This expansion occurs within the context of a growing US coffee market. According to the United States Department of Agriculture, the US is projected to increase its coffee bean imports by 800,000 bags, reaching 22.3 million. In 2023 and 2024, the primary suppliers of coffee beans to the US were Brazil, Colombia, Vietnam, and Honduras.

Data from the National Coffee Association (NCA) and Grand View Research indicates that 67% of the US adult population consumes coffee daily, with 45% of that group choosing specialty coffee. The consumption of specialty coffee has seen growth, particularly among younger demographics such as Gen Z and Millennials, with approximately 66% of adults aged 25 to 39 who are regular coffee drinkers having tried specialty coffee within the past week.

Sebastián Mejía, Vice President of International Business at Juan Valdez, stated, “The United States represents considerable market potential for us, due to both the high number of coffee consumers and the increasing consumer interest in innovation, experience, and sustainability.”

Current Juan Valdez store locations include Miami International Airport, the Florida Mall in Orlando, CityPlace Doral, and International Drive. The company has announced plans to establish new stores in Miami Springs, near Miami International Airport; Fulcrum Orlando, a business center; Wynwood The Dorsey in Miami; and Sawgrass Mills in Sunrise.

Juan Valdez was established in 2002 by the FNC and is named after the long-standing icon representing Colombian coffee. In 2021, the company received B Corporation certification, an achievement of its social and environmental performance. The company’s business model aims to provide added value to Colombian coffee growers through brand recognition and royalty resources generated from global sales.

Headline photo: A Juan Valdez Coffee Shop in Jardines mall, Llanogrande, near Medellín. (@ Loren Moss)

Finance Colombia has reached out to Rappi’s founders for their side of the story. Should they respond we will provide an appropriate update.

Case number 4:2019cv07415 filed in the Northern District of California names Jorge Uribe, Jose David Mendoza, Mauricio Paba Serje and Jose David Mendoza Macanaz as plaintiffs against Rappi, Inc., RAPPI S.A.S. and Simon Borrero Posada. First reported in Colombian business daily Dinero, the plaintiffs allege that they hired Rappi founders to create an app called Kuiky (Spanish spelling that sounds like “quickie” in English). According to the plaintiffs, they contracted with Imaginamos, a software firm founded by Rappi’s Simón Borrero in 2015 to develop the application.

The effort faced several delays, then according to the lawsuit: “By this time, however, the Kuiky creators had grown increasingly concerned about the repeated delays by the Imaginamos team and the service they were receiving from Imaginamos. Because of these delays and concerns, the Kuiky creators decided to discontinue their relationship with Imaginamos and to try to develop the Kuiky app and business in a different way. The last email between the Imaginamos team and the Kuiky creators is from April 23, 2015, and Plaintiffs are informed and believe and on that basis allege that Rappi S.A.S. was incorporated only days later on April 27, 2015.”

Plaintiff’s lawyer Nathalie Lozano Blanco told Dinero “the defendants had access to all the information of the business; they took the idea and developed the Rappi business model.” According to Lozano, charges have also been filed with Colombia’s prosecutor general’s office for unauthorized use of privileged information, violation of trade secrets, and violation of “moral rights of the author” (similar to copyright violation), and unlawful enrichment.

More Troubles For The Unicorn

Last month, Colombia’s Superintendencia de Industria y Comercio (SIC), similar to the Federal Trade Commission in the US ruled that Rappi had breached an administrative order regarding the company’s terms and conditions offered consumers, and legal violations regarding pricing and disclosure, guarantees, and dispute resolution.

Evidently, there have been mounting consumer complaints against Rappi, with a backlog mounting in Colombia’s consumer protection bureau. According to the SIC:

The decision was taken after evaluating more than 750,000 requests and 117 complaints filed by RAPPI users before the Deputy Superintendence for Consumer Protection.

In addition to the above, the SIC took into consideration the total of 472 lawsuits that the Deputy Superintendence for Jurisdictional Matters met in the exercise of the consumer protection action, of which 108 are active.

The government threatened Rappi with a fine of up to 1,000 Colombian monthly minimum wages, or just under$250,000 USD.

According to the SIC, the charges against Rappi are:

1. Alleged breach of the order related to indicate to consumers the source of the right of withdrawal and reversion of payment.
2. Alleged non-compliance with the order to adjust the clauses of the terms and conditions.
3. Alleged breach of the order to report on its electronic commerce platforms, the total price of the products.
4. Alleged breach of the order to establish clearly, in the cooperation agreements concluded with their commercial allies, the responsibility of each of the subscribers of the agreement regarding the effectiveness of the guarantee.
5. The presumed partial breach of the order related to provide its customers with requests, complaints and claims (PQR) mechanisms in the e-commerce platforms.

Backed by Softbank, the same Japanese investment fund entangled in the WeWork financial drama, Rappi is laying off over 300 employees, or 6% of its workforce, according to Axios. Just last year, Rappi was hailed as a Latin American venture capital success story, with the largest ever technology financing raise by a Latin American startup.

It is too early to tell whether the lawsuit has merit, but clearly Rappi has growing pains, to say the least. A backlog of complaints may indicate growing consumer dissatisfaction, and these actions only include Colombia; not the 8 other countries where Rappi operates. Time will tell whether the company will endure in the long-term, or if these legal actions and layoffs are signs of structural weakness and indicate existential threats.

Photo credit Felipe Balduino from Pexels

Founded in 2015, Rappi has emerged as the leading service app in the Latin American region, primarily offering on-demand shopping and home delivery of restaurant orders and products, including groceries across a range of categories, including medications and digital payment services. The investment will enhance Rappi’s presence in existing markets such as its home base of Colombia where it is ubiquitous in practically all urban areas and accelerate growth into additional markets throughout the Latin America, as well as into additional product and service areas.

“This is the result of very hard work by all members of our team which is absolutely committed to transforming the quality of life of Latin Americans. We will continue to invest in market-creating innovations to provide opportunities for millions in the region said Rappi co-founder and CEO Simon Borrero. “It is time for a technology-driven Latin America, and SoftBank’s support is essential to lead this transformation.”

Bolivian born Marcelo Claure, SoftBank Group’s Chief Operating Officer, CEO of SoftBank Group International and CEO of Innovation Fund, said, “Rappi’s founders have a bold vision to create the premiere multi-service ‘super-app’ for Latin America, improving the lives of millions in the region. In less than four years Rappi has become one of the fastest growing start-ups in Latin America. This rapid growth demonstrates the immense opportunity in the Latin American region. We are excited to be investing in this passionate team of entrepreneurs and believe Rappi will benefit from being a part of the greater SoftBank ecosystem.”

In 2018, Rappi expanded the number of products delivered by 700% and achieved 20% monthly growth in the seven countries where it operates. Additionally, Rappi was supported by Y Combinator in 2016 and reached unicorn status last year.

“SoftBank’s vision of accelerating the technology revolution deeply resonated with our mission of improving how people live through digital payments and a super-app for everything consumers need. We will continue to focus on building innovations for couriers, restaurants, retailers and start-ups that translate into new sources of growth,” said Sebastian Mejia, Co-Founder and President of Rappi.

In connection with the agreement, Jeffrey Housenbold will join the Rappi Board of Directors. SBG and the Vision Fund join existing Rappi investors DST Global, Delivery Hero, Sequoia Capital, Andreesen Horowitz and Y Combinator.

“We are investing ahead of an incredible long-term growth opportunity for Rappi. This rapidly-scaling company has the potential to expand far beyond its current business and become one of the most important technology companies in Latin America. By creatively addressing the unique market dynamics of the region, Rappi is building a robust technology platform of products and services designed to revolutionize the way consumers shop and live their lives, said Jeffrey Housenbold, managing partner at Softbank Investment Advisers.