The Italian coffee chain may find the going tough in an already crowded market.
To appeal to the crème-de-la crème, Italian coffee roaster Lavazza is here with a new format Espression. The first of its speciality format recently unveiled in Delhi, will be gradually extended to Bangalore and Mumbai. The company is targeting 30 such stores over the course of three years. Unlike the company’s other international retail formats like Caffe di Roma (Spain), Onda (Bulgaria) and Barista (India), with Lavazza Espression the ambition is to develop a global coffee retail brand.
In India, Lavazza Espression will continue to co-exist with Barista Lavazza and its premium extension Barista Crème. Capuano dismisses any cannibalisation with Barista’s premium format. “Unlike Crème, with Lavazza we will not adapt the taste to the Indian audience as we want to provide a truly international experience,” says Attilio Capuano, Asia and Pacific Director, Lavazza. With Espression, the offering in India will be similar to the menu in its 30 stores across the globe, and prices will be 15-20 per cent higher than Barista Lavazza. To ensure a consistency in taste, Lavazza will train staff at the Fresh & Honest (its coffee vending business acquired by Lavazza in 2007) training centre in Chennai.
According to Capuano, the most critical part of the Lavazza Espression strategy is to identify the right location for the retail footprint. Upscale locations within the metros and zones like international airports will help target expatriates and Indians who are exposed to coffee culture in the West. This will be significantly different from the locations of Barista Lavazza, who is primarily targeting youth. Technopak analyst Purnendu Kumar agrees location is key for premium coffee retailers. “Such retailers who are targeting the office going crowd need to be in close proximity to where the consumer is as these people do not prefer to walk a distance to pick up a cup of coffee,” he says.
For the Turin-based company, increasing retail presence is one of the ways Lavazza is trying to establish ground in India. Today, 65 per cent of the business in India comes from its Fresh & Honest, while 45 per cent comes from Barista and Barista Creme. However, with the new format, the revenue split might get skewed towards the retail business, believes Capuano.
However, making its presence felt is not going to be easy. For one, the market is already crowded with several players expanding their presence. While Tata Global Beverages is bringing the Seattle coffee giant Starbucks to India, the ambition of homespun chain Cafe Coffee Day with a network of 1180 cafes in the country is no less ambitious. It is experimenting with upscale coffee outfits like Coffee Day Lounge and Coffee Day Square. There are international chains like Costa Coffee, The Coffee Bean & Tea Leaf, Java Coffee and Gloria Jean’s Coffee which are ramping up presence in India.
Also, Barista’s track record in India, also might leave us hesitant. For one, the company has changed hands a few times, leading to an inconsistency in management policies. Founder Amit Judge of Turner Morisson sold 65 per cent to Sterling’s promoter C Shivasankaran and the rest to the Tatas. Later, Tatas too exited the business handing over the entire ownership to the NRI businessman Shivasankaran.
“The other worrying factor is that the company shut down close to 40 Barista stores across India, perhaps because they were not doing well,” notes an industry insider who does not wish to be named. “Barista Crème too has not done well, given the differentiation from the base chain was hardly there,” he adds. So, bringing in this new format, where there is higher level differentiation could perhaps put their past behind them.
Lavazza, on its part, is serious about India. This is evident in the fact that it is setting up a new production facility in the country, which will be up and running by 2012. At an investment of 120 crore, the facility, which will be the first one outside Italy, will allow the company better margins which will translate into price advantage for the consumer. Currently, there is 100 percent import duty on green and roasted coffee.
Once the manufacturing facility is up, the plan is to develop 100 per cent Indian coffee blends which can be sold through Fresh & Honest, and later exported to other markets.
source: http://www.business-standard.com / Home> Mgmt & Mktg / by Preeti Khicha & Dilasha Seth / Bangalore, New Delhi / November 23rd, 2011
