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Cuban Coffee: Rowland Takes Aim at the U.S. Hispanic Market
The Tea & Coffee Trade Journal / February 2005

By Larry Luxner

"There is nothing Cuban about Cuban coffee," the alternative newspaper Miami New Times recently observed. "The beans are grown in Brazil or Colombia, the coffee machine is made in Italy, and the person who serves it to you from a sidewalk cafeteria is most likely going to be from Nicaragua, Argentina, or anywhere else but Cuba."

Even more likely is that the brand of coffee you're served belongs to Rowland Coffee Roasters, a family business that today roasts 80% of all espresso coffee sold in the United States.

The company is owned by José A. "Pépe" Souto and his three sons, José Enrique, José Alberto and Angel. The family traces its roots to the central Cuban province of Sancti Spíritus, where it has been growing coffee since the 1820s.

Business prospered until 1959, the year Fidel Castro and his band of revolutionaries overthrew the Batista regime and established a Marxist government in Havana. The Souto family emigrated from Cuba in October 1960, shortly after Castro nationalized the island's coffee industry and forced most private entrepreneurs out of business.

"After the Bay of Pigs invasion in April 1961, we realized we weren't going back to Cuba, so my father started the coffee business here in the U.S. He began selling coffee door to door," said José Enrique Souto, the company's vice-president for sales and marketing.

"At the time, I was 17 and had a driver's license, so I helped my dad. Then I enrolled at the University of Miami and my two younger brothers began doing the same thing, delivering coffee all over the city," he told The Tea & Coffee Trade Journal in a recent interview.

At UM, Souto studied marketing and business administration, and in 1967, his father purchased Rowland Coffee Roasters, which was the owner of Café Pilón, the family's main competitor in Cuba.

"It was like una hormiga contra un elefante (an ant versus an elephant)," said Souto. In 1974, he rejoined the family business and began acquiring other local firms such as Café Estrella and Café Ideal.

But the company's biggest acquisition didn't come until February 2000, when Rowland purchased Tetley USA's espresso coffee business for an undisclosed sum. That buyout added Café Bustelo, Medaglia D'Oro, El Pico and Oquendo espresso coffees to Rowland's growing portfolio.

Today, Rowland has 250 employees and annual sales of around $75 million. In 2003, the company ranked No. 56 in the Hispanic Business top 500 index.

It owns Bustelo and Pilón, the No. 1 and 2 brands of espresso in the United States. Likewise, Medaglia D'Oro is the nation's leading Italian espresso brand.

Rowland's market is nationwide, though the company's strongest concentration is in urban markets like New York, Miami and Chicago — cities with large Puerto Rican, Cuban and Dominican communities.

José Enrique Souto, now 62, says Rowland Coffee roasts about 25 million pounds of coffee a year. The company occupies 60,000 square feet of production space, another 60,000 square feet for storage and 22,000 square feet of office space.

It exports coffee mainly to the U.S. commonwealth of Puerto Rico, which buys around a million pounds a year, followed by the Dominican Republic and Central America.

"In Puerto Rico, coffee imports are government-controlled, so we have to pay a very high duty, around $2.50 a pound, to ship coffee there," he said. "Our product has been accepted extremely well by the Puerto Rican community. Café Bustelo is like a Puerto Rican icon."

That brand dates back to the 1920s, when it was introduced by Gregorio Bustelo — a Spaniard who went to Cuba, learned the coffee business and established himself in the Bronx. Both Bustelo and Goya owe their success to the large waves of Puerto Rican immigration to New York in the 1940s and 1950s.

"The market in the Miami area is dominated by Cubans, so the Cubans have pretty much dictated how to drink coffee here," Souto said, noting that 95% of the restaurants and cafes along Miami's Calle Ocho (Southwest 8th Street) use either Pilón or Bustelo.

"We do very well in the Cuban community, as we do wherever Caribbean Hispanics live. And as other Hispanics emigrate to the United States, they get used to drinking our type of coffee."

Souto attributes Rowland's success partly to its use of its highly specialized roasters, manufactured by Italy's Scolari.

The company started with one Scolari roaster in 1991; now there are four six-bag roasters on the production line. The machines, which roast 800-lb. batches, are now fed from a Scolari green coffee silo system.

"The system is completely computerized for stocking of the silos and feeding of the roasters," explained company sales representative Howard S. Weiss of Marlton, N.J. "The roasts follow a curve using a process called slope roasting."

The Scolari roasters cost about $1 million each, and can handle 3,200 pounds of beans per hour per roaster.

"We picked Scolari probably about 15 years ago," said Souto. "At the time, we were using American roasters, and we discontinued them to go with Scolari. We have been extremely happy with their products. It's an excellent product that has excellent backup, and we have never had any problems with service."

Souto said Rowland's business is 65% brick bags and 35% cans. Its biggest customers are the Publix, Pathmart, Shoprite and Winn-Dixie supermarket chains. Retail prices fluctuate from $1.99 for a 10-oz. bag to as high as $4.00 per pound in some areas of the country. In Puerto Rico, Rowland's coffee brands go for around $5 per pound because of protectionist policies aimed at supporting the island's local coffee industry.

Meanwhile, coffee production in the land of Souto's birth continues to deteriorate.

Cuba's 2002-03 coffee crop produced only 14 million kilograms, which was 11% lower than the previous year's crop. And a prolonged drought in eastern Cuba means the next coffee crop might even be lower than that.

Some 90% of Cuba's coffee comes from eastern Cuba, another 8% from the central provinces, and the remaining 2% from the western province of Pinar del Río. Coffee no longer grows in the deforested and exhausted soils in the plains and hills around Havana.

"The climate conditions of Jamaica and Cuba are very similar, so their coffee should be of very good quality," said Souto. "The problem with Cuban coffee is not with the beans, which are excellent, but with how they make it. They blend it with all kinds of stuff that's not coffee. It's definitely an adulterated product."

Interestingly, he said, "during the 1970s, all the coffee brands in Cuba disappeared, and the only brand kept by the government was Pilón."

Says Souto: "Once the Castro situation is resolved and we have a free country, we will definitely look at Cuba as a major part of our future business. The problem is that there's very little good coffee. I've tried coffee roasted in Cuba, and it's terrible. So we're going to have to teach them how to drink coffee again."

Despite Washington's long-standing embargo against the Castro regime, roasters like Rowland could now sell coffee to Cuba if they wanted to. The Trade Sanctions Reform and Export Enhancement Act (TSRA) allows U.S. companies to ship food commodities to Cuba on a cash basis only.

Since TSRA's passage in 2000, Alimport — the Castro government's food purchasing agency — has spent over $1 billion on U.S. commodities, mostly soybeans, grain, frozen chicken, edible oils, wheat and corn.

Yet it's unlikely Rowland will ship even one coffee bean to Cuba until Fidel Castro is gone from the scene.

"We came here as political exiles, because Castro took our brands, our products and our homes and kicked us out of the country," Souto said. "We won't go back there as long as Castro or his regime is in power. Once he's gone, we'll be the first in line."

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