How a local coffee store is killing STARBUCKS in Colombia.

“Business as usual” is a contradiction in developing countries or, at least that’s what I keep reading from (HBR), throughout the years companies have been adapting their business models to such markets forgetting the most important rule of all :Keep your market segment the same.Captura de pantalla 2017-08-16 a la(s) 5.30.07 p.m.

Huge companies like Starbucks, Dunkin Donuts, McDonald’s, and such are based on one primary basic target marketing concept. To sell their product to the masses. So they target the middle classes in developed countries. Because that segment is the sweet spot of the population, right there is where they start building up their corporate empires.

Foreign Brands in developing countries like Colombia have a strong reputation not only for their aggressive brand awareness campaigns that reach as far as here, but because they are blessed with a strong aspirational value just for the fact of being foreign and successful. When one of these brands arrives here, disruption hits everywhere, long lines of people wanting to purchase the product are usual and… hold on, Did I just said “disruption hits everywhere?”

The target market for such products in Colombia is not the middle class they were created for in their country of origin. Instead they aim for the top 1 or 2% of the population who have the means and resources to buy from them. Their value target changes from middle class in developed countries to the richest part of the population on the developing ones. In Colombia rich people are the ones who drink coffee at Starbucks and eats at McDonald’s.

The “Cafe Latte” Index.

There’s a Big Mac Index to measure the purchasing power parity between currencies. I will take a shot and do a “Cafe Latte” index.

starbucks-2346226_960_720The price of a Starbucks Cafe Latte (Grande) in Colombia is nearly US$2.50 , now hear this, the colombian minimum wage is about US$2.50. Now hear this, the Colombian minimum wage is about US$250 per month. 10 Lattes a month (2-3 Lattes per week) takes nearly 10% of that salary. If you add a croissant half the time you buy that latte, it will be 15 to 18% of your monthly income. So much for Starbucks’ goal to become “The third place” to be besides your home or office right?

“The target market for such products in Colombia is not the middle class they were created for in their country of origin. Instead they aim for the top 1 or 2% of the population who have the means and resources to buy from them.”

In Colombia we have been drinking coffee our whole lives. First in small coffee shops called “Cafeterías”. Then in Juan Valdez coffee shops, which basically targeted the same audience as Starbucks. So they use the same strategy I’ve been describing.

So why do foreign companies (and local copycats) keep repeating this “exclusive” business model in developing countries over and over? Well, because this has been a viable model hitherto.

The Democratization of Coffee

Now, there’s this company called Tostao in Bogota (Colombia) who basically took ideas from these business models and created a product for basically… everyone. Here’s the deal, a cup of coffee starts at US$0.30, a Latte (Grande) is about US$0.84, and the equivalent of a Ham and Cheese Croissant is nearly US$0.85, so 10 lattes a month, will only cut 2.1% of the minimum wage salary. Compare this with Starbucks 10%. How they did they do this? They started by having the same basic business model Starbucks had in their country of origin but for Colombian middle class commuters.

 Tostao in a nutshell

A typical Tostao store has a limited budget for rental expenses. Depending on the location the size of the store varies. In order to be profitable they need to open an significant number of stores. There are nearly 100 of them in Bogota. They plan to finish 2017 with 130 more. All the pastry is imported (frozen) from Spain and baked right at the store. The design is simple yet nice. Prices and products are described on chalkboards. Forget about fancy backlighted or digital menus. Remembering the famous quote from Mies Van der Rohe: “Less is More”, Tostao in delivering a simple yet good looking store to buy from.

A TOSTAO store in Bogota, Colombia

People can buy quick lunch options like sandwiches and salads for pretty low prices as well. The stores even have a few small-but-not-laptop-friendly tables as a subtle suggestion to drink your coffee and keep walking. You can expect long lines first time in the morning for every soul going to work. Yet the lines moves as fast as the Starbucks at Picadilly near Earls court at 8AM, nothing to envy those Brits there.

Tostao is democratizing coffee stores in Colombia, I like to think about the “YMCA song line scenario”, any given day you see a worker, a policeman, a business man and myself at any Tostao store line waiting for our coffee, seeing that in a country like mine is one of the most mesmerizing experiences you could ever have. It put us all in the same place at the same time looking to enjoy the same product, if you are from a developing country you will know what I’m talking about, for the first time in my life I’m buying something here that not only almost everyone CAN but WANT to buy along with me. That scenario in a mostly-non-inclusive country is a magnificent moment for the mind-set change we need so badly.

The HUAWEI Dance

It’s not the first time we see this. Huawei technologies had the same patron  as “the Economist” mentioned “The rise of domestic firms such as Huawei is a disaster for the Multinationals”. Established in 1988 Huawei basically focused on markets that western companies ignored for years. Nowadays it is a main competitor of huge multinationals like Cisco Systems.

Huawei strategy started by producing very simple mobile phones that provided the basic functionalities the average costumer asked for. This is how they managed to penetrate markets of developing countries like Zimbabwe, Nigeria, Pakistan, Kazakhstan and Turkmenistan that no one was interested in, aiming for the underdogs you could say.

Huawei and OPPO that are popular among the Kenyans today. (Photo: Ken Banks, Flickr)

At a major mobile phone event held in 2007 at Johannesburg, they presented one of the models they were marketing in Africa, the basic mobile phones were in most of the attendees hands. How come?  Well, they gave free phones to every person at the event, daring their western competitors to follow suit. That’s how aggressive Huawei marketing tactics became a company standard. (1)

Both Huawei and Tostao understand how to develop strategies to place their products and value in developing countries for masses who are unexplored by most western corporations. The problem is once the western corporations realize the jeopardy represented by the upstarts it’s too late to react. The usual “too little too late” scenario has taken effect.

Tostao Starbucks 2“…for the first time in my life I’m buying something here that not only almost everyone CAN but WANT to buy along with me, that scenario in a mostly-non-inclusive country is a magnificent moment for the mind-set change we need so badly.”

The business model inception is right there, it’s just a matter of time until more and more companies understand this and put in motion this whole concept of inclusiveness in developing countries corporate DNA.

So how about doing this for Hamburgers, Tacos, arepas (4) or even Financial services? (Read my Blog about Blockchain) anyone?

Update: Starbucks surely is getting short in their stores projection, according to their 2013-14 plan (2), they will be opening 50 stores in Colombia by 2019, it’s late 2017 and they have openened 13 stores so far (3), their projections were before Tostao opened their first store in mid 2016.

Killing is not the same as DEATH, I do believe Starbucks is not going to die, for sure as an industry incumbent company is looking ways to digitize their business model and/or evolve and innovate, but that doesn’t change the share-shifting factor I believe is taking place.


I’m Phillip Stolen, which is Felipe Hurtado in Spanish: What say you?

(1) “Billions of Entrepreneurs: How China and India Are Reshaping Their Futures—and Yours.”Tarun Khanna, Publisher: Harvard Business School Press.



(4) Michael loves arepas, thanks for you kind help!

Blockchain and the “Inception Hack conspiracy”

Everyone is talking about Blockchain, for some people  it’s  the nerdiest-hype-tech word trending nowadays, for bankers and accountants could be as scary as Mr. Sandman himself, and for some others (like me) it’s just as intriguing and huge as the invention of the internet but, ¿What is exactly? and ¿What is the Inception hack conspiracy?.


Lets start by saying some concepts I’ve heard around, Blockchain is basically a ledger, it records transactions between parties, the identity of both parties can (or not) be private, however the transaction not so much, lets put it this way, your home address for instance  is public (transactions) but whatever happens at home is private (parties), every block contains information about transactions that are linked (chained) to another block and so on. So blocks record transactions that can’t be erased nor modified in any way, like the Genesis,  only creation is viable.

Since it’s public, anyone can have access to it, that being said the key element about Blockchain is that it doesn’t only generates copies of itself in every party of interest in realtime every time a transaction is performed, but every block is created based on the prior block information (your transaction history), this means that if there’s no “logic” according to the last transaction the block is not created,  so if anyone try to hack it, it would be necessary to hack all the peers copies and edit all the non-editable blocks at the same time , making the task basically imposible…ish.

¿So how does Blockchain affect us all?


Since every transaction is publicly shared, and all this records are copied in realtime to peers, the waiting time for every transaction is  basically reduced to none since all the intermediaries who usually validates the authenticity of every party and transactions are there no more. So the mere existence of banks, credit bureaus, accountants and even some lawyers procedures (contracts) are jeopardized by this technology.

However for some others the reality is quite different, the fact that cost*/time per transaction is zero allows parties to low their cost per service or product, and lets see beyond that, since every transaction is public you will know why a Chilean Syrah wine is more expensive than a Californian Malbec, not from the brand positioning perspective but from the actual cost of the operational effort, so yes, Blockchain value is about transparency.

The “Blockchain inception hack conspiracy”

So, here’s my theory, I’m not a data-programmer mogul so just bear with me for a second here. Let’s think about the Blockchain origins, the creator is supposed to be Satoshi Nakamoto, no one knows if that is a He, a She or even a “Them”, what we do know is that Blockchain was written for Bitcoins, but the creation itself, the genesis was the typical ” I’m gonna leave this here and slowly walk away” scenario, that’s pretty scary  since we do know how it works, but we don’t know who did it. We also know about the fact that apparently it’s un-hackable… ¿right?, at least for third parties but, can we say the same about the creators?

Captura de pantalla 2017-06-23 a la(s) 12.42.56 p.m..png

Think about this, Blocks can’t be edited, Each block needs validation from the prior Blog in order to approve the upcoming transaction, that means that the information of the new transaction has a reference from the prior block, that way the new transaction can be linked to the one before and so forth, then it’s copied (the whole thing) again and again to other users (peers) over the web, that’s how it works, so far, is solid as steel but, I just can’t stop thinking about the Inception movie…

The movie was about a group of people who were hired to place thoughts in the target minds  in order to make them believe that something that never happened, actually happened. That’s basically the whole concept of the movie, if you really remember something happened the most probable thing is that you BELIEVE that happened,  even if it is a LIE you just can’t know the difference, this is what they called an INCEPTION, it’s a thought in the past that HIT the present, changing the Future…

Now let’s get back to those damn Blocks..

ctrl-alt-del-oonal-getty-images-56a6f9fb5f9b58b7d0e5cd08What if at the creation, the genesis, the Inception of the Blockchain, the creator(s) coded a pretty little lie on the first block, a little, almost imperceptible something that has been copied and chained over and over in the system, something no one sees, because it is part of Blockchain already, or even sleep until some trigger event put it in motion…

Think about this:

  1. Blocks can’t be edited
  2. Blocks are copied to all peers every time a transaction is performed
  3. Blocks needs validation from the prior blocks to be created. 

So what if this “code” this “inception” is a command waiting to steal, change or even worst shut down the whole thing? ¿Is it crazy? I mean,  if the malware  is there from the beginning , none of the 3 rules above can save us.

Besides, ¿Who on earth wouldn’t take credit for such invention? . There’s much I don’t know about this life but I do know this is weird as h…

I’m Phillip Stolen, which is Felipe Hurtado in Spanish and I ask: What say you!?

*cost is zero based on current intermediaries , however the mining processing power do have some significative cost per  transaction. Thanks to Jairo for put this in consideration.