 
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Selling the Beans 
The FNC played various roles in the marketing of Colombia’s green coffee all over the world. It 
operated offices in cities including New York, Amsterdam, Tokyo and Beijing. For instance, FNC 
representatives would encourage major coffee brands to participate in the “100% Colombian” 
program and develop local marketing campaigns. Restrepo’s group brokered deals with major coffee 
players around the world for beans procured by the FNC through the purchase guarantee program. 
Trends such as the rise of Starbucks had made end-consumers more discerning, and roasters needed 
new tailored solutions to please them. “We used to sell coffee by the shipping container, now we 
often have to sell it by the bag,” said Restrepo. Brands around the world sought certain taste profiles 
for their proprietary blends, balancing levels of acidity, robustness and flavor undertones to create 
distinctive products. Some roasters sought beans grown via certified organic methods or from a 
certain region of the country to differentiate their brands within the “100% Colombian” program. In 
2002, around 4,000 Colombian coffee farms had received some sort of environmental or other 
certification; by 2009, the number was nearly 80,000. Restrepo and his team used their expansive 
knowledge of the country’s coffee-growing regions and even individual farms in order to help buyers 
develop unique blends and build marketing programs.  
Even though these efforts led to price premiums for Colombian green coffee and deeper 
relationships with roasters, these tailored marketing and sales programs were not without their 
detractors within the FNC. “Our board was used to a simple concept: ‘100% Colombian Coffee.’ 
Period. It was difficult for some to acknowledge that there was more value to capture,” said Restrepo. 
“We had a successful, unified marketing message for decades. But, some thought that if Colombia 
was touted as a ‘land of coffees’ rather than a ‘land of coffee’ we risked the effort we had already 
exerted on branding.” 
The Art and Science of the Coffee Industry 
Though the average consumer might not know it, there was a great deal of science behind a cup of 
Colombian coffee. The FNC had supported research into agricultural best practices and 
environmental trends since its earliest years. Its Cenicafe research complex near Pereira managed 
dozens of programs on the science of growing and processing coffee. The 12,500 square-meter 
complex housed over 180 professionals, including biologists, chemists, agronomists, meteorologists 
and geologists—and even a few “cuppers,” coffee tasters with some of the most discerning palates in 
the world. Since protecting the value of the “100% Colombian” mark was so critical to the federation, 
a number of researchers focused on analyzing the distinctiveness of Colombian coffee. Cenicafe 
scientists employed chromatographs to break down the chemical composition of beans from around 
the world and genetic research tools to analyze the genome of Colombian coffee plants. 
Environmental issues were also of paramount concern to Cenicafe researchers. Climatic changes had 
already impacted the Colombian coffee industry, turning some traditional growing regions into 
zones of marginal productivity. Cenicafe investigated new strains of coffee that were more tolerant of 
the evolving climatic conditions and studied how the environment affected pests, plant diseases and 
other flora and fauna in coffee-cultivating zones. 
The FNC’s Intellectual Property group also spearheaded many research projects designed to 
showcase “our profound knowledge of our product,” according to Samper, the leader of the group. 
The FNC had created “bean track” software that helped roaster clients and consumers ensure that 
they were getting coffee from the Colombian regions or communities they intended to buy from. 
Consumers, for instance, could type a code from a package into an FNC website and learn more 
about the beans that went into their coffee. For some of the coffee-growing regions, Samper’s group 
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had commissioned multimedia virtual tours that allowed coffee connoisseurs to see working farms 
and learn more about growing practices in those areas. “Viewing this kind of content would appeal 
to people in the same way learning about the wine-growing regions of France or Napa Valley is 
interesting to wine-lovers,” commented Samper. He envisioned a network of terminals that would 
allow consumers to view these vignettes in cafes and gourmet food shops. The Intellectual Property 
group also investigated issues such as the carbon footprint of the Colombian coffee industry and 
studied strategic trends in the global coffee industry.  
As a part of its attempt to add value to Colombia’s coffee exports, in the 1960s the FNC developed 
a facility to freeze dry coffee. Expanded many times in succeeding decades, the facility, in Caldas 
province west of Bogota, had become one of the largest producers of soluble coffees in the world and 
a leader in R&D on products and manufacturing techniques. Though the FNC did produce its own 
niche soluble coffee brand called Buendia, nearly all of the plant’s capacity was committed to export 
products, primarily private label coffees for retailers such as Walmart and other players in Europe, 
Russia and Asia.  
The New Juan Valdez 
In 2006, the man who had portrayed Juan Valdez for 37 years, Carlos Sanchez, handed over the 
Conchita’s reins to a new Juan. Sanchez had appeared in nearly 100 commercials and even made a 
cameo in the Jim Carrey movie Bruce Almighty, delivering the perfect cup of coffee to the God-like 
Bruce. During Sanchez’s tenure, Juan Valdez had become one of the most recognized brands in the 
world, receiving a citation in 2005 from Brandweek as the top U.S. advertising icon, sharing the honor 
with the Geico Gecko and beating out the likes of Ronald McDonald and the Energizer Bunny. Like 
Sanchez, the new Juan Valdez, Carlos Castaneda, was a real working cafetero before stepping into 
this role of a lifetime, representing his profession, an entire industry, and, indeed, his country (see 
Exhibit 6 for photos of portrayals of Juan Valdez). 
Procafecol: Raising Juan’s Profile 
The FNC had successfully managed one of the world’s iconic advertising characters for decades, 
but Silva felt even stronger marketing capabilities would be needed if Colombia were to achieve the 
ambitious goals laid out in “The Green Book.” In 2002, a new legal entity called Promotora de Cafe 
Colombia (Procafecol) was created to manage all consumer-facing branding and marketing activities 
internationally (see Exhibit 7 for financial information on Procafecol). Procafecol was initially staffed 
almost entirely by FNC veterans and was co-located in the office complex with the remaining 
elements of the FNC. Shares in Procafecol were offered to members of the federation in 2007; 22,567 
individual coffee growers bought stock in the new entity, raising a total of approximately $9 million 
at a valuation of around $60 million.10 The remaining shares were held by the World Bank’s 
International Finance Corporation and the FNC. 
Silva aimed to have Procafecol accelerate the evolution of the Juan Valdez brand. He hoped Juan 
Valdez would soon be a full-fledged product and service brand linked to offerings developed, owned 
and marketed by Procafecol. The expanded use of Juan Valdez products would allow Colombian 
coffee to “conquer every occasion,” according to Silva. “We can’t compete on price with other 
producers. We’ve needed differentiation and innovation. We recognized we had created a huge asset, 
one of the most well-regarded brands in the world,” he said. “But our differentiation was no longer 
sufficient to capture the margins we needed. Our ‘ingredient brand’ was associated with limited 
types of consumption in the middle tiers of the market.” By owning a larger portfolio of products and 
services, Colombia would participate in more parts of the industry’s value chain. Samper 
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commented, “Our coffee growers need to benefit more from the use of their coffees. We need to 
combat what we call ‘The Cartagena Syndrome,’ where our coffees suddenly command huge margins 
once some other industry player has bought the beans from us and shipped them out of the Port of 
Cartagena.”  
Creating Cafes 
The familiar face of Juan Valdez was about to become even more familiar to coffee lovers in key 
markets. In 2002, Procafecol opened the first “Juan Valdez Café” at a location in Bogota’s 
international airport. At the ribbon-cutting ceremony, Alvaro Uribe, the President of Colombia, 
announced to “Juan” (Carlos Sanchez) and an assemblage of Procafecol and FNC officials, “Juan, you 
thought that you had left a legacy . . . [but] now you have to start growing again.” President Uribe 
also expressed a hope that the cafes would become a huge business opportunity for the Colombian 
Diaspora all over the world. “We received about 4,000 applications from Colombian expatriates after 
that,” said Londono. 
Procafecol planned to site Juan Valdez Cafes primarily in developed, western nations with 
entrenched coffee-drinking cultures. Markets that had been exposed to Juan Valdez through 
significant advertising campaigns, such as the United States and Spain, would be at the top of the 
priority list. Though most consumers in Colombia were not familiar with the Juan Valdez brand—the 
character had not been used in major domestic marketing campaigns—the team planned to develop 
the first ten cafes in Colombian cities in order to test and refine the concept. 
Executives within Procafecol believed that though they had much of the expertise needed to make 
the Juan Valdez Café successful, they would have to partner with outsiders to bring in key 
capabilities. “We knew how to sell green coffee, but we didn’t know how to sell cappuccinos,” said 
Crane, who transitioned from being the CFO of the FNC to the CEO of Procafecol in 2008 upon the 
departure of the previous CEO, who had come from the Colombian beer industry. An experienced 
international retail consulting and architecture firm designed the identity and floor plans for the early 
stores. Procafecol also planned to partner with retail and restaurant operators in international 
markets who knew the economics of food and drink operations and also possessed specific 
knowledge of local regulations, culture and tastes.  
Juan Valdez Cafes would be “American-style cafes,” which meant they would emphasize speedy, 
dependable service and deliver their products in convenient paper cups that could be taken on-the-
go. They would be situated mainly in high-traffic, prestige commercial and retail districts, sometimes 
incorporated into existing developments and sometimes built as standalone facilities (see Exhibit 8 
for photos of early locations). Commenting on the design of the cafes, Londono said: “We wanted 
repeat consumers, so we had to avoid a decor that would be perceived as ethnic, a type of ‘poncho 
and sombrero ambiance’ that would justify only a one-time visit. We had to be modern, but at the 
same time we wanted to show consumers our roots, that this is the Colombian coffee growers’ 
business owned by the growers themselves.”  
The menu for a Juan Valdez Cafe was similar to that of a Starbucks, though a bit more focused. 
The Juan Valdez Cafe would offer several varieties of distinctive Colombian coffees and other drinks 
like cappuccinos, mochas and hot chocolate, but not teas. The stores also offered a limited food menu, 
including some hot breakfast sandwiches. 
The drink menu utilized only beans grown in Colombia, which required a bit of tweaking to 
traditional barista techniques and recipes. Colombia’s coffees were exclusively of the mild Arabica 
varietal, while espresso was customarily brewed from the stronger Robusta family of coffee beans. 
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Since drinks like cappuccinos, mochas and macchiatos were traditionally based on espresso, Juan 
Valdez baristas needed to take some special measures in order to have the milder Arabica grind 
emulate regular espresso in these drink recipes. 
Everybody Loves Juan 
The rollout of the initial Juan Valdez Cafes in Colombia was very successful, surpassing the 
projections of Procafecol management. The average ticket in the stores was higher than anticipated, 
with robust levels of food orders and impressive sales for Juan Valdez branded merchandise such as 
T-shirts and mugs. “Even though Colombians weren’t very familiar with the Juan Valdez brand 
previously, they really came to view these cafes as a source of national pride,” said Crane. The 
positive results encouraged Procafecol to dramatically bolster their domestic expansion plans even as 
they laid the groundwork for their international thrust.  
Going it alone in the café business had not always been the plan for the Colombian coffee 
industry. Before the advent of the Juan Valdez Cafes, some within FNC had hoped that Starbucks 
would be the venue to promote Colombian coffees at the retail level in major markets. “I went to 
Starbucks and offered them an alliance, a ‘Colombia Corner’ in their stores,” recalled Silva. “We 
needed to get the message about coffees of Colombian origin to this new consumer without 
intermediaries.” The talks with Starbucks proved unfruitful. 
Procafecol launched its first stores in the United States in 2004. It planned to develop around 50 
cafes in a three-year period, capitalizing on Americans’ familiarity with, and affinity for, the Juan 
Valdez brand. Times Square was selected as the site for the U.S. flagship store. The café contained 20 
tables and was built with premium fixtures and materials, contributing to a build-out expense that 
was probably 20% higher than that of a prestige Starbucks location, according to Crane. Other early 
U.S. locations—including Philadelphia, Washington DC, Miami, and Seattle—also featured premium 
décor and fixtures. 
In Spain, another large, high-income market with a great deal of familiarity with the Juan Valdez 
marketing program, Procafecol assessed several interested candidates and eventually decided on an 
operating partner that ran quick-service restaurants throughout the country. Latin America also 
emerged as fertile ground for cultivating the cafes. In Chile and Ecuador, Procafecol decided to 
opportunistically launch Juan Valdez Cafes after experienced partner candidates approached them. 
In Chile, the owner of a chain of department stores became the local operating partner. Ecuador, 
though not a high-income country, presented an intriguing opportunity because of the interest of a 
particularly capable local operating partner, a firm that ran dozens of KFC franchises. “Our early 
Latin American expansion opportunities presented unique challenges because consumers in those 
countries were not familiar with the character. The Juan Valdez brand was born there as a cafe, not 
through an ad campaign,” commented Londono. 
The cafes not only provided a venue to earn revenues via the direct sale of prepared drinks, food, 
packaged coffee and other merchandise, they also afforded the opportunity to promote Colombia and 
its unique coffee industry. “Each location was like a billboard for our industry. Even more than that, 
we saw real opportunities to educate customers about the importance of knowing the place of origin 
of the coffees they consume and the growing practices of the farmers,” said Samper. “We could really 
use the cafes to disseminate information through point of purchase displays, point of sale 
publications or even interactive, Internet-enabled kiosks.”  
In the early years of the Juan Valdez Cafes, Silva was pleased with the growth trajectory and the 
halo effects of the shops. “If you measure from the time Schultz took over Starbucks, Juan Valdez 
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cafes actually grew faster. But, our goals are stated in terms of numbers of stores, not profit. We want 
a sustainable operation, but most of all, we want a ‘footprint.’ We have to combine a business mission 
with an origin-branding mission,” Silva commented. The FNC’s Fondo received a direct financial 
benefit from the cafes: a five percent royalty on all products sold. According to Silva, the FNC also 
attributed several beneficial spillover effects to visibility created by the expansion of the cafes. All 
told, according to the FNC, interest in premium Colombia coffees grew and exports of specialty 
coffee beans increased nearly fivefold in five years, leading to millions of dollars in incremental 
revenue for growers.  
Coming to a Supermarket near You . . . 
With its café development strategy underway, Procafecol launched a line of Juan Valdez-branded 
ground coffees to be sold within the outlets. Though the face of Juan Valdez had been a part of the 
“100% Colombian” mark for years, this would be the first time that a coffee product would bear the 
familiar visage in large form on the front of the package and employ the popular character’s name as 
the product brand (see Exhibit 9 for branding elements utilized by FNC and Procafecol). Three and a 
half years after its launch, the “Juan Valdez Signature” brand of premium coffees also started to 
appear on supermarket shelves in select countries, next to brands from consumer product companies 
that were major purchasers of Colombian coffee beans. 
Though television commercials featuring the character Juan Valdez were ubiquitous in the 1970s 
and 1980s (see Exhibit 10 for advertising spending levels on the Juan Valdez character/brand and 
Café de Colombia as a whole), Procafecol needed to count on a different kind of promotional plan to 
support the new Juan Valdez Signature line of packaged coffee. “We plan on developing a feedback 
loop to create demand for the coffees. Our coffee shops will drive awareness for the brand and for 
our packaged products, and vice versa,” said Crane. 
In 2007, Walmart, the largest retailer in the world, approached Procafecol about placing the 
product on the shelves of some of its stores. “The line we launched for them is doing reasonably well, 
but it frankly does not help the positioning as a premium brand,” stated Crane. “It’s difficult for us to 
maintain the right price level in the Walmart system.” By 2009, roughly 2,300 outlets in eight 
countries carried the Juan Valdez Signature line of packaged coffees. 
Procafecol experimented with another beverage product in their cafes and other retail channels in 
2006. A line of coffee-based colas seemed like it would be a strong fit with the brand and resonate 
with customers, given the growth of both ready-to-drink coffee products and energy drinks such as 
Red Bull. However, Juan Valdez Cola did not take off like expected in Colombia. “This was a ‘baby’ 
that I really loved a lot, but it had to be sacrificed,” said Silva. “I was enamored with the idea of 
taking part of the market from major soft drink brands. We played with it for about three years, but 
couldn’t make it work.” 
Two main issues surrounding the future of the Juan Valdez Signature brand concerned some 
within Procafecol and the FNC. First, some felt that if the Juan Valdez brand and the 100% Colombian 
coffee program both continued to expand, consumers might experience a great deal of confusion. The 
brand symbol for the Procafecol-controlled product was very similar to the mark employed by 
dozens of coffee companies around the world to show that their offerings contained only Colombian 
beans. Samper’s IP Group issued a style book to all participants in the 100% Colombian program, 
guiding them on the use of the mark, including size, color and placement in packaging, displays and 
advertisements. However, the FNC tried to be as flexible as possible since allied brands often spent 
millions of dollars to support sales of products containing Colombian beans. Some brands’ labels 
featured renderings of Juan Valdez almost as large as that on the Signature line’s packaging. “You 
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may see a premium brand like Juan Valdez being sold for $7–$10, and then nearby a mass-market 
brand with a large picture of Juan, but it sells for $3. This is a challenge we need to sort out,” 
commented Londono. Samper echoed that the 100% Colombian program made positioning in the 
premium market more difficult. “Our research shows that our 100% Colombian descriptor plus the 
small Juan Valdez mark boosts customers’ views of quality by 17% in the mainstream market,” he 
stated. “However, at the high end, it lowers that perception. People say, ‘This makes me think of a 
normal supermarket brand.’” 
A second complicating factor with the rollout of the packaged coffee line was the reaction of some 
of the partners in FNC’s 100% Colombian program. Some roasters came to view the Juan Valdez 
Signature brand as a potential competitor for their own offerings. Restrepo recalled that some of the 
most difficult moments in his two years at the FNC had come when he was challenged by brands 
who saw Signature line’s packages encroaching on valuable territory: supermarket shelf space. 
“These are important customers of the FNC and they use much, much more coffee than does the Juan 
Valdez Signature brand,” he said. “I need to tell them that we are exercising our right and our 
mandate to move up the value chain. We believe coexistence is possible because it is a huge market 
with room for everybody. But we in Colombia cannot keep just keep being green coffee exporters.” 
Carlos Ignacio Velasco, a direct report to Restrepo in the commercial sales group, said that the 
introduction of Signature coffees makes dealing with some roasters a more difficult, but not 
impossible, task. “It is, I’ll say . . . ‘material for interesting conversations’ . . . right now. But, we 
haven’t lost any accounts, yet,” Ignacio Velasco said.  
The Coffee Harvest: Picking the Right Opportunities 
The notoriety of the Juan Valdez brand led to no shortage of interested partners approaching 
Procafecol about possible product development and distribution deals. As they assessed potential 
geographic expansion opportunities for both the cafes and the packaged coffee line, Crane and her 
Procafecol team needed to decide if they should stick closely to their well-researched prioritization 
plan or if they should pursue new partners and ideas opportunistically. 
Procafecol’s original plan for the rollout of the cafes, crafted about five years earlier, emphasized 
developing locations in rich countries with entrenched coffee drinking cultures and with significant 
exposure to the Juan Valdez and/or “100% Colombian” marketing programs. This list of markets 
included the United States, Canada, Spain, Germany and the Scandinavian countries. However, the 
early performance of the cafes in the United States and Spain had not met expectations, leaving some 
within Procafecol to question the opportunity prioritization schema as well as the tactics they 
employed for market entry.  
Expansion: Planned or Opportunistic? 
“Our original thinking was that it was best to develop cafes where Starbucks already had 
prepared the ground, so to speak,” commented Crane. “But now, some of our analysis says that it 
might be best to go where Starbucks isn’t.” Juan Valdez cafes dominated the Colombian coffee 
landscape and Procafecol’s very capable operating partner in Ecuador had built a successful 
operation in that country. “Now we are being flooded with all kinds of business proposals for café 
development in Latin American countries,” said Crane. 
Most Latin American countries could be classified as middle-income or developing nations; the 
majority of consumers in this region did not have the kind of disposable income typical of buyers of 
premium coffees in American-style cafes. Many countries were also cultivators of coffee themselves, 
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albeit on a smaller scale than Colombia. “These markets might not have the highest potential for 
packaged coffee sales, either via the Juan Valdez brand or the 100% Colombian program, so the FNC 
would not be as excited about the ‘billboard effect’,” Crane said.  
Crane’s team had recently received an inquiry about marketing packaged coffees from a country 
that could not be further off Procafecol’s strategic roadmap—almost literally. A major South Korean 
retailer wanted to carry Juan Valdez Signature coffees in nearly 1000 locations. While South Korean 
consumers did, indeed, possess among the highest recognition levels of Colombia as a country of 
origin for high quality coffee, they scored at zero in terms of their recognition of Juan Valdez. Still, 
among the countries with 20% or higher growth in annual coffee consumption—South Korea, Brazil, 
China, India, Indonesia, Mexico, Poland, and Russia—South Korea had by far the highest per capita 
GDP and disposable income. Procafecol officials wondered if this country—which possessed a fairly 
high concentration of Starbucks—should be elevated much higher on the list of territories for possible 
expansion of the Juan Valdez cafes. 
East Asia stood out as a tremendous potential market in the opinion of some in the FNC and 
Procafecol. “The big enemy of coffee in the future is the tea culture of Asia. Our next frontier is to 
really defeat the tea culture, as we did in Japan…as you may know Colombia is the largest provider 
of specialty coffees in Japan. People think that tea is so wonderful and healthy, but for us coffee 
growers, tea is evil,” Silva chuckled, tongue firmly in cheek. But there was no doubt that the rising 
incomes and huge populations of Asian countries could make them extremely attractive markets. 
Those managing Colombia’s coffee future debated how opportunities here and in other new markets 
would best be exploited. Procafecol could invest in developing the Juan Valdez brand or Procafecol 
and the FNC could seek out roaster and distribution partners via the 100% Colombian program, a 
much less resource-intensive path. Ignacio Velasco, for one, was dazzled by the potential for 
Colombian coffees in Asia. “In a place like China, we could make instant soluble coffee a priority 
since it is much more economical. I would say we should go it alone and build our own Juan Valdez 
brand there,” he said. Ignacio Velasco cited the huge impact two medium-sized players—California-
based Coffee Bean & Tea Leaf and the UK’s Costa Coffee—seemed to be having on the embryonic 
Chinese coffee market. “There’s plenty of room to develop a brand still. We could paint on a white 
canvas.” 
Procafecol was also assessing the potential of instituting a franchise model. To date, all expansion 
efforts outside of Colombia had been pursued in collaboration with local-market corporations with 
experience in restaurants and/or related industries. Some thought that opening opportunities for 
individual entrepreneurs to develop sites could accelerate the proliferation of the cafes and the 
growth of the Juan Valdez brand as a whole. But, as they discussed a possible change, planners 
within Procafecol knew they had to balance the potential of this strategy with the possibility that 
franchising might compromise the respect for the Juan Valdez brand and the quality of the café 
experience. 
New Product Development: Which Direction?  
Top executives in the ranks of both the FNC and Procafecol were almost unanimous in the view 
that the Juan Valdez brand should be affiliated with more coffee products of various types. But they 
sometimes emphasized different paths, both strategically and technologically, in the development of 
new offerings.  
Some favored an approach which would keep the Juan Valdez brand and FNC/Procafecol 
expansion projects closely tied to familiar food and beverage product segments. “There is so much 
room to grow…so many categories we could move into,” said Samper. He saw many opportunities 
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with products like coffee-flavored ice creams and liqueurs. “These could be developed under the 
Juan Valdez brand, or we could pursue co-branding deals in ways that could expand the prestige of 
Juan Valdez and the partner brand. Our pursuit of opportunities like these would also not be viewed 
as threatening to key partners in the coffee industry.”  
Others within FNC/Procafecol supported investing in different sorts of development initiatives—
projects that emphasized creating new technical competencies. “With resources like Cenicafe and 
others, we have such amazing knowledge of coffee, but, for the most part, it is on the growing and 
processing side,” Londono commented. “Why aren’t we leaders in new formulations for products or 
in innovative packaging or in new brewing technologies?” That sort of path had proven lucrative to 
other players in the industry. For example, over the previous decade, Nestle, the global consumer 
products giant, and Keurig, an American startup, had built successful businesses in portion-pack 
brewing for the home and office environments. The FNC entered this arena later when it decided to 
license the Juan Valdez brand to a mid-sized maker of portion pack brewers based in France for 
coffeemakers sold in Colombia and Chile. However, the possibility of being a leader in new 
technologies by creating more innovations in-house was intriguing to some within FNC and 
Procafecol. 
Flagship or Experiment? 
Most of the Juan Valdez Café locations in the United States and Spain had been struggling for 
nearly two years. Procafecol had opened the cafes only to see its first two high-income markets 
become mired in recession while prices for green coffee were spiking. The Juan Valdez Cafes were 
not alone in feeling the pinch of an economic downturn, global in scale. In 2009, Starbucks closed 
hundreds of locations around the world and reassessed its pricing levels. “Basically, the ‘out of home’ 
coffee industry has been hurt pretty badly everywhere,” said Samper. 
“We bet heavily on Spain, but with the economic crisis and high unemployment there, no one 
wants to spend a Euro more on any goods than they have to,” said Silva. Procafecol was considering 
closing down most of its six cafes in Spain and instead developing small kiosks within the floor plans 
of some of the restaurants run by their Spanish operating partner.  
Attempting to stem the flow of red ink in the U.S. market, Procafecol had already shuttered stores 
in Seattle and Philadelphia. Throughout their short history, the U.S. cafes had exhibited very different 
customer behavior and purchase patterns than the Colombian locations. The average ticket in the U.S. 
sites was significantly less than the purchase per visit in the Colombian outlets. Customers bought 
slightly less food and spent significantly less on clothing and other branded merchandise. Sales of 
packaged Juan Valdez branded coffees represented 18% of sales in the Colombian locations, but just 
5% in U.S. stores. In addition, the design scheme and theme of the cafes did not seem to resonate with 
Americans in the same they did with Colombians. “Colombians became familiar with the brand of 
Juan Valdez as a symbol of our country and a point of pride,” said Londono. “Americans had a very 
different experience; the brand equity there was rooted in a simple, hard-working cafetero. When they 
went to the cafes, they expected to see the mountains . . . the greenery . . . not a modern, hip place. 
They wanted the donkey.” 
Procafecol’s early experiences in the American market showed they might have missed an 
opportunity to increase the appeal of the stores by not focusing the theme more around the coffee 
growers—especially how the Juan Valdez cafes directly impact the livelihoods of hundreds of 
thousands of self-employed farmers. “U.S. consumers like to help; it’s a cultural thing. In Chile, they 
won’t care about the cafeteros. ‘Giving back’ is a big thing for the American buyer, it’s really 
rewarding for them, but it’s not the same with our Latin American consumers,” commented 
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Londono. “The story we’ve had thus far in Latin America has been about being the highest quality, 
the top brand in the world of coffee.” Procafecol managers were considering some adaptations of the 
U.S. strategy and store plan to take advantage of this insight. 
There was some good news on the American front, though; airport kiosks recently opened in 
Miami and New York’s JFK had performed relatively well in spite of the recession. Some in the 
organization felt that that an expanded franchising program might boost the growth prospects in the 
U.S. as well. Procafecol was assessing this possibility. But right now Crane and her team had to deal 
with a very pressing—and high-profile—matter in the American market. 
Juan Valdez’s global flagship store in New York’s Times Square was hemorrhaging cash. The café 
occupied expensive real estate in a neighborhood dominated by high-profile tourist attractions and 
the flagship outlets of firms many times the size of Procafecol and the FNC. Procafecol signed a 
multiyear lease to secure the location. “This store is very expensive to keep open, but it would also be 
very expensive to close,” lamented Crane. 
In spite of the uncertainty around the Times Square store, one thing was certain: the Colombian 
coffee industry was committed to and dependent on the U.S. market, historically by far the largest 
foreign market for Colombia’s coffees. Procafecol would develop a new plan for the Juan Valdez 
Cafes in the U.S., potentially concentrating on smaller formats. The Juan Valdez brand of packaged 
coffees would continue to expand its presence in the country’s retail food outlets. Should Procafecol 
seek to overhaul and streamline the Times Square operation, so that it could continue to serve as a 
center of learning about the U.S. market, as well as a “billboard” for the brand, Colombian coffees 
and Colombia as a whole? Or should they view the flagship store as an experiment that they needed 
to wrap up, having lost money, but having gained knowledge about local tastes and the economics of 
running a café in the world’s largest coffee market? 
Decisions to Make . . . 
After completing their analysis on the state of the international locations of the Juan Valdez Cafes, 
Crane and her team were among the last to leave the office complex that housed the FNC and 
Procafecol. As they exited the office, they passed the Juan Valdez Café just outside. For Crane, the 
sight of the café—bustling, as usual—was a welcome break from her work assessing the 
disappointing results from the U.S. market. She knew there were many pathways to growth open to 
the Juan Valdez brand—a point she would drive home in her meeting tomorrow with Silva on her 
turnaround strategy and growth plan for the Juan Valdez Cafes.  
 
 
 
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Exhibit 1
Colombia Fact Sheet 
 
Population: 44,205,293, ranked 28th in world (July 2010 est.) 
Urban population: 74% of total population (2008) 
Literacy: 90.4% 
Area: 1,138,914 sq km (roughly twice the size of the U.S. state of Texas) 
GDP (purchasing power parity): $401 billion, ranked 29th in world (2009 est.) 
GDP per capita (purchasing power parity): $9,200, ranked 110th in world (2009 est.) 
Exports: petroleum, coffee, coal, nickel, emeralds, apparel, bananas, cut flowers 
Exports–Partners: U.S. 38%, Venezuela 16.2%, Ecuador 4% (2008) 
Imports: industrial equipment, transportation equipment, consumer goods, chemicals, paper 
products, fuels, electricity 
Imports–Partners: U.S. 29.2%, China 11.5%, Mexico 7.9%, Brazil 5.9% (2008) 
 
Recent economic developments:  
Colombia experienced accelerating growth between 2002 and 2007, chiefly due to improve-
ments in domestic security, rising commodity prices, and to President URIBE's promarket 
economic policies. Foreign direct investment reached a record $10 billion in 2008. A series of 
policies enhanced Colombia's investment climate: President URIBE's pro-market measures; 
pro-business reforms in the oil and gas sectors; and export-led growth fueled mainly by the 
Andean Trade Promotion and Drug Eradication Act. Inequality, underemployment, and 
narcotrafficking remain significant challenges, and Colombia's infrastructure requires major 
improvements to sustain economic expansion. 
 
Source: 
https://www.cia.gov/library/publications/the-world-factbook/geos/co.html. 
 
 
 
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Juan Valdez: Caffeination in Innovation 
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Exhibit 2
FNC Marketing Expenditures, 1985 
 Country 
Budget 
($US) 
Percent of 
Total Budget 
    
 
 
United States 
11,200,000 
52.8% 
West Germany 
2,865,000 
13.5% 
Spain 
1,500,000 
7.1% 
Canada 
1,050,000 
5.0% 
Japan 
1,000,000 
4.7% 
France 
747,000 
3.5% 
Argentina 
677,000 
3.2% 
Denmark 
545,000 
2.6% 
Scandinavia 
540,000 
2.5% 
Other 
1,080,500 
5.1% 
Total 
21,204,500 
100.0% 
    
 
 
Source: 
Juan Valdez: The Strategy Behind the Brand, FNC, 2008, p. 159. 
 
 
 
Exhibit 3
Historical Statistics on the Recognition of Colombian Coffees in the U.S. 
 
1959 
1960 
1961 
1993 
2005 
    
 
 
 
 
 
“Colombia grows the best coffee” 
4% 
11% 
21% 
59% 
53% 
Recognition of Colombia as a coffee origin 
45% 
64% 
75% 
96% 
92% 
    
 
 
 
 
 
Source: 
Juan Valdez: The Strategy Behind the Brand, FNC, 2008, p. 197. 
 
 
 
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Exhibit 4
FNC’s Profit and Loss Statement (in thousand $US) 
 
2009 
2008 
    
 
 
INCOME  
614,196 
646,654 
Coffee Grower Contributions and brand royalties  
63,397 
74,721 
Sales of Coffee and Services  
550,799 
571,933 
    
 
 
COST OF GOODS SOLD   
521,606 
489,081 
    
 
 
GENERAL EXPENSES AND CONTRIBUTIONS 
178,495 
176,790 
Administrative Expenses, legal and consulting fees 
37,368 
38,034 
Research and Others  
7,221 
6,659 
Coffee Grower Support and Social Development  
50,068 
53,063 
Promotion and advertisement 
6,172 
2,595 
Other Selling Expenses  
27,387 
28,506 
Quality control   
4,889 
6,003 
Taxes and Contributions paid  
18,576 
20,534 
Provisions and Depreciation  
21,363 
16,042 
Miscellaneous Expenses  
5,452 
5,354 
    
 
 
OPERATIONAL PROFIT 
-85,906 
-19,216 
    
 
 
OTHER NET INCOME (EXPENSES)  
28,829 
-25,931 
    
 
 
SURPLUS (DEFICIT) OF THE PERIOD  
-57,077 
-45,147 
    
 
 
Source: 
FNC. 
 
Exhibit 5
Global Coffee Exports 
Top Exporting Nations, June 2008–May 2009 
 
Exports by Variety, June 2009–May 2009 
Number of 60-kilo bags 
 
Number of 60-kilo bags 
    
 
 
 
 
Brazil 
30,933,256 
 
Colombian Milds 
11,093,696 
Vietnam 
17,615,741 
 
Other Milds 
22,255,849 
Colombia 
9,910,287 
 
Brazilian Naturals 
29,936,699 
Indonesia 
6,032,111 
 
Robustas 
35,225,687 
Peru 
3,827,398 
 
 
 
Guatemala 
3,574,598 
 
 
 
India 
3,256,217 
 
 
 
Uganda 
3,217,944 
 
 
 
Honduras 
3,109,634 
 
 
 
Ethiopia 
2,061,476 
 
 
 
 
 
 
 
 
Others 
14,973,269 
 
 
 
 
 
 
 
 
Total  
98,511,931 
 
 
 
    
 
 
 
 
Source: 
International Coffee Organization, http://www.ico.org/prices/m1.htm. 
 
 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


Juan Valdez: Caffeination in Innovation 
513-090 
19 
Exhibit 6
Juan Valdez in FNC/Procafecol Promotions 
 
Ads featuring Carlos Sanchez as Juan Valdez 
 
 
 
 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


513-090 
Juan Valdez: Caffeination in Innovation 
20 
Exhibit 6 (continued)
 
FNC promotional photos featuring Carlos Castaneda as Juan Valdez 
 
 
 
Source: 
FNC. 
 
 
 
Exhibit 7
Procafecol Profit and Loss Statement (in millions of $US) 
 
2006 
2007 
2008 
2009 
    
 
 
 
 
Net Sales 
10.35 
24.35 
38.47 
36.87 
COGS 
4.95 
11.65 
17.51 
15.95 
Gross Margin 
5.40 
12.70 
20.95 
20.91 
Operational Expenses 
3.85 
9.59 
14.52 
14.65 
Admin Expenses 
4.40 
6.66 
6.40 
5.13 
EBITDA 
-2.85 
-3.55 
0.04 
1.13 
    
 
 
 
 
Source: 
Procafecol. 
 
 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


Juan Valdez: Caffeination in Innovation 
513-090 
21 
Exhibit 8
Juan Valdez Cafes 
Bogota, Colombia 
Manizales, Colombia 
 
 
Interior of Juan Valdez Café, Washington, DC, USA 
Times Square, New York City, USA 
 
 
57th Street, New York City, USA 
 
Source: 
FNC. 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


513-090 
Juan Valdez: Caffeination in Innovation 
22 
Exhibit 9
Branding Elements Utilized by FNC and Procafecol 
 
100% Colombian ingredient brand employed by participating roasters 
 
 
 
 
Juan Valdez Café logo 
Juan Valdez signature soluble 
(instant) coffee 
 
Source: 
FNC. 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


Juan Valdez: Caffeination in Innovation 
513-090 
23 
Exhibit 10
Advertising Spending Levels 
 
Advertising for Juan Valdez brand and 100% Colombian Programs ($US million) 
 
Source: 
FNC. 
 
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513-090 
Juan Valdez: Caffeination in Innovation 
24 
Endnotes 
 
1 FNC, Juan Valdez: The Strategy Behind the Brand, p. 117. 
2FNC, p. 137. 
3 “Roaster” referred to the company or brand that processed raw coffee beans into the whole bean or ground 
product purchased by consumers. For decades, the most well-known roasters were brands such as Folgers, 
Maxwell House and Yuban, which were primarily sold in supermarkets. As the coffee industry in the U.S. 
evolved, café operators such as Starbucks began to be more prominent as roasters. Roasters usually created 
blends containing many different types of coffee beans, but as consumers became more informed about coffees, 
the companies would offer specialty products, often at premium prices. 
4 FNC, p. 145. 
5 FNC, p. 197. 
6 FNC, p. 162 
7 According to Luis Samper, in 1990, a surplus year on many global coffee exchanges, Colombian coffee sold 
for 96.57 U.S. cents per pound while other coffee averaged 90.21 cents. In 2009, when stocks of Colombian coffee 
were limited due to weather conditions, Colombian green coffee was valued at 177.28 cents while the selling 
price for other beans was 125.35 cents per pound.