Brewing more coffee for India

When Giuseppe Lavazza speaks about coffee, it is with a sense of pride and knowledge that comes from decades of learning. Few people understand coffee better than the Lavazzas, now into brewing for close to 116 years.

The Lavazza brand of the sixth largest coffee roaster globally, Luigi Lavazza S.p.a. with revenues of €1.13 billion, speaks for itself. Now it is the fourth generation managing this family business across the globe, nurturing ambitions to enter new markets and, possibly, make India its second largest market after Italy, which contributes to nearly 60 per cent of total sales.

For Italians, coffee is not just a beverage. It is a way of life, consumed several times a day, practically on every occasion, not just for one's own enjoyment and refreshment but to socialise, says Lavazza.

“In fact, we are keen that the Italian way of coffee sipping becomes popular in India too and its consumption goes up gradually, at offices, public places and homes. The key here is to popularise different ways of making coffee to suit individual tastes,” says Giuseppe Lavazza, Vice-President and Marketing Director of Luigi Lavazza.

“You see, Italians consume about 6 kg per year per person as against 80 gm in India. This shows there is so much potential for us to grow the business here. This is not going to be easy. It will take at least five years to consolidate and expand presence,” he says.

The Italian coffee company, which has four manufacturing units back home and a small one in Brazil, has announced plans to set up a unit at Sri City in Andhra Pradesh, about 60 km from Chennai. This facility, along with the existing chain of cafes, will play a major role in its business plans.

On whether they would consider an entry into the tea business, Lavazza says, “Definitely not. We prefer to do just the coffee business. There is so much scope to grow this business.”

The Lavazzas bring rich history and heritage to their business. The company traces its origin to a small grocery store opened by Luigi Lavazza back in 1895 at Via San Tommaso in Turin, Italy. The small shop that specialised in roasting and selling coffee gradually expanded. While emphasising organic growth it made a series of acquisitions, including Barista Coffee Company Ltd and Fresh & Honest Café Ltd in India in 2007.

“In 2010, we acquired Italian Ercom, the Onda chain of coffee shops in Bulgaria and the Argentine Coffice, culminating in the acquisition of an approximately 7 per cent stake in the American company Green Mountain Coffee Roasters. Lavazza operates with 11 direct subsidiaries globally,” says Marco Lavazza, Development and Acquisition Manager.

“If the acquisition of Barista Coffee and Fresh & Honest helped us enter India in phase one of the business, the setting up of the new manufacturing unit will mark the second one. With this unit, we will be able to address the regional market by making India a business hub. We are keen that India become the second largest market after Italy within five years,” he says.

Speaking passionately about coffee and the business potential, Giuseppe Lavazza says, “Barista Lavazza has over 200 espresso bars in 30 locations in India. We plan to double this number within the next three years. Thus far we have invested over €100 million in the country and plan to invest €20 million in the new plant.”

“These investments will be crucial for growth. Once the new plant is operational, the income generated from it would be ploughed into the expansion of coffee bars. Apart from marketing efforts, we see these coffee bars playing a crucial role in popularising our brand and Italian coffee drinking ways,” he said.

So will they consider roping in a brand ambassador for popularising their brand? Maybe some time later. “We do this in several markets, though nothing has been planned as yet on this front,” he explains.

“We are also considering setting up Lavazza bars. The first one will come up in Delhi shortly. These bars help popularise our coffee products and brand,” he says.

In India, Fresh & Honest, which is now part of Lavazza, is a one-stop shop offering complete beverage solutions with its AVMs (automatic vending machines), roasted coffee beans and other supplies. Along with the Barista chain, this will play a role in reaching out to offices and through FMCG chains.

The cost of coffee beans has been going up lately. “We expect a tough year ahead again. But the sale price is not hiked. We try and balance the price hike and sale price by close monitoring. One of the focus areas for the Lavazzas has been to engage the local communities. We already source coffee beans from plantations in India. This could go up over time,” says Giuseppe Lavazza.

The country has more than 1,200 coffee outlets across various brands. The recent announcement of Starbucks making its India entry is seen to be stirring up the market further. But Giusuppe Lavazza believes there is great potential for growth as the number is quite small for a large population. He says, “We welcome competition. Every market we are present in, there's competition. This helps improve the quality and levels of service. This also provides us an opportunity to differentiate ourselves from the rest.”

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