Mexico’s Alsea Marks 20 Years of Operating Starbucks, Plans to Continue Expansion

The operator of the coffee shop franchises in Mexico now also operates branches in Argentina, Chile, Colombia and five European countries

Alsea plans to open 613 branches of Starbucks and Domino's Pizza by 2025, the company's two most profitable brands.
September 05, 2022 | 05:01 PM

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Mexico City — It is no secret that Starbucks Coffee is the leading coffee shop chain in the world, but what may surprise some is that a Mexican company is among the main operators of the brand in much of Latin America and Europe. Alsea, the restaurant company behind brands such as Dominos Pizza and Vips, has been operating the ‘mermaid’ brand for 20 years, a relationship that has not been without controversy and challenges.

The Mexican company currently has 1,591 of the nearly 35,000 Starbucks-branded units in its portfolio worldwide. Mexico is one of the 10 countries with the most Starbucks in the world; as of the end of June, there were 753 coffee shops in the country.

Building confidence

Alsea began operating Starbucks with four coffee shops in Mexico in 2002, with the arrival of the branches led by a company in which Starbucks Corp. itself had an 18% share in Café Sirena, the company created to operate the brand in the country.

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The Chicago, US-headquartered beverage giant, founded by Howard D. Schultz, and which receives royalties from Alsea, was initially reluctant to allow the brand to be operated without its participation, and the initial association considered the use of the brand until 2021, as well as the option for Starbucks to acquire up to 50% of Café Sirena between 2007 and 2008.

However, Starbucks did not opt for that alternative, and the company soon began to explore, together with Alsea, the markets of Brazil - a country from which Alsea exited in 2010 -, Argentina, Chile and Colombia.

A decade and 400 stores later, Starbucks had the confidence to leave the operation to Alsea in its entirety, which in 2013 paid $50.3 million to control 100% of Café Sirena, which now has the use of the brand until 2035.

Starbucks said the sale was “part of the ongoing evaluation of appropriate ownership structures in international markets,” in a statement filed to the US Securities and Exchange Commission (SEC) in 2013.

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Soon after, Alsea also acquired Starbucks’ stakes in Argentina and Chile, and also established an alliance with Grupo Nutresa to open coffee shops in Colombia, the land of the renowned Juan Valdéz coffee shop chain.

The European expansion that Alsea activated in 2018 with the purchase of Spanish company Grupo Zena, and in 2019 with the acquisition of the Starbucks business, have allowed it to manage the brand in Spain, France, Holland, Belgium, Portugal and Luxembourg.

Starbucks and Alsea, between challenges and controversy

Alsea and Starbucks have faced challenges however, such as environmental issues when the company’s operating model incurred the excess use of water, although since then the two companies have implemented measures to control this and other environmental impacts.

Other challenges have been more of a business nature. Brazil has been a market that Alsea has tried to break into through various formats, including Starbucks, without success. Although the Mexican company initiated the expansion of the coffee shop chain in that country, in 2006 it decided not to continue.

In 2010, Alsea sold its minority stake to Starbucks, arguing a change in its strategy to penetrate the Brazilian market, where it sought to have a majority stake, thus achieving greater control and influence in its operations.

The arrival of Covid-19, shortly after taking on debt to acquire Starbucks’ European operations, was Alsea’s most recent headache.

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Both Alsea and Starbucks saw traffic in their stores plummet during the first months of the pandemic, and activated measures to boost consumption by taking the products directly to consumers’ cars and even to their homes.

The pandemic also generated labor issues for Alsea in Mexico, given the need to control costs due to the decrease in revenues. Starbucks is currently going through its own labor problems, with unionized workers demanding better conditions.

After the pandemic hit, Alsea pointed out in conferences with analysts and investors the recovery of its sales for Starbucks, but has warned that it still faces challenges in terms of commercial traffic in city centers.

“That’s the only one that’s causing a little bit of a problem for growth. But all the other five [sales zones], airports, other channels, neighborhoods, malls, are above our orders from last year,” said Armando Torrado, Alsea’s new CEO, in July.

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The Mexican company is currently fighting a court battle over taxes with the Mexican government, and which temporarily led to the freezing of the company’s bank accounts.

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In the midst of this conflict, its former CEO, Fernando González, left the company in July, only six months after formally assuming the position. The reins of the company were taken again by a member of the Torrado family, founder of the Alsea.

Looking ahead, Alsea is preparing to open 613 more branches of Starbucks and Domino’s Pizza by 2025.