Lavazza Group Ambitious To Open 1000 Outlets In China By 2025
The first flagship outpost for Lavazza opened in Shanghai last year, and they’ve added many more coffee shops across the country since.
The Turin-based European coffee company formed a joint venture with Yum China (YUMC) a year ago, and it seeks to benefit from Yum’s supply chain and logistics infrastructure as well as their knowledge of the local market.
Yum China currently has exclusive rights in mainland China to popular restaurant brands including KFC and Pizza Hut as a local operator. Yum owns 65% of the partnership while Lavazza holds the rest. Their partnership involves injecting $200 million into the venture to fund growth.
According to Mordor Intelligence market research, the coffee market in China should grow at a compound annual rate of more than 10% through 2026. Lavazza seeks to capitalize on this expanding market to rival American coffee giant Starbucks (SBUX).
The Seattle-based coffee company first trail-blazed China’s untapped market in 1999 when they opened their initial store in Beijing. Though it took more than a decade to entice the historically tea-drinking nation, Starbucks currently has over 5000 stores operating in China and they intend on reaching 6000 by the end of 2022. China’s COVID-19 resurgence hurt Starbucks sales by 7% in fiscal Q4 earnings.
Domestic favorite Luckin Coffee (LKNCY) still manages to operate around 5,259 stores in China, though it might take some time for Luckin’s management to repair their credibility with investors. Thirsty consumers in China’s busy working class will welcome the competition for the best cup of 'Joe' in China.
Investors will have to see if Starbucks can retain its dominant market share while competing with Luckin as Lavazza enters the market to shake things up.
Disclaimer: This article's content is intended to be used solely for informational and educational purposes, and not as investment advice. Always do your research and consider your personal ...
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There’s only one #Luckin in the area of China where I live part of the year, that I haven’t yet hit, so I wanted to drop by for an order count. All the others in the area open between 7am and 8am, but this one opens at 10am, which I found curious and obnoxious. Well, turns out it’s in a mall, and that’s what time the mall opens. Mystery solved. Anyway, my plans changed when, immediately upon entering the mall I found an Algebraist, one of the newer boutique coffee companies to hit China. I was very intrigued and had to check it out. Algebraist is in a prime location. Right at the entrance to the mall, which is just next to a subway stop. Gotta be high rent. In contrast, the Luckin is buried in the basement.
There’s a LavAzza opening right across, showing you just how insane this flurry of openings is. LavAzza is an interesting story. It has been common for almost two decades to see shitty coffee shops and hotels offering LavAzza coffee. It seems the practice has been to advertise having the beans, but then murdering them in the brewing process. Thus, I have a pretty bad impression of the brand, and I associate it with horrible places like C Straits. I’d love to learn more about the history of LavAzza in China, because in my mind, they have 100% botched their strategy. Only now do they decide to open shops? Too late, guys.
Agree with what you said about the treatment of Lavazza coffee. Aside from the in-store macchiato I mentioned, the only other coffee I’ve had of theirs has been from people who’ve bought their beans and brewed at home. Sadly, my experience with that has never been good. Somebody pulls that familiar can with the logo out, and my heart sinks. I know it’s not going to be good.
Years ago I was researching espresso machines and discovered that the best ones, like the La Marzocco, can draw out flavors from a bean that other machines (or processes) can’t and that’s why La Marzocco’s are often used in competitions.
The point being, if I’m doing pour-overs at home, an espresso might not be the best test for my at home results. Anyway, long ramble to say I’m not interested in Lavazza coffee beans.
Yep, you nailed it. Agree with all of that. And actually, it’s pretty common these days in China to see tiny unassuming independent shops popping up with a La Marzocco machine. Probably cost more than everything else in the store combined, but the equipment is important.
I’ve had a good macchiato at a Lavazza in New York City, but their store presence here in the states seems limited, even in NYC.
Also curious what their coffee offerings will be in China. If memory serves, they typically sell a dark rich coffee. Not sure if that aligns with Chinese tastes.
Everyone is working the "credibility with investors" issue. #Luckin needs a Wall Street Journal article and a CNBC spot with the lead JPL explaining why this is safer than any Chinese stock investment in terms of validity of $LKNCY financials.