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Lavazza departs India coffee chain market with sale of Barista

By RJ Whitehead , 14-Aug-2014

Lavazza departs India coffee chain market with sale of Barista

Yet another international firm has bid farewell to the Indian food service market after Lavazza sold its Barista Coffee Co., India’s oldest coffee chain, to local company Carnation Hospitality.

Turin-based Lavazza said it had decided to sell Barista, which it bought in 2007 and has since expanded to 190 outlets across India, to focus on its core coffee business during a period of realignment and restructuring. 

The company has not disclosed any further details of the transaction, though it has stated that all Barista coffee shops will continue to use Lavazza coffee beans thanks to a long-term supply agreement between the two companies.

"The decision to move out of Barista has been taken accordingly with the global business guidelines of the group to no longer manage directly the coffee shop business," Lavazza chief executive Antonio Baravalle said in a statement.

Changes in the market required us to relook at our commercial penetration methods, and as a result, Lavazza has decided to concentrate on coffee in the region.”

Trouble on the home front

Lavazza, the world’s seventh biggest coffee processor by sales, is currently in a battle to remain independent. According to Baravalle, the company is aiming to boost revenue by almost 50% over the next 10 years.

Unlike Di Bella, another international coffee chain which last year moved to dissolve its joint-venture with local promoter Sachin Sabharwal following a furious row between both parties, Lavazza’s departure seems to be based on market and corporate conditions, and the company sees India as a pivotal market during turbulent times on the home front.

Indeed, Lavazza, a family owned business, was founded in 1895 by Luigi Lavazza, has seen first-hand the rise in popularity of Western-style coffee shops at a time when other operators, including Starbucks, Gloria Jeans and Costa Coffee, have joined the market to compete with ubiquitous local brand Café Coffee Day.

In fact, India continues to remain an extremely important market to Lavazza’s international operations, and it is strategic to the brand’s overall growth initiatives across the world,” Baravalle added. 

Furthermore, we will continue to develop our presence in the country through away-from-home business and through investments in the Sri City plant, our first and only production facility outside of Italy.

Carnation takes control

Carnation Hospitality is a unit of packaging and food services company Rollatainers. It will also acquire Lavazza’s business in other countries, including the United Arab Emirates, Sri Lanka, Nepal, Bangladesh and Myanmar, where the chain has a number of outlets, according to a filing to the Bombay Stock Exchange.

Stakes in Barista, which was founded in 2000, have been sold several times, with major shareholders at times including Tata and Streling Infotech. 

“Carnation now fully owns the Barista brand in India with no ongoing franchise or licensing obligations to Lavazza,” Rollatainers Ltd said in a statement.

India’s food service coffee market is estimated to be worth around US$300m, Currently, there are 3,100 cafes in the country and the market is growing at a rate of 20% in value, according to an October 2013 report by consulting company Technopak Advisors.

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