Coffee chain Lavazza to set up unit in Andhra Pradesh SEZ

Italian coffee major Lavazza is gearing up to expand its market share in the Indian coffee market. The company is setting up a manufacturing facility at Sri City, a special economic zone in Andhra Pradesh, with an investment of 20 million euros.

The facility, which is expected to get operational in mid-2012, would have an initial capacity to manufacture 1,100 tonnes of coffee with an option to expand it up to 1,600 tonnes.

“We want India to be our second-largest market. The Indian coffee market has the potential to scale up further since the coffee consumption is increasing,” Giuseppe Lavazza, vice-president of the Lavazza group, said.

The group currently records about 1.13 billion euros in revenues and about 60% of that comes from the Italian market, he said. “We get about 40% of the revenue from overseas market. Currently, France is the second-largest market for us with about 100 million euros in revenues and we hope to make India the second-largest market for us in about five years,” he said.

Lavazza, a coffee company set up in Turin in Italy in 1895, currently operates in about 90 countries. The group made its foray into the Indian market in 2007 by acquiring Barista and Fresh and Honest Cafe Ltd. Fresh and Cafe has a facility to manufacture 960 tonnes in Chennai. With the new facility in Sri City taking shape, the company is planning to shift the existing facility out of Chennai to the new location.

“We are selling about 800 tonnes of coffee in India now and the market is growing at the rate of about 10%. The company’s sales are growing at about 10-15%,” he said. The company records about 30 million euros in revenue from the Indian market.

The company records its sales in two categories - home and away from home (AFH: including food service, vending and coffee shops).

In Indian market, the company is yet to make inroads into the home segment with about 65% sale in the AFH segment. While the Barista network of coffee shops helps the company cater to the retail market, Fresh and Honest provide the company access to several luxury hotels.

“We are a pure coffee company. We are not into instant coffee but focus only on espresso segment. We have a range of coffee machines that are popular in the home segment which come with coffee capsules. We have a strategy to expand our presence in the home segment in India by offering the complete range of our products,” he said.