“These are unprecedented times facing the coffee industry” – Lavazza Group Chairman, Giuseppe Lavazza

Giuseppe Lavazza became Lavazza Group Chairman in April 2023 | Photo credit: Lavazza Group

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Rising costs, geopolitical instability, supply chain disruption and extreme weather damaging coffee harvests around the world – there was plenty to preoccupy Giuseppe Lavazza when he became Lavazza Group Chairman in April 2023. 
 
Nevertheless, Mr Lavazza, who first joined the 130-year-old family business in 1991, is taking it all in his stride as he prepares the iconic Italian coffee roaster for a new era of global growth. 
 
Despite facing numerous headwinds, Lavazza is confident about the future and says optimism underpinned relentless planning and a carefully executed strategy will enable Lavazza Group to navigate an increasingly complex and challenging world.
 
“These are unprecedented times facing the coffee industry,” he says, acknowledging the additional €600m costs Lavazza Group has faced over the last two years following sky high coffee prices and operational costs. 
 
Continuing a longer-term trend, arabica futures rose to nearly $4,000 per ton in April 2024, with robusta also hitting a 29-year high the following month after drought hit production in Brazil and a prolonged heatwave damaged coffee crops in Vietnam.
 
“The green coffee situation remains unstable,” Lavazza says, adding that market speculation, particularly from hedge funds, has pushed prices higher a led to greater market volatility.
 
Lavazza Group posted record $3.1bn revenues in 2023 – a 13% year-on-year rise. However significantly higher costs contributed to a 17% fall in group EBITDA to €263m ($284m). Even so, Lavazza says the business will continue to limit price increases for customers. 
 
“We try to protect the supply chain and consumers. Our first priority is to keep quality intact and provide farmers with the income they need – even if the prices are high,” he says. 
 
Supply disruption is another major challenge. Attacks on Suez Canal shipping by Yemen-based Houthi militants has caused delays of up to four-weeks and a quadrupling of shipping costs as many vessels are forced to reach Europe via the Horn of Africa.
 
The war in Ukraine has also directly impacted Lavazza. The Turin-based coffee roaster managed an €80m business in Russia before Vladmir Putin invaded Ukraine, after which Lavazza Group took the prudent but costly decision to suspend operations in the country. 
 
Then there’s the strength of the US dollar, which has further increased costs – as have higher interest rates. “We have never seen such a spike in price as the trend right now,” Lavazza adds.
 

“Lavazza wants to play in every possible channel”

 
In a world of higher costs and growing geopolitical tensions, Lavazza hails Lavazza Group’s omni-channel global strategy as “unstoppable and ambitious.” To this end, Lavazza has transformed its global business to compete more effectively with giants such as Nestle and JDE Peet’s – and has big ambitions for the US market. 
 
“The US is a crucial market for the company. It’s our next big target and now generates around $400m revenues ­– but we aim it to get to $1bn in the next four years.”
 
To achieve this, Lavazza Group has been active on several fronts. The Italian coffee roaster’s acquisition of Mars Drinks’ Office Coffee Service (OCS) vending business in 2018 gave the iconic coffee roaster a vital foothold in the US self-serve market. 
 
“Large offices are a huge market for volume and convenience as employers ask associates to come back to workplaces after remote working during the pandemic,” Lavazza says. 
 
It’s a strategy that is also playing out in Italy, where Lavazza has agreed to fully acquire IVS Group’s expansive European self-serve coffee business, and in the UK following the acquisition of Scottish vending group SV24-7.
 
“Whether in the home, workplaces, vending or even branded coffee shops Lavazza wants to play in every possible channel,” Lavazza says, highlighting the recent expansion of its North America partnership with US coffee capsule giant Keurig. 

In China, another growth priority for Lavazza Group, a partnership with Yum China has seen Lavazza open more than 100 branded cafés and tap into the foodservice giant’s extensive quick-serve restaurant portfolio, which includes thousands of KFC and Pizza Hut outlets. 
 
“Many operators need to have a big coffee partner because they feel the pressure from competitors, whether that’s smaller coffee players or larger renowned brands. This is true in the US, but also in Middle Eastern markets like Saudi Arabia and the UAE, especially with new premium real estate and hotel chains. We at Lavazza are ready to step in a provide these services,” Lavazza says. 
 
Closer to home, Lavazza Group, like coffee businesses across Europe, is facing a new regulatory hurdle in the shape of European Union anti-deforestation legislation. EUDR will require businesses importing products to the EU considered ‘main drivers for deforestation’ – including coffee, cocoa, palm oil, paper and wood – to produce a due diligence statement that goods have not contributed to forest degradation anywhere in the world after 31 December 2020. 
 
Acknowledging the urgent need to protect forests and woodland, Lavazza says the legislation is “dramatic”, and that “the coffee industry is committed to reforestation… this was not considered by lawmakers.”
 
Lavazza also highlights that that only around 20% of the world’s 12.5 million coffee farmers are currently ready to comply with EUDR. With the 30th December 2024 deadline for compliance looming, that means millions, particularly smallholders, could soon lose access to the European market. 
 
“We blend coffee from many countries and EUDR means some could be cut off,” Lavazza warns, adding that many farmers in developing countries such as Ethiopia will be unable to implement EUDR requirements in the current timeframe, with broader trade from Africa and South America likely to face significant disruption.
 
Lavazza also points to the little-discussed fact that while EUDR applies to all green, roasted and decaffeinated coffee imported to the EU, soluble coffee will remain exempt, potentially giving a huge market advantage to instant coffee brands. 
 
Asked about the UK market, which generated revenues of £117m ($148m) for Lavazza in 2023 and where the new Labour government has pledged closer ties with the EU following Brexit, Lavazza is clear:

“Everything that can simplify the trading relationship and enable us to integrate better, faster and with stability and transparency is very welcome. We don’t like uncertainty.” 
 
Whether tapping into new sales channels in the US, supporting coffee growing communities through the Lavazza Foundation or sponsoring international sporting events, under Giuseppe Lavazza’s stewardship Lavazza Group has never been in a stronger position to chart an increasingly choppy global economy – and harness the incredible opportunities that its international omni-channel strategy presents. 
 

Giuseppe Lavazza is Chairman of the Lavazza Group