"Grown In Colombia"--A Business Opportunity (It's Probably Not What You Think)
I wrote last week about the abundance of business and investment potential in Colombia right now. We noticed opportunity everywhere we looked. Our daughter, for example, decided to try exporting the cow hides we found for sale in a roadside shop just outside Medellin. We bought seven to carry back with us to test the idea and have already sold two. Meantime, Kaitlin is building web and Facebook pages…starting small…looking to develop the business idea slowly, organically…
While in Medellin, I met with a group of guys who are taking a much more aggressive and ambitious approach to capitalizing on opportunity they perceive in this market. These guys, Americans, moved to Medellin to retire.
“Sometimes I wonder what I’m doing, working so hard at this point in my life,” one of them told me when we met. “But I just can’t help myself. There are just too many ways to make money in this country right now.”
From businesses related to everything from real estate to seafood, airplanes, and coffee, these guys have a long and growing idea list. What impressed me most, though, was how quickly and systematically they’re working to go from idea to revenues, how efficiently they’re validating concepts.
The first business out of the gate for them was coffee. Ironically, they discovered, while the rest of the world looks for the “Grown in Colombia” label when shopping for coffee, you apparently can’t get a good let alone a great cup of coffee in Colombia.
As I’m not a coffee drinker, this disconnect never occurred to me, but it made sense when they explained it. It’s like not being able to get a great steak in most of Argentina, despite Argentina being known all over the world for its beef. Why? Because Argentina exports its best beef.
And Colombia exports its best coffee.
Investing In Coffee
What remains in Colombia to make coffee sold in Colombia is, well, the remains…the broken beans, the lowest quality beans, the stuff that doesn’t make the grade. Even the stuff that does make the grade ends up being mixed in with the leftovers during the production process for sold-in-Colombia coffee, meaning it really is impossible to buy a decent cup locally.
Listening to these guys explain the market niche they’d identified, I remembered that gringo friends in Colombia complain often about not being able to get a decent cup of Joe. They keep looking, thinking they must be missing something…that there must be a secret shop or café somewhere that serves the good stuff, the coffee Colombia is famous for.
As a non-coffee drinker, I simply dismissed the complaints…and overlooked an opportunity.
Not the guys I met with. They’ve taken the lack of quality coffee in Colombia as a challenge to help improve coffee globally. The business idea they have conceived combines a new and growing-in-recognition rating system for coffee (similar to Parker ratings for wine) with specifically targeted coffee-growers.
The objective is to identify the best beans. This is no easy thing. Coffee farming in Colombia is ridiculously fragmented. There are 560,000 coffee fincas in this little country, averaging just about 5 acres apiece. The entire Colombian coffee industry is small-time…and these small farms are all struggling. They enjoy no economies of scale and work on very tight margins.
About one-tenth of one percent (.001) of the best coffee coming from farms in Latin America makes it to the world’s specialty shops. Most of the rest ends up being blended with “regular” or substandard coffee to make it better.
The business premise the guys I met with have identified is straightforward. Incentivize farmers to focus on their best beans (environmental micro-climates have a big effect on quality) and then deliver those best beans directly…thereby creating a market with higher margins than the rest of the coffee industry.
Specialty coffee (real specialty coffee, these guys pointed out, not what passes for “special” in Starbucks, et al.) is a fast-growing market niche. They see the coffee industry today where the wine industry was five decades ago and believe that appreciation for coffee varieties (they referred to them as “varietals”) is about to explode internationally, just as it did for wine.
Other Investing Opportunities
And, as with wine, they think there’s a big opportunity to allow the coffee consumer (like the wine consumer) to know everything about the coffee he’s drinking–where it was grown, how it was harvested, and by whom. Their idea is to make it possible for coffee drinkers to compare coffee quality across the marketplace using a recognized scoring system.
It’s a business requiring much more effort than the average retiree is looking to put out. No question, these guys are entrepreneurs. They’re also coffee drinkers, incentivized by their desire to have consistently great coffee in their cups.
More interesting is the bigger-picture point that their coffee venture highlights:
Colombia is a land of opportunity. In addition to coffee, these guys’ idea list includes about 40 other businesses they are looking into. Some are long-term undertakings, like coffee; others are one-shot, turn-key projects, opportunities they’ve identified for getting in to something and getting out quickly.
The coffee guys are looking for partners in their endeavors. If you’d like to speak with them, send me a note, and I’ll put you in touch.