- Colombian traders are capturing value locally with specialty coffee shop chains
- Rising costs and shrinking margins are driving a shift from green coffee exports to domestic retail
- Specialty coffee shops showcase Colombian coffee culture and foster innovation
COLOMBIA’s coffee industry, long celebrated for its exceptional green coffee exports, is witnessing a strategic shift as traders venture into specialty coffee retail.
This move is fueled by a dual motivation: to capture more value within the supply chain and to cultivate a stronger local appreciation for high-quality coffee.
With domestic coffee consumption on the rise and export premiums shrinking, traders are navigating both challenges and opportunities, leveraging retail to diversify revenue streams and adapt to evolving market dynamics.
In recent years, Colombian coffee traders have increasingly ventured into specialty coffee retail, launching their own café chains to capture greater value locally and connect directly with consumers. This strategic shift highlights the quality of Colombian coffee while reshaping the country’s coffee culture.
Leading names like Pergamino Café, Libertario, and Campesino are at the forefront of this transformation, offering a blueprint for other coffee-producing nations. By leveraging their deep supply chain expertise, these traders are not only building strong local brands but also meeting the rising domestic demand for specialty coffee.
“One of our primary motivations for entering specialty retail was to showcase our expertise across various stages of the coffee supply chain, providing consumers with a more holistic experience of Colombian coffee,” says Pedro Echavarria, General Manager of Pergamino Café.
“On one hand, we aimed to gain a deeper understanding of our clients’ world. We wanted them to see us not just as a partner for sourcing and growing their green coffee, but as a company that truly understands their business – from roasting to retail,” he said.
Consumer demand has also played a significant role in the diversification of the Colombian coffee sector.
“The Colombian public is becoming more demanding and selective when it comes to drinking coffee,” says Santiago Gamboa, owner and co-founder of Hermanos Colombian Coffee Roasters Ltd. “There’s an increase in consumers willing to pay more for better quality and experience when visiting coffee houses.”
This focus on quality has opened avenues for resource optimisation. Traders are increasingly repurposing high-quality small beans, often set aside during dry milling, for their own coffee shops instead of selling them to exporters. This strategy not only emphasises sustainability but also aligns with a commitment to delivering exceptional quality.
“High-quality small beans are often sourced from specific regions known for their unique flavours and sustainable farming practices,” explains Santiago. “Although specialty beans are more expensive, they are more cost-efficient because of the thorough selection process.”
Expanding business domestically is also driven by a desire to address a key imbalance. Many foreign companies sourcing Colombian coffee have leveraged its quality to enhance their own brand reputation, often at the expense of making the highest-quality coffee accessible to the local market.
“We drew inspiration from our visits and connections with roasters worldwide,” says Pedro. “These roasters managed to stand out from larger coffee companies by truly celebrating origin and quality.”
“It was always frustrating to see the best coffees we were growing and sourcing exclusively destined for export. While we take pride in sharing these coffees with roasters and coffee lovers globally, it was our dream to make them accessible to our own community here in Medellín as well.”
Pergamino’s rapid expansion in Medellín, with 10 stores opened over the span of 12 years, has set a high bar for Colombia’s specialty coffee scene. Similarly, players like Libertario and Campesino are establishing strong footholds, aiming to retain value traditionally lost in green coffee exports by investing in roasting and retail.
A key strategy includes repurposing high-quality small beans from dry milling operations for their cafés, rather than selling them as lower-grade green coffee. This approach not only optimises resources but also reflects a focus on quality and sustainability while driving local value capture.
Beyond cafés, this movement signals a broader ambition: exporting roasted coffee to secure higher margins and elevate Colombia’s coffee identity on the global stage.
Shrinking margins in green coffee exports
The decision to diversify isn’t entirely voluntary. Shrinking margins in the green coffee trade have pushed Colombian traders to explore new avenues, as domestic coffee prices – often higher than those in competing countries like Brazil and Vietnam – continue to erode profits.
Compounding these challenges, rising costs for green coffee and declining premiums for specialty beans have left traders increasingly exposed to market volatility. These economic pressures have driven traders to adopt innovative strategies to maintain resilience and profitability.
“As green coffee prices increase, often becoming volatile, traders are facing tighter margins,” says Santiago. “Lower premiums for specialty coffee mean that traders may not find the same profit levels in trading green coffee, leading them to seek higher-margin retail opportunities.”
Colombia’s growing domestic coffee consumption also presents a lucrative opportunity. Specialty coffee is gaining popularity among Colombian consumers, creating a niche for traders to establish coffee shops that showcase their expertise and access to exceptional coffee.
This trend mirrors developments in other producing countries like Ethiopia, where domestic coffee shop chains are growing in popularity. Vertical integration offers a solution by allowing traders to capture value at multiple stages of the supply chain, in both green and roasted coffee.
“Diversification is something that is always a goal of most businesses, and in this case, although hard, it is the perfect diversification,” says Pedro. “Both businesses share coffee knowledge as a core asset, but the capacities and risks are significantly different.”
By roasting and retailing their coffee, traders mitigate risks associated with exporting while building brands that resonate with domestic and international markets.
Likewise, by capturing value at multiple stages, traders also position themselves for international retail expansion in regions like Europe and the Middle East.
A virtuous circle?
This emphasis on retail and domestic markets holds the potential to create a virtuous cycle within the Colombian coffee industry.
By enhancing the reputation of Colombian coffee both locally and globally, these efforts could incentivise better farming practices and promote greater economic stability for producers.
“With a constant and stable growing domestic market consumption, producers will be less exposed to external market factors and negative fluctuations in the international market,” says Santiago.
“Local branding efforts will also result in more educated consumers who demand higher-quality coffee, creating a stronger foundation for the specialty coffee sector. ‘Café 18’, a specialty coffee chain in Bogotá, sells award-winning and exclusive coffees, some for more than $80 USD/lb. This underscores the unexplored market in Colombia for specialty coffee – people willing to pay what other consumers would in the international markets.”
However, while some see the growth of specialty coffee consumption in the Colombian domestic market as indicative of a broader change, its small scale means that a larger change across the global coffee sector might still take some time to occur.
“I think this local growth of specialty coffee consumption is crucial to the development of our industry, from farming to retail,” says Pedro. “However, I’m not sure this will significantly change bigger trader strategies, as it remains focused exclusively on the specialty segment and usually starts as small scale projects.”
Naturally, such a shift comes with its own set of challenges. Balancing wholesale export partnerships while simultaneously scaling retail operations demands substantial resources and nuanced market expertise.
Expanding retail ventures to compete with established global giants like Starbucks and Luckin Coffee – not to mention the myriad specialty coffee businesses already in the market – adds further complexity.
For other coffee-producing countries, trader-owned coffee shop chains present a compelling model to reduce reliance on volatile global markets. However, success hinges on traders’ ability to strike a balance between local and international ambitions while preserving the quality and authenticity that define both Colombian and specialty coffee.
“Larger traders don´t find value investing in smaller ventures and usually don’t have the skill set to do roasting or retail,” says Pedro. “Not that smaller traders do inherently, but the upside to their business of trying it and acquiring the capacities is larger, therefore the incentives are clearer.”
The rise of Colombian trader-owned coffee shops and chains represents a strategic shift in the coffee industry.
By embracing vertical integration and catering to local consumers, traders may be able to add more value to the local coffee industry, foster domestic coffee culture, and potentially reshape the global perceptions of Colombian coffee.
This trend also has the potential to inspire similar transformations in other coffee-growing countries – with any luck, it may create an overall more resilient and sustainable specialty coffee sector.
Coffee Intelligence
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