Lavazza coffee rushes to thousands of stores, can it be done with Yum China? | After the coffee ③

2021/10/0103:01:03 food 2299

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Head image source/ TURIN ITALY GUIDE

▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ ▼ , Capital is always looking for new prey, and a number of coffee rookies have emerged. [Coffee Waves] series, telling new stories of China's coffee market. This is the third chapter, Centennial Italian Lavazza .

Past review: [Canadian national coffee Tim Hortons ]

[specialty coffee]

Low-key for a long time, Italian coffee giant Lavazza began to high-profile.

On September 23, an official press release stated that Lavazza Coffee will cooperate with Yum China to open up to 1,000 Lavazza stores in 2025. To this end, the two parties will inject US$200 million into the Chinese joint venture, which is the sole distributor of Lavazza in mainland China.

Photo source/Lavazza official website

In April 2020, the two parties cooperated for the first time to open the Lavazza Asian flagship store in Shanghai. But since then, despite the ups and downs of the Chinese coffee market, Lavazza has always walked with a "light luxury" boutique tune.Quite low-key.

Foreign coffee rookies such as Tims, %Arabica, Peets’ Coffee, etc. have increased their high profile in China, but Lavazza has only opened more than 20 stores so far.

Picture source/Lavazza's official Weibo

Now, Lavazza's high profile official announced a large-scale expansion plan. The two partners are one of the century-old Italian coffee giants, and the other is a Chinese catering giant. Both have the "lost" Chinese coffee dream. Now that we are speeding up together, can we rewrite regret?

Starting from the grocery store, Lavazza's 126 years of "simple" history

"Like all stories, our stories are made up of emotions, obstacles, important changes, and motivations that drive us into the future.

Starting from a small grocery store, after four generations of management, Lavazza condensed its 126-year history into this sentence, which contains a family's "simple" success history, both hardworking and dedicated, but also determined to forge ahead.

Image source/Lavazza official website

A century-old coffee empire, product innovation is the bottom secret

In 1895, a small grocery store next to Via San Tomasso in Turin, Italy’s third largest city Stand up. The owner Luigi Lavazza pioneered the creation of blends and cultivated the first batch of loyal fans.

The coffee makers had good opinions, and the grocery store slowly turned into a coffee shop, gradually gaining a reputation for roasting coffee beans and homemade coffee drinks. Luigi Lavazza simply moved the store to a larger place and cultivated a group of foreign customers through mail.

Picture source/TURIN ITALY GUIDE

Since then,Continuous and keen product innovation is the secret of a century-old brand. In 1989, the world's first capsule coffee (Capsule coffee) was launched, enabling consumers to drink coffee in places other than cafes; in 1965, the first decaffeinated coffee was launched. Even after entering the millennium, this kind of product innovation awareness and ability continues, making Lavazza's brand more permanent.

In 1927, Luigi Lavazza, his wife, and 3 children established Luigi Lavazza SpA, which was the first model of a family business. From then on, Lavazza took a multi-pronged approach to realize long-distance sales, multi-scenario consumption, and expand the scope of customer base radiation.

For example, when Luigi Lavazza SpA was founded, it began to use fleets for mobile sales and build a flexible sales network.

Picture source/Museimpresa

Advanced packaging innovation measures continue to extend the storage time of coffee. In the 1920s, special paper bag (Pergamin) packaging was invented; in the 1950s, vacuum packaging cans were introduced; in 1971, it became the first coffee company in Italy to launch vacuum packaging bags. These actions have also had a profound impact on the world coffee industry.

Supply chain first, marketing assistance

To be bigger and stronger, supply chain is the last word. In the 1970s, Lavazza invested in the construction of its first factory. The innovative "downstream" processing cycle mode made the vertical production process more efficient, processing more than 40,000 kilograms of coffee per day-the world's largest and most modern coffee roasting, grinding, One of the production plants.

Image source/Lavazza official website

Innovations in products, packaging, supply chain, etc., made Lavazza firmly established as the number one coffee brand in Italy in the 1970s.

At that time,The Italian economy is prosperous, and European countries are also committed to recovering and developing their economies, strengthening cooperation, and establishing the European Community , which is a friendly international business environment. Taking advantage of this opportunity, Lavazza, who was able to make the bottom line, assisted with marketing.

It launched an advertisement, "The more you drink it down, the more Lavazza pick you up". The catchy advertising quickly exploded and became a springboard for Lavazza to enter other European markets.

Picture source/Lavazza's official Weibo

In the 1980s, in line with the pace of European siege, the marketing offensive increased. Lavazza and espresso lifestyle, frequently appearing in newspapers and television and other media.

"I haven't drunk Lavazza, don't say you have drunk good coffee", it is not only the official brand of Lavazza, but also widely accepted by consumers in many European countries.

In the next 10 years, Lavazza subsidiaries intensively settled in France, Germany, Austria, the United States, and the United Kingdom, becoming a multinational company.

Going abroad in great strides, Lavazza began to build an overseas supply chain network in the 1990s to support the operation of local subsidiaries and achieve global synergy.

Today, the Lavazza Industrial System includes six manufacturing plants: three in Italy, producing products for the international market; one each in France, India, and Brazil, mainly for the local market.

Capitalization operation, global expansion

To lay a solid foundation, Lavazza capitalizes operations through mergers and acquisitions, expands the coffee empire territory-to acquire local coffee brands, quickly penetrate the local market, and at the same time Strengthen its own supply chain, sales channels, brand voice, etc.

Through the acquisition of benchmark coffee companies in France, Australia, India, Brazil and other countries, Lavazza has transformed into a global coffee giant, forming a multi-brand matrix such as Lavazza, Carte Noire, Merrild and Kicking Horse, with operations in 140 countries and regions around the world.

Lavazza's business mainly sells coffee powder, coffee beans, coffee capsules , instant coffee, coffee machines, and coffee machines. But the coffee shop business is relatively blank.

To make up for the relatively blank store business, in 2017, the world's first Lavazza coffee flagship store landed in Milan. So far, the scale of global stores is unknown, but the official website shows 10 stores located in world-center cities such as Milan, Paris, New York, Chicago, Boston, and Moscow.

Picture source/Lavazza official website

Global expansion spans to China, Lavazza deeply binds Yum China. The two parties recently announced that by 2025, the number of Lavazza stores in China will be expanded to 1,000. This cooperation is the result of both parties taking their needs and distributing benefits.

02 Lavazza x Yum China: Realizing the Dream of Chinese Coffee

Lavazza and Yum China have their own lost Chinese coffee dreams.

Previously, Lavazza has explored the Chinese market. On November 18, 2011, it held a brand launch conference in Guangzhou Autoland. Liang Jialin, managing director of Lavazza coffee shops, said that there are 15 stores and it plans to open 200 new stores in China's first- and second-tier cities in the next three years.

Picture source/Lavazza's official Weibo

That year, the Chinese coffee market ushered in a "small explosion". Starbucks announced that it will increase the number of Chinese stores to 1,500 by 2015; Costa plans to open 250 new stores within three years; China Resources is pushing Pacific Coffee to expand in the Mainland.

The market is heating up, but Lavazza has little sense of existence. In recent years, local and foreign coffee brands have been conquering cities, and the Chinese market has become increasingly hot.

Lavazza rekindled its ambitions and once again made efforts in the Chinese market. At the beginning of 2020, Lavazza and Yum China established a joint venture company, each holding 65% and 35% of the shares, to push Lavazza to open stores in China.

Tested and polished for one and a half years. As of September 29 this year, Lavazza stores have expanded to 4 cities, a total of 25; Shanghai stores are concentrated at 20 stores, and the rest are located in Beijing (1), Guangzhou (2) and Hangzhou (2). ).

Photo source/Lavazza's official Weibo

At the moment, Lavazza is entering the "accelerated stage" of sprinting thousands of stores. Both sides are full of confidence and expect high expectations.

CEO Antonio Baravalle firmly believes, “China’s coffee market has huge potential and there are many untapped areas. As China’s largest catering operator, Yum China is the best partner.”

And Yum China CEO Joey Wat said, “ Our partnership is capable of accelerating store expansion and seizing important coffee opportunities in China, because “Yumum China has a world-class supply chain, digital capabilities, and in-depth understanding of Chinese consumers.”

Photo source/Lavazza official Weibo

Before joining Lavazza, Yum China has been exploring the coffee market for 7 years.

In 2014, Yum launched the first coffee brand K coffee in China, and in 2018 it launched the boutique hand brewed coffee brand COFFii&JOY.

K coffee Positioning for popularization, it is located in Deji restaurants and sold as hot single items. COFFii&JOY is an independent boutique cafe model, positioned at the mid-end, with more emphasis on coffee quality, brewing technology and space experience.

Photo source/COFFii&JOY official Weibo

September of the same year,Yum China was listed on the Hong Kong stock market for the second time, and the net capital raised was approximately HK$17.267 billion. According to the prospectus, 90% of the funds will be mainly used to expand restaurant stores, invest in supply chain and digitalization, food innovation and value proposition enhancement.

Funds are in place, which in theory can provide sufficient development momentum for the coffee business. but it is not the truth.

According to Yum China’s 2020 financial report, K coffee sales exceeded 140 million cups, a slight increase from 137 million cups in 2019. But the price of K coffee is 15 yuan/cup, which is higher than the 5-8 yuan/cup of convenience store coffee. The consumption habit of “going to KFC to buy coffee” is not as popular as “going to a convenience store to buy a cup of coffee”.

COFFii&JOY is exhausted. As of June 30, 2021, the brand has 38 stores, a decrease of 4 compared to the same period last year, and a sharp decrease of 15 compared to 2019.

In order to avoid "short-handedness" with K Coffee, COFFii&JOY can achieve healthy development only by carefully selecting locations. The large number of KFC stores that K Coffee relies on has caused difficulties for the location of COFFii&JOY.

In addition, COFFii&JOY's marketing is relatively low-key and has a low volume on social platforms. For example, Xiaohongshu has only 700+ notes.

Image source/COFFii&JOY official Weibo

In general, Yum China’s coffee business is not developing as expected. Cooperating with Lavazza can make its coffee map form a high-end, mid-range, and popular matrix, expand customer coverage, and further tap the Chinese coffee market.

Nowadays, Lavazza rushes to a thousand stores. But in this move, there are still many uncertainties.

Light luxury specialty coffee, how elegant is the ambition of thousands of stores?

In the wave of Chinese specialty coffee, Lavazza is unique. A single cup of coffee is about 30 yuan, with a snack in the early 50s, but it comes with a touch of "light luxury" boutique tonality.Have a halo similar to luxury brands-a sense of heaviness on the scale of time and culture, and high barriers to brand competition.

This is due to the fact that the family business has been passed down from generation to generation in the 126's, carefully managed, and the cultural soil of the ancient Italian coffee country. In this country, a small cup of espresso is a national lifestyle and a symbol of commercial coffee pilgrimage. The first store in Italy is regarded as Howard Schultz "realized the dream of opening a store in Italy, the hometown of espresso".

Lavazza is separated from the cultural soil of its home country. In China, where the coffee atmosphere is weak, it is necessary to spend more effort to overcome some difficulties in order to maintain the brand tonality and to sprint thousands of stores.

Image source/Lavazza official website

The store has diversified forms and increased retailing

The Lavazza store model is generally single, with strong attributes of heavy scenes and heavy products.

The stores are mainly blue, white and gold in large areas, with Italian style elements such as marble, brass, and Venetian glass mirrors. The space vision is “simple, luxurious, stylish and elegant”.

is standard equipment in the flagship store, with a limited edition of 70 antique coffee machines in the world, moka pot which is one of the "Made in Italy" logos, Italian coffee layout, etc.

Image source/Lavazza official WeChat

This kind of store format strengthens the brand style, but its reproducibility is weak. The short-term large-scale opening of stores will inevitably dilute the brand value.

may be aware of many restrictions, Lavazza's official public account disclosed in March this year that it will cooperate with Yum in 2021 to "explore a variety of store formats from flagship stores to mini stores."

Refer to foreign brands such as Starbucks, Tim Hortons, Peets’ Coffee, %Arabica, etc. Common store formats include flagship stores, standard stores, creative theme stores, takeaway stores, mini stores, pop-up stores, etc.

Lavazza currently has flagship stores and standard stores. It can be speculated that Lavazz will deepen the diversification system of store forms in order to sprint the "thousand store goal".

This move can break through the limitations of the brand's original single store form and heavy scenes, adapt to more space sizes and scene shaping schemes, and effectively speed up store expansion. As the size of the store increases, it reaches more segmented customer groups and meets the needs of multiple scenarios such as social networking, takeaway, and buy-and-go.

Picture source/Lavazza official Weibo

The product ratio must also be adjusted. For example, perhaps not every store will have a Michelin chef to take the place to launch "Godfather level" meals; and the city's special drinks will also be better spread.

In addition, it is worth trying to adjust the retailing plan of the store. At present, the retail products in the Lavazza applet are more conspicuous than coffee beans with bags and badges. However, its customer base is positioned as "senior coffee friends", which can increase the retailization of main products such as coffee beans and coffee powder, and give full play to the advantages of the profound global coffee supply chain.

Image source/Lavazza's official Weibo

Try more cities and locations

Lavazza has been cautious before and is in the "model trial" period of initial expansion. The location of stores is relatively limited, which is not conducive to brand penetration.

Of the 25 stores disclosed on the official WeChat account, 20 are located in Shanghai, where the coffee culture is strongest, and Pudong New Area has the most, reaching 5 stores.

However, Shanghai is undoubtedly the "second hometown" of many foreign coffee brands. According to statistics from Yingshang Cloud Think Tank, in Shanghai, compared with local coffee brands,The proportion of foreign coffee brand stores is as high as 66%.

Pudong New Area, with its vast business opportunities, is also a place where foreign coffee "settles" heavily, and competition is fierce. According to data from Winners Big Data as of December 2020, 21 sample foreign brands, including Starbucks, Starbucks Elite, Tim Hortons, COSTA, Lavazza, Peet's Coffee, etc., have opened more than 60 foreign brands in Pudong, with the Lujiazui business district as the core. Shop.

Photo source/Tim Hortons official Weibo

In addition, Lavazza is mostly located in high-end and mid-to-high-end shopping malls. It has settled in Shanghai IFC, First Yaohan, Shenzhen Mixc, the upcoming Qiantan Taikoo Li, Hangzhou Xizi International Center, Guangzhou World Trade Center, etc.

Lavazza may try more site selection scenarios. Take the Japanese Internet celebrity specialty coffee %Arabica as an example. The official Weibo revealed that 55 stores have entered 18 cities (including Hong Kong and Macau), mainly in the first-tier and new-tier cities, and even initially sank to the second-tier cities Wuxi and Nanning.

In addition to haunting the city's core shopping malls, %Arabica has also settled in the art district (Beijing 798), the historical and cultural district (Kuanzhai Alley in Chengdu), and even office shops and street shops in Hong Kong.

Image source/%Arabica official Weibo

Increase marketing efforts

From the number of notes in Xiaohongshu and the popularity of Weibo topics, Lavazza does not lose Peet's Coffee, %Arabica, but the brand The sound volume is smaller than the two, and it is still a "niche brand."

is not the same as the Blue Bottle, which has always been "unopened". After getting financing from Tencent, the store quickly broke the 200th Tims coffee. Every time I went to a city, the microblog overcall caused tens of millions of readings.

Lavazza’s low profile,It is related to factors such as the persistent characteristics of a century-old family business, the development is still in the exploratory period, and the "light luxury" positioning. Next, Lavazza must appropriately increase its marketing efforts to understand and capture more "Chinese senior coffee lovers" while maintaining the brand's tonality.

China's specialty coffee soil, pre-climate

Even if the above-mentioned difficulties are overcome, Lavazza and Yum China still have to face the Chinese specialty coffee market, which is not as hot as perceptual perception. .

The true lifestyle of specialty coffee is far from being a climate in China. What is the real "specialty coffee lifestyle"? A cup of Espresso becomes a national drink.

Image source/Lavazza official WeChat

Espresso, espresso , is the ultimate symbol of specialty coffee. In technical terms: it is ground into very fine coffee powder, after 9 atmospheres of pressure and high temperature hot water of about 92 degrees Celsius, 30 milliliters of strong coffee liquid is rapidly extracted within 15 seconds.

In order to promote the "authentic Italian lifestyle", Lavazza launched the member "1 yuan drink pure concentrated Espresso" activity in March 2020.

But in China, usually only a small number of discerning coffee friends can appreciate the taste and taste of Espresso. For most consumers, no matter how pure Espresso is, it is just bitter and hard to swallow.

Perhaps realizing this, Lavazza has made major adjustments to the product. On its official mini-program, there is no classic Italian Espresso in the menu bar such as Popular Must-Order, Italian Classic, Italian Layout, etc., but more of it is based on Espresso and blended into Italian latte. , Fresh milk latte, hazelnut latte and so on.

Picture source/Lavazza applet

At this stage,Chinese specialty coffee brands generally do not emphasize "Espresso", but "freshly ground" and "hand-made". Typical brands such as Peets' Coffee and %Arabica entered mainland China in 2017 and 2018. So far, the number of stores is 55 and 51.

The Starbucks Boutique is the symbol of Starbucks betting on specialty coffee. According to statistics from the RQ Commercial Observation Office, at the beginning of 2019, there were only 20 Starbucks stores in Shanghai, which increased to 64 in the first half of 2021, accounting for 7.4% of the total number of stores in China.

The above three stores have grown at a considerable rate in recent years, but the base number is still small, which also proves that the Chinese specialty coffee market has not become a climate.

From a global perspective, the specialty coffee market is not suitable for short-term staking. Founded in 1966, Peets’ Coffee, known as "the grandfather of the coffee industry", had only more than 200 stores worldwide as of 2018, mainly in the United States. ( Wikipedia data)

Blue Bottle, the representative of the specialty coffee wave, was founded in 2002. In 2017, it was acquired by Nestlé to acquire a majority stake and obtained expansion capital. Five years later, the number of global stores is only 102, and more than 60% are located in the United States, 20% are located in Japan, and there are only two in Hong Kong, China.

Lavazza itself is a century-old Italian coffee giant, with the help of Yum China, and has gone through the preliminary model testing stage in China, giving it the confidence to accelerate expansion.

However, in the European and American markets where coffee culture is long and strong, it is not easy to scale specialty coffee brand stores, but it is even more difficult in China. In the next four years, Lavazza wants to realize the dream of thousands of stores in China.