Starbucks Exec Discusses Colombia Expansion Plan

NEW YORK ( TheStreet) -- As the largest purchaser of Colombian coffee, Starbucks ( SBUX) might be justified in opening a few stores in the Andean nation purely as a public relations move.

"Your question's a really good one but I want to be clear that we're there to be profitable and we're there because we believe that there'll be strong brand awareness and acceptance of the brand," said Rich Nelsen, Starbucks' senior vice president and general manager, Latin America.

While Colombia's main guerrilla group, the FARC, has yet to lay down its weapons, the country has made great strides to reduce the level of violence that just a few years ago made Colombia the kidnapping capitol of the world.

"If you look at the last five years each year is getting better in Colombia and we feel very safe," Nelsen says.

Starbucks will open its first store in Colombia in 2014, and has committed to at least 50 over its first five years there.

Nelsen, who had been responsible for Starbucks Europe, Middle East and Africa (EMEA) region from January 2011 until February of this year, says expanding Starbucks' presence throughout Latin America is a priority, as it is has fewer stores there relative to its overall international portfolio. Starbucks opened its first Latin American store in Mexico and now has 708 stores throughout Puerto Rico, Chile, Peru, Bahamas, Brazil, Argentina, Aruba, El Salvador, Curacao, Guatemala and Costa Rica.

Starbucks' expansion plans in Colombia come as fears of rising U.S. interest rates have driven away equity market investors. Colombia's main stock market index is down nearly 10% year to date, and Global X FTSE Colombia 20 ( GXG), an exchange traded fund comprised of a basket of Colombian stocks, is down by 15%.

Nelsen says exchange rates and interest rates aren't at the top of Starbucks' list of concerns when it looks at expanding into a particular market. Rather, it is focused on long-term growth prospects. Nelsen disputes reports that Colombians don't drink much coffee.

"There's heavy coffee consumption in Colombia. There a growing level of coffee consumption out of the home and its one of the nice things about entering the Colombian market is that coffee is already seen as a daily routine."

Nelsen says coffee consumption "and awareness of coffee and high quality coffee" increases whenever Starbucks goes. Mexicans now drink almost twice as much coffee outside of their homes as they did when Starbucks first entered that market about 10 years ago.

"We think we're a part of that. Not all of that," he says.

In Colombia, Starbucks will work with Alsea, a Mexican restaurant operator it has worked with for 10 years, and Grupo Nutresa, a Colombian food manufacturer and distributor.

"The timing of the three relationships coming together made it perfect, but even if that hadn't we'd be figuring out a way to come to Colombia," Nelsen says, citing its population of 46 million, consistent growth rate above 5% and increasing political stability.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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