ADVERTISEMENT

Colombian Coffee and Flowers – How the Best Gets Exported

November 2016 Product, Selling

I’ve had the opportunity to travel to Bogota several times over the past year for a client in agribusiness. It’s not only given me an opportunity to learn more about the growing patterns within Colombia, but also about its agricultural trading dynamics with the US.

Among Colombia’s most well known (legal) exports are coffee and flowers. In 2015, Colombia exported $1.2B in unroasted coffee (and around $600M in flowers and other plants) to the US; out of a total US export value of $14B.

Colombians are correctly proud of their coffee and flowers, but at first it came as a surprise that Colombia may not always be the best place to buy Colombian agricultural goods. Much of their optimal produce is destined for export.

This is especially apparent at the airport. When it’s time to fly back to the US, I always try to get a window seat. From there, you can see workers loading up the cargo hold. After the passenger baggage, which isn’t very interesting, comes box after box of packaged flowers destined for the U.S.

And these are just passenger flights. According to a 2015 report by the USDA Foreign Agricultural Service:

“At three major international airports (Miami, Bogota, and Medellin) flowers are the single most important cargo items. In fact, flowers have turned the Bogota airport into Latin America’s foremost air cargo handler, with 200,000 tons of annual airfreight. In addition, flowers are the single most important cargo item for the Miami airport. International trade in Colombian flowers also generates nearly $250 million per year in freight revenues for U.S. and Colombian airlines. Flowers carried by eight airlines, flying mainly to United States, represent their major cargo business. During the peak season, 30 to 35 fully loaded flights per day take off from Colombia, most landing in Miami.”

That’s a lot of flowers. But what about coffee? Let’s first take a step back to define some concepts.

The coffee industry, at least in the U.S., is often thought of in terms of waves. The first wave of coffee introduced the beverage across the U.S. with brands like Folger’s and technologies like vacuum packaging. The second wave is associated with chains that took coffee upscale, such as Starbucks. Its focus was educating consumers about drip vs. espresso, bean origination, and coffee as enjoyment. High quality craft roasters such as Chicago’s Intelligentsia represent the third wave. Coffee becomes an artisanal good akin to wine (or craft beer, which has had a similar trajectory) with as much variation in flavor and approach.

Coffee served in Colombia, traditionally, tends to be lower quality. While the Colombian coffee industry has used the famous Juan Valdez quality marker for almost 60 years, much of the best production has been for export. What’s left has typically become tinto, a dark, concentrated, and inexpensive brew. It’s best thought of as first wave.

Juan Valdez Cafes, a second wave phenomenon, opened in 2002. By the end of that year, in contrast, Starbucks already had nearly 6,000 stores worldwide. To simplify, Colombia has had neither the disposable income nor the large cultural shift to favor second wave until much later than in the U.S.

cafeteros

It may be surprising that a country that originates a product might not be its most upscale consumer, but such situations are fundamental aspects of world trade and different purchasing powers.

The U.S. is Colombia’s largest trading partner, and Colombia is the U.S.’s third largest in Latin America behind Mexico and Brazil. Thanks to a bilateral free trade agreement that went into effect in 2012, Colombia became the fifth largest open market for U.S. exports in the world. As U.S. consumers have continued to develop a taste for high quality coffee and flowers, they have become less burdensome to import.

Although Colombia’s economy has grown strongly since 2000, due in large part to currency weakness, the past two years have been rougher.

While this makes Colombian goods even more appealing for export, that means the opportunity cost of keeping a product in the country that could be sold internationally is higher too.

That gives a stronger economic argument that Colombians may remain slow to adopt coffee habits similar to the U.S. On the other hand, taste for specialty coffee is growing in Colombia, and the third wave is arriving.

With many worried about an impending coffee shortage, it should be an interesting decade to see how trade dynamics and drinking habits continue to change hand in hand.

As for flowers, my guess is Valentine’s Day isn’t going anywhere.



About the author

Kyle Thompson-Westra is a Consultant at Wiglaf Pricing. His background includes digital strategy, marketing analytics, and international relations. He holds a BA from Tufts University and an MBA from DePaul University.

Kyle Thompson-Westra
More by Kyle Thompson-Westra
» April 2017

Complacency and Panic

» March 2017

Pricing in the Life Sciences

» February 2017

Price Isn’t Cost