Lavazza sales have been mirroring the overall market trend, averaging less than 1% annual growth since 2011 due to Italy’s low birth rate (1.4 children per woman) and stagnant economy (under 1% annual growth since 2011).
“Clearly Italy is not capable of delivering major sales growth for Lavazza any longer. Instead, the company has turned abroad,” Euromonitor drinks analyst, Matthew Barry, said.
Expansion in Australia and North America
Lavazza turned around years of sales decline in Australia by reclaiming the rights to it branded coffee, which it had sold off decades before, and invested in improving its distribution infrastructure, Barry said.
In addition, the Italian coffee maker remained committed to growing its presence in the US with an ambitious target of $300m in annual sales over the next few years through its first television campaign in the US market and new product development.
“In markets like the US, it is still positioning itself in the mid-to-upper price tier, with a primary focus on standard fresh ground coffee,” Barry said.
Lavazza has rolled out several new products over the last few years, including a sustainably-sourced ground coffee called ¡Tierra! and Jolie, its branded coffee pod machine.
In Canada, Lavazza recently acquired ethically-sourced Kicking Horse Coffee, whose products sell for a premium price, making it a good fit for Lavazza, Barry said.
"Canada is one of the fastest-growing coffee markets in the developed world and makes a lot of sense for a company like Lavazza that is struggling to grow volumes in the highly mature markets of Western Europe," Barry said.
Late participation in instant coffee
Lavazza was late to take advantage of the instant coffee trend and the company had no significant instant coffee sales share until 2014, according to Euromonitor.
The company acquisitions of Carte Noire and Merrild as well its own-brand, ¡Prontissimo! (launched in 2015), represent the bulk of its newfound instant coffee volume sales.
The addition of Carte Noire to its portfolio added over half a billion dollars in annual sales, making France the company's most important market outside of Italy, according to Barry. Similarly, the Merrild acquisition boosted Lavazza’s sales by $92m, making it the leading coffee brand in Denmark.
"The move to instant coffee is interesting because it was done very carefully in order to keep Lavazza’s quality image intact," Barry told BeverageDaily.
“For a long time Lavazza leadership mimicked the prejudices of Italian coffee drinkers in general, which held that instant barely deserved to be considered real coffee at all.”
However, such a prejudice against instant coffee is a liability when operating in markets with major instant consumption like Australia and the UK, Barry added.
"While Prontissimo may be held in low regard by Italian traditionalists, it has that premium image among the Australian and British instant coffee drinkers for whom it is really designed," he said.
Future global sales growth for Lavazza
In order for Lavazza to compete with other major coffee players like Nestlé, it must embrace the rising trend of instant coffee mixes in Asia, Euromonitor said.
Euromonitor data showed that sales of instant coffee mixes are expected to grow at 4% annually during the forecast period, faster than any other segments of coffee, except pods.
“It is not only Chinese consumers who prefer the sweet taste of these drinks, but also most other Asians and a significant chunk of consumers in the Middle East and the Balkans,” Barry said.
“It may be difficult for Lavazza to resist joining this category for long.”