San José, Costa Rica, since 1956

Café Britt Bond Issue A Resounding Success

THE first series of bonds issued by pioneer gourmet coffee producer and distributor Café Britt, totaling ¢1 billion ($2.35 million), sold out before they went on sale on the country’s financial markets.

The bonds are part of two bond issues totaling ¢2 billion ($4.70 million) that Café Britt plans to sell to obtain funding for various projects aimed at expanding its distribution capacity.

The bonds were issued at 20.5% fixed interest over three years and divided into ¢1,000 ($2.34) titles. Individual investors were required to purchase at least ¢1 million in titles ($2,350).

The bonds begin generating interest on March 23 and will expire on March 23, 2007. The second series of bonds will be issued in March 2005, according to company representatives.

CONSIDERING them a sound investment, risk-rating agency Fitch Ratings gave Café Britt’s bonds an AA-(cri) rating, meaning they are “very high-quality investment-grade” bonds.

The bonds sold out immediately after their sale was announced. In fact, the demand surpassed supply by 50%.

“This means that while there were only ¢1 billion in bonds being sold, we received offers totaling ¢1.5 billion,” explained Guillermo Masís, president of Mercado de Valores, the firm in charge of selling the bonds.

STEVE Aronson, founder and president of Café Britt, highlighted the important role that acquiring private capital would play in the company’s future expansion plans.

“In 1997, we had a contract to sell our coffee at 150 Sam’s Club stores in the United States. That experience taught us a lot,” Aronson said. “It was then that we learned that to grow and play with the big ones, capital was needed. We then began a process of opening ourselves to capital.”

Before entering the market in search of investment capital, Britt went through several years of preparation and restructuring to ensure its venture would be a success.

THE company underwent five years of internal audits by accounting firm Ernst & Young (now KPMG), faced corporate restructuring, established a board of directors with members from outside the company and obtained ISO-9000 standard certification.

The company originally consdered the possibility of becoming an Initial Public Offering (IPO) – a publicly traded company – and set its sights on the NASDAQ Stock Market.

However, as a result of the volatility shown by U.S. markets and recent corporate scandals, such as the highly publicized Enron case, Britt managers changed their mind and decided to seek funds in the company’s home turf of Costa Rica.

IN the aftermath of corporate scandals, additional requirements were imposed on prospective IPOs that significantly increased the cost of going public, making it more difficult for small companies.

That’s the main reason why Britt chose to seek capital from Costa Rica’s financial markets, Aronson explained.

“This is where we started; it’s the place where people really know us,” he said.

The funds obtained from the bond issues will be used to transform a large warehouse the company recently bought between Santa Bárbara and Barva in Heredia, north of San José, into the company’s new international distribution center.

The center will be in charge of shipping coffee ordered through Britt’s hotline (1-800 GO BRITT) and Web site (, to clients all over the world.

ARONSON said he sees venturing into the markets for capital as a logical next step for the company that will make it possible for it to continue to grow at a steady pace and keep up with growing customer demand.

Obtaining investment capital, he explained, is one of the main problems the coffee sector faces.

He said what Britt has managed to do by specializing in value-added coffee products and actively seeking additional capital for expansion constitutes “a new road” for the coffee industry.

Aronson said he expects even more opportunities to obtain capital in the future, particularly if the U.S.-Central America Free-Trade Agreement (CAFTA) is approved.

“We believe that under CAFTA, the country’s financial markets will become more open,” he said. “This will make foreign capital increasingly accessible.”

CAFÉ Britt began operations in 1985 as a coffee buying, roasting and marketing company. Since then, the company has expanded its offering to include more than 3,000 products and now employs more than 300 workers.

The company has six main sources of income – sales from the 10 Costa Rican arts and crafts stores it owns, sales of specialty coffee to supermarkets, hotels and gift shops, direct sales (mail-order and online), sales of green (un-roasted) coffee, wholesale roasted coffee sales and its renowned Coffee Tour and theater.

The company has been successful at diversifying its sources of income to the point that last year, coffee was responsible for only 52% of the company’s total revenues.

The company says its gift stores are now its main moneymaking activity.

In 2003, Britt’s sales totaled $21.1 million – $7.5 million more than the previous year. During the last decade, the company has boasted growth at an average rate of 41.9% a year.


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