Lavazza expanding into U.S. grocery store specialty coffee

Tue May 14, 2013 4:37pm EDT

Related Topics

* Four new retail blends not expected to boost Lavazza's bean volume

* Lavazza will face strong competition in U.S. grocery stores

* Lavazza's Rivo Keurig System still in infancy

By Marcy Nicholson

NEW YORK, May 14 (Reuters) - Italy's Lavazza is joining the ranks of Starbucks and Gevalia in the highly competitive specialty coffee section on grocery store shelves as the nearly 120-year-old roaster makes another push into the U.S. and Canadian consumer markets.

The family run business, a brand little-known by North American consumers that has been supplying its Italian-roasted brews primarily to U.S. restaurants for years, will launch four specialty blends of bagged coffee in September as a part of its international expansion.

The company aims to boost international sales to 50 percent of its total, up from the current 46 percent, said Ennio Ranaboldo, chief executive of Lavazza North America.

While the move is unlikely to boost Lavazza's coffee volumes significantly in the near term, the United States could in time become its second-biggest market after Italy, its flagship market. Currently, the U.S market ranks fifth or sixth, Ranablodo said, and France is its second-biggest market.

"The U.S. and Canada are a priority for Lavazza. The U.S. ... is still the richest, most dynamic coffee market in the world," he said.

Lavazza buys around 2.3 million bags of green coffee annually.

Going head to head with U.S. household brands such as Starbucks Corp, the new blends Gran Aroma, Classico, Gran Selezione and Perfetto will be on U.S. and Canadian shelves in time for the holiday season at the end of the year.

Lavazza sees opportunities for its new blends as American coffee connoisseurs are increasingly looking for sophisticated brews.

Competition in the coffee grocery aisle is intense, dominated by premium brands owned by Starbucks and Kraft Foods Inc.

Starbucks cut its grocery list prices on its Seattle's Best packaged coffee by 10 percent this month as coffee costs fell and it fought for more sales through supermarkets and other retailers.

Kraft later announced it lowered the price if its premium Gevalia brand by 6 percent, marking the second price cut in a year, as green coffee prices fell.

The company has been selling its more established blends in the less-visible ethnic aisles for years.

Last week, the Turin-based company increased its stake to 8 percent in U.S.-based Green Mountain Coffee Roasters Inc , which makes Keurig single-serve brewers and K-Cups.

Lavazza made its first move into the mainstream North American consumer market late last year when it launched the new Keurig Rivo System, a single cup machine that makes cappuccinos and espressos, with Green Mountain in the U.S. market.

Lavazza has been selling its own single-serve espresso machines in Europe since 1989.

Single-serve machines are a fast-growing sector in the coffee industry and allow consumers to make one fresh cup at a time, typically at home or in the office, with individual pods of brewed coffee.

Ranaboldo declined to share Keurig Rivo sales figures, saying it is still in its infancy, but he said Lavazza expects single-serve will play a key role in its U.S. growth plan.

The move is not likely to boost Lavazza's coffee volumes significantly, however, in the near term.

"It still stays in the ballpark of what Lavazza has been planning for its regular growth, which still is an organic growth," he said.

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