INTERVIEW - Italy's Lavazza bets on India, Brazil for growth

Thu, Nov 5 10:45 PM

Enlarge Photo A couple drink coffee at the 'International Coffee Festival 2007' in Bangalore February 24, 2007.... Slideshow: World in pictures: November 05

Italy's leading coffee roaster Lavazza plans to make India and Brazil its hubs for expansion in the Asia Pacific region and Latin America where demand is growing, unlike its saturated domestic market, its chief executive said.

Lavazza, which operates in more than 90 countries, plans to earn half of its revenues abroad in the next three years, up from about 40 percent now, but without losing its market share in Italy, Lavazza Chief Executive Gaetano Mele said.

In 2008, Lavazza's revenues rose nearly 9 percent to 1.12 billion euros ($1.66 billion).

"Espresso consumption is growing abroad. In Italy we don't have significant possibilities for further growth because we already have considerable market share there," Mele told Reuters in a telephone interview on Thursday.

Lavazza sees its main growth markets in India, China and elsewhere in Asia as well as Latin America and Eastern Europe where consumption of espresso coffee has been growing and at a faster pace than in traditional west European markets, he said.

The company, the world's sixth-biggest coffee roaster by purchases of green coffee, is looking at acquisitions in those three main growth areas and plans to build its own coffee roasting plants in India and Brazil.

"We want to grow abroad following the markets (growth there) ... we want to move as close as possible to our consumers and we will create modules (flexible capacity plants) which will grow with the market growth," Mele said.

WIDE REACH

Lavazza has focused its foreign expansion efforts in India which would become its platform for reaching as far as Australia in the future, he said.

India has a strong tea-drinking tradition and the 94,000 tonnes of coffee consumed in 2008, according to India Coffee Board (www.indiacoffee.org), is tiny for its 1.1 billion population.

But Lavazza has decided to build a coffee plant there after it bought India's second-biggest coffee shop chain Barista Coffee Company and Indian coffee vending company Fresh & Honest Cafe in 2007 for 100 million euros.

"It is part of a very long-term strategy ... (India) can become an excellent growth possibility in the long term," he said adding that Lavazza expects more young people in India will take to coffee.

Lavazza is investing 5-7 million euros in the new plant in Sri City in the Indian state of Andhra Pradesh. It will have an initial capacity of 1,100 tonnes a year in 2011 which could be raised to 1,600 tonnes by 2014 if demand grew.

It would supply the Indian market first and then the entire Asia Pacific region, Mele said. Lavazza aims to use only Indian green coffee for its new plant if it finds enough local coffee matching its quality standards, he said.

It plans to follow a similar path in Brazil, the world's biggest coffee producer, where it bought two small coffee vending and distribution companies in 2008 and is looking for a site to build a coffee roasting plant under an investment plan comparable to the one in India, Mele said.

"We think to create ... a hub not only for Brazil but for all of Latin America, and then maybe, why not, for the entire American continent," he said without giving more details.

(Editing by Sue Thomas)

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