Juan Valdez Revives IPO Plans as Chain Becomes Profitable

Juan Valdez plans to go public after two more years of profit as the Colombian coffee chain takes on Starbucks Corp. in U.S. and Latin American markets.

The chain -- controlled by a growers federation through Procafecol SA and symbolized by a mustachioed farmer and his mule -- reported its first annual profit last year. If results remain positive, it will look to undertake an initial public offering in 2016, Procafecol President Hernan Mendez said.

“It’s not easy to turn the company around, but we’re on the right path,” Mendez said in an April 11 interview in Bogota. “Probably in three years we’ll be on the stock market.”

Procafecol is reviving IPO plans after higher sales and lower costs helped generate profit of 8.95 billion pesos ($4.6 million) last year. The turnaround is bolstering over-the-counter trading of shares issued to growers in 2006, he said.

Since its creation in 2002, Juan Valdez has opened 190 coffee shops in Colombia, famed for its mild arabica bean, and 80 outside the country. It plans another 18 in Colombia this year and 40 abroad.

In the past month, the company has opened stores in South Korea and Malaysia, sending a team of Colombian baristas to teach local staff coffee-making techniques.

The expansion will include higher-end shops offering a variety of regional Colombian coffees, part of Juan Valdez’s strategy to take on Seattle-based Starbucks, which is preparing to open its first stores in Colombia, Mendez said.

In Chile, where the two brands already compete, Juan Valdez has performed well, Mendez said, without giving data.

No Risk

Starbucks is the premier roaster and retailer of specialty coffee and the largest purchaser of high-grade specialty Colombian coffee, company spokesman Zack Hutson said in e-mailed response to questions. Starbucks plans to open its first store in Colombia this year, he said.

“I know Starbucks is going to arrive with premium coffee as well,” he said. “They’re going to do a very good job. But because of our consolidation, our product and number of shops, we don’t see a risk.”

In 2006, the company issued preferential shares to 22,000 Colombian coffee growers, shares that today represent 4 percent of the company. Sellers must first offer the shares to existing holders. If no buyer steps up within 15 days, the shares can then be sold to the general public.

“People now view us differently,” Mendez said. “As our results improve -- now with net profit and savings in all areas -- there are more people looking to buy shares.”

Juan Valdez has seven shops in the U.S., including New York and Washington, and plans to open its first in Florida this year.

“Asia is important, but our main challenge is to be successful in the U.S. because of its size and purchasing power,” Mendez said. “In the U.S., there’s a strong demand for specialty coffees.”

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