April 12, 2018 / 5:18 PM / 14 days ago

Lavazza vows independence, says turned down JAB and Nestle

TURIN, Italy (Reuters) - Italian coffee maker Lavazza is determined to stay independent, one of its family owners said on Thursday, revealing the firm had rejected bid approaches from the industry’s top players, JAB Holding and Nestle NESN.N, in recent years.

A man stands in front of the new Lavazza headquarters building, named "Nuvola", in Turin, Italy April 10, 2018. Picture taken April 10, 2018. REUTERS/Massimo Pinca

The 123-year-old company, founded by Luigi Lavazza in the northern Italian city of Turin, is a mid-tier coffee producer and distributor which, according to some industry analysts, risks being left behind or swallowed up by bigger rivals.

Lavazza has bought five coffee companies in Europe and Canada in the last three years, sharply increasing its scale, but last month said it planned to focus on organic growth.

“JAB Holding was built through acquisitions and we were an important target for them,” vice president Giuseppe Lavazza told reporters at the opening of Lavazza’s new Turin headquarters.

He said the group had rejected a bid approach from JAB, the holding firm through which Germany’s Reimann family built a coffee empire, about two or three years ago. Previously, Nestle had also made an approach, he added.

JAB Holding and Nestle declined to comment.

Lavazza posted revenue of 2 billion euros ($2.5 billion) last year. JAB and Nestle, which are much bigger than Lavazza, do not provide directly comparable data on their coffee related revenue. Nestle’s sales for soluble coffee and coffee systems were 9.28 billion Swiss francs ($9.65 billion) last year.

Nestle owns coffee pods specialist Nespresso and JAB has the Jacobs Douwe Egberts brand.

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“We have always attracted suitors,” Giuseppe Lavazza said.

His co-vice president, Marco Lavazza, added: “Being courted is something that pleases us and we talk with everyone ... but we are clear in mind we want to be independent.”

Nestle, JAB and coffee chain Starbucks (SBUX.O) are the three largest players in the global coffee market, followed by several mid-tier players including Lavazza.

“We think we can reduce the risk of being cornered by increasing our sales to around 2.2 billion euros by 2020, we are nearly there,” Giuseppe Lavazza said, adding that the group was big enough to defend itself from rivals.

The group, which ended 2017 with 460 million euros in cash, could fund more acquisitions with internal funds and through a potential bond issuance, Giuseppe Lavazza said.

“The valuations (for coffee companies) have increased a lot so you have to look carefully at what you want to buy,” he said, adding that he expected a recent acquisition spree in the sector to slow down in the future.

    The two vice-presidents reiterated that an initial public offering was not on the table at the moment.

    Additional reporting by Martinne Geller in London; editing by David Evans and Jane Merriman

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