How Has the Colombia Coffee Industry Changed?

The Colombia coffee industry moved from selling beans on the futures market to owning its own brand. The Coffee Growers Federation formed in 1927 to stabilize prices and quality, the Juan Valdez character was created by a New York agency in 1959, and Juan coffee bars opened in the 21st century to compete with Starbucks.

International price swings still hit smallholders hardest, which is why grower groups push quality and direct trade. In Huila province, organic coffee farm operations show how growers combine altitude, shade, and careful picking to earn more per pound. Emerging markets such as China now absorb a growing share of Colombian exports.

Colombian coffee is renowned worldwide for its aromatic, low-caffeine Arabica varieties, and the image of Juan Valdez—wearing a wide-brimmed straw hat and leading a mule—is deeply ingrained in people's minds. From the founding of the Coffee Producers Association in 1927, to the creation of the classic spokesperson by an advertising agency in 1959, to the opening of Juan coffee bars in the 21st century to directly compete with Starbucks, the Colombian coffee industry has gone through a transformation from passively relying on the futures market to actively building its own brand. This article traces the origin and development of the Juan brand, analyzes the impact of international coffee price fluctuations on coffee farmers, and ventures deep into the mountains of Huila Province to document the real lives and hopes of organic growers. It also examines the potential and challenges of Colombian coffee in emerging markets such as China.

A small mustache, a wide-brimmed straw hat on his head, a mule beside him carrying burlap sacks full of coffee beans, and the majestic Andes Mountains behind him. This figure, named Juan Valdez, represents Colombia's traditional coffee growers. For more than half a century, his simple and honest image, carefully packaged, has long been known throughout the world.

Entering the 21st century, Colombia vigorously introduced foreign investment and promoted economic restructuring. Juan was not eliminated by the times; instead, he transformed into a chain brand, attracting urban white-collar workers to taste naturally rich coffee, and even challenged Starbucks, the world's largest coffee chain giant.

The Colombian Coffee Growers Federation was founded in 1927. It is a semi-official private organization that stabilizes market prices and guarantees quality by purchasing coffee, and is dedicated to research, development, and promotion. The image of Juan was conceived by a New York advertising agency in 1959. Today, every bag of coffee produced in Colombia bears the logo of Juan and his mule.

A total of three genuine coffee farmers have served as spokespersons, appearing through TV reality shows. Their influence has endured, making Juan a world-class brand. The third-generation Juan also interacts with coffee lovers through various social networks, maintaining a wonderful connection that is both virtual and real, so that customers feel as if they are seeing an old friend the moment they see the logo. Colombia is the world's third-largest coffee producer, after Brazil and Vietnam. The association's members include more than 550,000 small and medium-sized coffee farmers across the country, growing Arabica coffee—delicate in aroma and low in caffeine—which is highly favored by discerning coffee lovers.

Coffee's trading volume on the international futures market is second only to crude oil. For developing countries whose economies rely mainly on coffee production, it is a major source of foreign exchange and the foundation on which thousands of producers—including farmers, transporters, processors, and traders—depend for their livelihood.

During the Cold War, the International Coffee Organization used a quota system to stabilize prices, with the aim of ensuring that Latin American and African countries had a certain amount of foreign exchange income, maintaining economic development, and containing the spread of communism. The United States played a key role in enforcing the quotas. However, after the United States withdrew from the organization in 1989, the quota system could no longer be sustained, and coffee prices plummeted. By 2001, prices had fallen to one-third of their 1960s level. In this process, speculative capital ran rampant, and pricing power essentially shifted to middlemen such as large multinational corporations and futures trading giants, making the survival of coffee farmers increasingly difficult.

The analysis department of the Colombian Coffee Growers Federation once did the math: when consumers drink a cup of coffee at a place like Starbucks, most of the profit goes to middlemen, and the share received by producers is minimal. So in 2002, the association established a commercially operated listed company and opened coffee bars, starting in the capital, Bogotá, selling coffee beans and coffee drinks directly, challenging multinational corporations.

Juan coffee bars are comparable to Starbucks in price, with some products priced slightly lower. The coffee bars have a modern decor style, deliberately avoiding folk elements, and are very much in tune with the taste of young white-collar workers coming in to order a cappuccino.

Because Colombian coffee is grown at high altitudes, yields are lower, harvesting labor costs are high, and the price is more expensive than ordinary coffee. General coffee merchants often blend it with other varieties when roasting. However, the Juan brand insists on using pure Colombian coffee. For knowledgeable consumers, this authentic combination of color, aroma, and taste is truly worth every penny. But Juan coffee bars have not expanded abroad very quickly; overseas stores account for about one-fifth of the total, mainly in a few large cities in the United States and Europe, as well as neighboring South American countries.

In recent years, coffee prices have continued to rise, squeezing the profit margins of coffee bar operations, but Juan faces relatively little pressure in terms of capital operations and can still hold on.

In addition, the Coffee Growers Federation encourages customers to buy coffee beans and grind and brew them at home, which is much more economical than consuming outside. This business model of having a store in front and a roastery in back has achieved the effect of promoting the brand, so the profitability of the coffee bars themselves is not the primary consideration.

In the 1990s, international coffee prices fell. In addition to the collapse of the quota system, large amounts of Robusta coffee grown in Asian countries such as Vietnam and Indonesia flooded the market, causing global coffee production to surge. After prices plunged, some coffee farmers were forced to switch to growing coca and selling it to drug trafficking groups for refining into narcotics; drug trafficking groups fought over territory, while government eradication troops sprayed herbicides to destroy coca plants from the air, making the mountains extremely dangerous.

In recent years, anti-drug efforts have achieved remarkable results, and combined with a decline in world coffee production, coffee prices have entered a new cycle of rising prices. However, due to the appreciation of the Colombian currency, commodities are priced in US dollars, so when converted into Colombian pesos, the gains are discounted.

Sevilla is a typical mountain town in Huila Province in western Colombia. Every Sunday, coffee farmers come to the producers' association to sell raw coffee beans. Association staff first put the sacks on the scale and record the gross weight, then take samples from each bag, remove the outer husk, inspect the quality, and then decide the price.

Recently, the price per bag (12.5 kilograms) of coffee has been around 90,000 pesos, much higher than the 70,000 pesos of five or six years ago. However, the producing areas have been affected by global warming, and excessive rain and high temperatures have led to rampant pests and diseases, reducing coffee production. Although prices have risen, the overall income improvement for coffee farmers has been limited.

Carcés, about 50 years old, is a second-generation coffee farmer with brown skin, a short and stocky build, and strong large hands. He lives in a concrete bungalow by the hillside. He owns a 1.7-hectare farm, 80 percent of which is used to grow organic coffee, with the rest used to raise dairy cows and grow fruit trees.

Several years ago, he switched to growing organic coffee, mainly using earthworms, African bees, and pungent crops such as onions, planted among the coffee trees, to replace chemical fertilizers and pesticides. He picks ripe coffee beans once every two weeks to prevent mold and insect infestation.

Organic coffee yields about 300 bags per hectare, a quarter less than ordinary coffee. Carcés says it is hard to tell how much of the lower yield is due to weather and how much is due to the switch to organic. He considers himself very lucky that the mountain area where he lives is quite peaceful. Many coffee farmers in the south, unable to bear the dual threats of leftist guerrillas and right-wing self-defense forces, abandoned their fields and went to the cities to work. In recent years, however, a few elderly coffee farmers have returned to the countryside from the cities.

Huila Province has five cooperative branches. In 1990, a roasting plant was established to produce the Ginebras specialty coffee series, as well as several brands exclusively for export, sold as far as Russia and supplied to the US market. The highest-end product is organic coffee, which must be certified every year by international organizations such as Rain Forest or Biotropical, and the roasting process is independently controlled throughout, with limited output.

"Growing coffee is our traditional way of life. Our greatest pride is being able to grow high-quality coffee. No matter how hard it is, it is worth it," Carcés said.

He follows international coffee futures trends. There is a computer at home, but he does not go online to check every day. As we were leaving, we happened to meet his son, who, upon hearing that distant guests had come to the house, deliberately rode his motorcycle back to say hello. He works in town but would consider inheriting his father's business and becoming a third-generation coffee farmer.

Father and son have mixed feelings about the US-Colombia Free Trade Agreement just signed into effect by US President Barack Obama. Colombian coffee sold to the United States has always enjoyed most-favored-nation treatment, as part of a US aid program to support coffee farmers and combat drug trafficking. Although the free trade agreement merely replaced previous policies, it will be good for revitalizing Colombian trade and raising the overall economic level. However, the agreement opens up imports of dairy and meat products, and Colombia's dairy industry may be hit. Carcés's farm has dairy cows that produce about 20 liters of milk a day, bringing in about US$150 a month, and he worries that prices may be affected in the future.

Colombia produced 12 million bags (60 kilograms each) in 2006, but last year output fell to 9 million bags. At the same time, world coffee demand continues to rise, and coffee prices hit a 14-year high in May this year, reaching US$3.089 per pound.

The main growth driver comes from the middle class in emerging market countries. As a result, countries such as China and India have become markets contested by coffee producers and operators.

This year, the Colombian Coffee Growers Federation invited 15 Chinese operators from the production, roasting, and sales sectors to Colombia to attend a trade fair and visit producing areas. According to Mr. Wu Jiahang, the association's chief representative for Greater China, Colombian coffee currently has a very low market share in China. Ordinary consumers do not demand much in terms of quality and are still at the stage of thinking that only "strong and black" is good coffee. What is sold on the market is mainly Robusta varieties produced in Vietnam and Indonesia, which are dark in color, have little aroma, and taste ordinary, while tasting Colombia's fine coffee is limited to a niche group.

However, he is deeply confident in the Chinese market. Take Japan as an example: in the 1960s, Japan imported about 400,000 bags of Colombian coffee a year, and now its annual consumption reaches 7 million bags. China's current import volume is 500,000 bags. Given China's vast size, if it follows Japan's development trajectory, its future potential will be limitless.

The above content is compiled by CoffeeHunters, a coffee news website.