1 May 2020 | China

Lavazza launches flagship store in Shanghai as China eases lockdown

Italian coffee roaster and quick-service restaurant group, Yum China, unveil joint partnership to establish premium Lavazza coffee shop concept in China

Lavazza's new flagship store in Shanghai, China, where the Italian coffee roaster sees "huge untapped potential".



Lavazza has entered the highly opportune and fiercely competitive Chinese coffee shop market as it seeks to harness the growing potential of premium coffee in the vast east-Asian economy.
 
Announcing a joint partnership with restaurant giant, Yum China, Lavazza unveiled its flagship store in Shanghai’s fashionable Jing'an district. Pivoting to a premium audience, the ‘gastronomic café’ highlights Lavazza’s Italian heritage and serves a range of premium coffees alongside artisan Italian cuisine.
 
Indicating the calibre of Lavazza’s ambitions in China, the new store is located a few minutes from Starbucks’ super-premium 30,000sq ft Reserve Roastery, which opened in late 2017.
 
“China is an important market with huge untapped potential for coffee consumption. We have been searching for the right opportunities to establish Lavazza in China and Asia, and this partnership is an important first step," said Lavazza Group CEO, Antonio Baravalle.
 
Lavazza faces stiff competition in China, where Starbucks operates more than 4,300 stores and recently invested $130m in a new roasting and distribution facility. Domestic value-focused café chain, Luckin Coffee, has also established a sizeable 4,500+ store presence in China since 2017, but found itself in hot water in March 2020 after an internal investigation revealed fabricated sales of RMB2.2bn (US$310m).
 
Lavazza will be seeking to utilise the extensive experience of its local partner, Yum China, to navigate the complexities of China’s vast food and beverage market. The restaurant group currently operates 9,295 sites across more than 1,400 cities in the country, holding the license for prominent international brands including KFC, Pizza Hut, and Taco Bell. In 2019, Yum China brands sold around 130 million cups of coffee to Chinese consumers, company documents show.
 
The two companies have yet to release further details of Lavazza’s coffee shop model in China, or address the on-going coronavirus situation in the country. However, the store opening comes as China gradually eases coronavirus lockdown restrictions, with many businesses resuming operations after weeks of closure.  

Lavazza already operates a small portfolio of Il Caffè di Roma and Èspression stores in Europe and the US, but has yet to establish a significant coffee shop portfolio. In 2013 Lavazza announced ambitious plans to open up to 400 Èspression cafés in the UK, but closed its single remaining site in 2018.
 
Nevertheless, the Italian roaster has embarked on a programme of international expansion across multiple coffee categories in recent years. In 2016 it acquired French at-home coffee market leader, Carte Noir, for $800m. In 2017 it acquired an 80% stake in Canadian specialty coffee retailer, Kicking Horse, before purchasing Australian coffee pod firm, Blue Pod, and Mars Drinks’ global vending business in 2018.
 
In March 2020 Lavazza Group announced record 18% annual revenue growth to €2.2bn.
 

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