The image of Juan Valdez and his trusty mule has long become synonymous with the rich aroma and superior
taste of Colombian coffee.
The Colombian coffee industry is primarily represented by the Federacion Nacional
de Cafeteros de Colombia (FNC), which has prided itself in successfully branding and differentiating a
commodity that not only resulted in a price premium for Colombian coffee, but has also improved the image and
quality of life for the entire country.
However, during the mid 1990s, Colombian coffee producers were faced
with rising competition, increasing supply and changing industry trends, leading to rapidly decreasing prices in
the market for coffee.
Profits were quickly eroded and by the turn of the millennium, concerns were raised
regarding the long run sustainability of Colombian coffee producers.
The underlying problem faced by the FNC
is marketing and positioning Café de Colombia so as to maintain a profitable margin despite dwindling market
prices, increasing competition, shifting industry trends, and a shrinking marketing budget.
While Colombia has enjoyed constitutional stability, there still remains the problem of guerrilla activity
and internal conflict, which has caused many rural families to relocate to cities.
Abandonment of the currency
band resulted in a downgrade for Colombia’s sovereign debt as well as a 25 percent devaluation of its currency
against the dollar.
The negative impact on Colombia’s coffee industry is both direct and indirect.
activities become rampant, much attention will be diverted towards dealing with the internal strife and away from
profitable industries like coffee growing.
Also, as the turmoil causes families to migrate, there will be less people
in the rural coffee growing regions, which can lead to a decrease in both product volume and quality.
Furthermore, currency devaluation implies there will be less real dollars for investments in infrastructures that
require foreign technology as well as less money for international advertising, both of which can negatively affect
the long run profitability and market share of Colombian coffee.
Finally, increasing violence and drug trafficking
due to guerrilla activities has damaged Colombia’s image to the outside world, and can potentially cause coffee
consumers to steer away from Colombian coffee, as they may view purchasing as supporting the violence.
The labor-intensive nature of coffee production provides a livelihood for one third of Colombia’s
The FNC’s ability to maintain a historic premium for is coffee has positively impacted the
associated communities by creating a rural middle class, lifting many coffee growers out of poverty.
provided for an overall improvement in the quality of life for coffee-growing communities, as education,