Lavazza may go it alone for coffee retail chain in India if Barista deal falls through

WITH market reports that the negotiations between the world’s sixth biggest Italian coffeee roaster Lavazza and the Sterling Group for the takeover of the latter’s Barista cafe-chain and Fresh & Honest vending outfit have hit a rough patch, there are clear indications that if the deal does not fructify, Lavazza could enter the Indian market on its own steam.
Speaking to ET on the sidelines of the 2nd India International Coffee Festival, Lavazza director Mario Cerutti refused to talk about the present status of the talks with the Sterling Group beyond confirming that the process of due diligence was on. Replying to a query on whether Lavazza could go it alone if there was any hitch in the negotiations with the Sterling Group, he, significantly added, “We are definitely interested in the Indian market. Two-thirds of our annual turnover of 900 million Euros ($1.2 billion) is from our packet sales of roast-and-ground coffee powder and the balance from our out-of-home (OOH) cafe and vending business. Our strategy in some overseas markets is to first register our presence through the OOH route and then build on that to sell our packet coffee.”
Significantly, Mr Cerutti noted that the bulk of Lavazza’s 110 cafes were not in its home market of Italy but in the Iberian peninsula countries of Spain and Portugal. “85 of our cafes are franchised and operate under the Cafe de Roma brand name. The remaining are self-owned and operate under the Lavazza brand name, with 16 cafes in Germany, six in the USA and four in Italy. We also sell our packet coffee under the Lavazza brand name in 24,000 outlets in 80 countries. India has always been on Lavazza’s radar, initialy as a souring base for coffee beans. Out of the 2.3 million 60-kg bags Lavazza imports every year for its operations, 12% is from India which offers a variety of coffee beans. We are now looking at India not just as a base for our raw material but as an important market for both our OOH operations and our R&G packet coffees.”
While the Amalgamated Bean Coffee Trading Ltd (ABCTL), which owns India’s biggest coffee-cafe chain Cafe Coffee Day, was also looking at buying Barista and Fresh & Honest, it is reliably learnt that ABCTL backed out because it felt that the price being sought was too much. “For that price, we could have added another few hundred cafes of our own,” an ABCTL source quipped. ABCTL opened its 400th cafe in Kolkata a few days ago.
Lavazza is also looking at launching a sustainability-coffee project in India. Lavazza has three such ongoing projects in Colombia, Peru and the Honduras where the rationale is to ensure production of quality beans in an environment where the growers’ socio-economic needs are all fulfilled.
courtesy:economictimes
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