SHANGHAI – Yum China Holdings Inc., a licensee of Yum! Brands in mainland China, entered a joint venture with Luigi Lavazza S.p.A. (Lavazza Group) to open 1,000 Lavazza cafés in China by 2025. The two companies will invest $200 million initially to fund this growth initiative.
Yum China and Lavazza Group formed a joint venture in 2020 to explore and develop the Lavazza café concept in China. Yum China and Lavazza own stakes in the joint venture of 65% and 35%, respectively. The Lavazza flagship store in Shanghai opened in April 2020 making it the first store outside of Italy. The concept has since grown to more than 20 stores in China across Shanghai, Hangzhou, Beijing and Guangzhou. The companies credited digital channels for playing an important role in Lavazza’s initial success — sales to Lavazza members accounted for approximately 50% of total sales for the first half of 2021.
“The recent progress of Lavazza cafés in China has been encouraging and reaffirms our belief that our partnership is well positioned to capture the significant coffee opportunity in China with accelerated store network development. We are excited about what the future holds for this iconic Italian brand,” said Joey Wat, chief executive officer of Yum China. “Leveraging Yum China’s world-class supply chain, digital capabilities and in depth knowledge of Chinese consumers, we look forward to bringing Lavazza’s premium and authentic Italian coffee experience and products to even more consumers in China.”
The next phase of the Lavazza store expansion is to more than double the number of stores by the end of 2021. There are 22 stores in China as of Aug. 31. The expansion will feature a variety of store formats for a wider range of occasions. To support growth, the joint venture will further enhance capabilities to drive efficiencies, in particular in-store operation, branding and marketing efforts.
The joint venture aims to further grow the Lavazza brand in China through marketing, sales and distribution of Lavazza's retail products in mainland China, including coffee beans, ground coffee and coffee capsules.
“The potential for coffee in China is vast; there is a lot of unexplored white space,” said Antonio Baravalle, CEO of Lavazza Group. “As the largest restaurant operator in China, Yum China is the best partner to further grow the Lavazza brand in this market given its deep understanding of local consumers and market dynamics.
“Likewise, we believe Lavazza is the perfect premium brand for Yum China to achieve its coffee aspirations, bringing outstanding quality products and in-depth expertise of the coffee sector, nurtured over the 126 years of our history,” Baravalle said. “The strengths contributed by each partner create a solid foundation for the success of our joint venture, and we are excited to collaborate with Yum China to develop Lavazza into a leading coffee brand in China.”