| Italy

Lavazza agrees to acquire Mars coffee vending machine business

Transaction will see Lavazza acquire Mars Drinks' single-serve Flavia and Klix freestanding vending machine business in the US, Germany, UK, France and Japan as part of its international growth strategy

Lavazza Group CEO, Antonio Baravalle, said the Mars deal "fits perfectly" with the Italian coffee giant's international expansion strategy

Lavazza’s acquisition of Mars Drinks' coffee vending business will bolster the Italian firm’s presence in Europe and open a new front for the brand in the US as part of a strategy it calls ‘direct interaction’ with consumers. In a press statement, the Italian coffee giant said the acquisition of Mars’ Office Coffee Service (OCS) and vending channel business represented “considerable opportunities for growth and development.”

Mars Drinks is credited with introducing the world’s first fully automated in-cup drinks vending machine, Klix, in 1973 and the Flavia system in 1984. Both brands remain prominent coffee machine brands in workplaces and public spaces, with the business generating revenues of around US$350m. A Reuters report estimated the deal to be worth around US$650m, although the value has yet to be officially disclosed.

Lavazza is seeking to consolidate its reach among coffee vending consumers as part of its international growth strategy. In 2016 it acquired French coffee brand Carte Noir from Douwe Egberts for a reported €800m, a deal which gave it access to Carte Noir’s brands and businesses across 28 EU member states. Two years later it acquired an 80% stake in Canadian specialty coffee firm, Kicking Horse. In July 2018 the Italian coffee roaster acquired Australian coffee pod firm, Blue Pod, describing the Australian market as strategically important for driving growth at an international level.

“[The Mars] acquisition fits perfectly within our international expansion strategy, the objective of strengthening key markets, as well as the pursuit of having an even closer relationship with end consumers,” said Antonio Baravalle, CEO of the Lavazza Group.

Lavazza’s string of acquisitions forms part of strategy announced in 2016 to target turnover of €2.2bn by 2020. During this time the global coffee industry has experienced significant consolidation, with competition heating up among increasingly scaled coffee businesses. In May 2018, Starbucks and Nestlé announced a $7.1bn ‘global coffee alliance’, with latter firm distributing Starbucks’ retail products worldwide. In July, JAB Holdings created the third-largest soft drinks in the US after successfully merging Keurig Green Mountain and Dr Pepper to sell coffee through the latter company’s vast US distribution network. In August Coca-Cola announced the acquisition of UK coffee shop market leader, Costa Coffee, in a deal worth a reported £3.9bn and anticipated as a major step towards Costa opening stores in the US.

Lavazza’s latest acquisition is pending, subject to regulatory approvals, and is expected to be completed by the end of 2018.

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