INTERVIEW - India top target for Lavazza coffee

MILAN Tue Feb 1, 2011 8:13am IST

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MILAN (Reuters) - Italy's leading coffee roaster Lavazza plans to raise sales in India by 25 percent a year in the next few years thanks to a new coffee plant there as it aims to expand on growing Asian markets, a senior executive said.

Lavazza, which bought India's second-biggest coffee shop chain Barista Coffee Company and coffee vending company Fresh & Honest Cafe in 2007, expects India to become its No. 2 market after Italy in the future and a hub for expansion in Asia.

"It will be a long and difficult process, but it is an immense market in the future," Attilio Capuano, Lavazza's director for Asia and Pacific region, told Reuters in a telephone interview on Monday.

Lavazza's 30 million euro ($40.86 million) annual sales in India represent just about 3 percent of total group sales at present but they would rise by 25 percent a year in the next few years as more Indian consumers pick up western habits, including coffee drinking, Capuano said.

"We are targeting up to 100 million of potential coffee drinkers. It is an incredible growth potential," he said.

Coffee consumption in India is estimated at about 100,000 tonnes a year, a drop in the ocean for the more than 1 billion population, he said.

But coffee demand in the predominantly tea-drinking country has doubled since 1995 when it stood at 50,000 tonnes, according to the India Coffee Board (www.indiacoffee.org)

Capuano said it was important for Lavazza, which operates in more than 90 countries, to boost its positions in India because competition on the rapidly growing market was heating up.

He did not name competitors but Starbucks Corp the world's largest coffee chain, earlier this month signed an agreement with India's Tata Coffee Ltd to explore the possibility of opening retail stores in India.

NEW PLANT

Lavazza said on Friday it will invest about 20 million euros ($27.44 million) to build a new coffee plant in Sri City in the Indian state of Andhra Pradesh. The plant is expected to start up by the middle of 2012.

Capuano said the plant's initial capacity of 1,000-1,100 tonnes of roasted coffee a year can be raised up to 1,600 tonnes in 2014 and even higher in the future, if demand was strong, with new production modules to be built on the premises.

"We have room to grow: we have a territory of 40,000 square meters and we now use only 6,000 square meters," he said adding there were no precise long-term growth targets at present.

Lavazza's Fresh and Honest Cafe unit would strengthen its dominant positions on India's "away from home" coffee market segment with includes hotels, restaurants and catering, and expand in office service with coffee in capsules, he said.

(Reporting by Svetlana Kovalyova)

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