Lavazza to build out Pennsylvania plant in bid for US expansion


Dive Brief:

  • Italy-based Lavazza Group is starting construction on its first roasting and packing plant in the U.S., according to a company press release. It is set to open in October 2021. The plant will add 1,000 square feet to its 18,000-square-foot Lavazza Professional Facility in West Chester, Pennsylvania, which produces ground and roasted coffee.
  • Until opening the new facility, the company had sourced its premium roasted and ground coffee from Italy.
  • This plant will help Lavazza expand its U.S. presence and pivot quickly to meet any changing trends in the segment, as well as take advantage of rising coffee consumption during the pandemic. 

Dive Insight:

By expanding the capabilities of its one production plant in the United States, Lavazza is looking to more adeptly react to the U.S. market to better serve consumers stateside, the company said. 

Lavazza, which has a strong presence in Europe, began selling its premium coffee in the U.S. in the late 1980s. Among the places Lavazza products are currently sold in the U.S. are Walmart and Target, as well as online. It had also been sold at Costco, but Eat This, Not That reported in April the wholesale club would discontinue sales. In 2018, the coffee giant made $38 million in sales throughout the U.S., according to its 2018 annual report, and the year later, it brought in $46 million — seeing growth of more than 21%.

Over the past few years, Lavazza has made several moves to strengthen its position in the coffee segment. In 2018, it agreed to buy Mars Drinks, the coffee business of Mars, for $650 million. In 2019, it also inked a partnership with PepsiCo to launch a ready-to-drink cappuccino in the U.K., with plans to release new beverages the following year. 

But shifting its focus to the U.S. means facing stiff competition. In May 2018, Nestlé purchased Starbucks’ retail products, which include Starbucks, Starbucks VIA, Teavana, Seattle’s Best Coffee and Starbucks Reserve for $7.15 billion. In its latest earnings reportNestlé said coffee sales was its strongest category for growth, with sales for its Nespresso products jumping 17.1%.

JAB Holdings, which reportedly unsuccessfully tried to purchase Lavazza in the past, has also worked to increase its presence in the U.S. coffee market. The brand has owned Keurig Green Mountain, maker of K-cups, since 2015, and Peet’s Coffee since 2012. It later merged Peet’s Coffee and Jacob Douwe Egberts in 2019 to form JDE Peet’s. 

In the past year, coffee shopping behavior has changed dramatically. At the beginning of the pandemic, coffee futures saw a jump of almost 15% for May 2020, as reported by CNBC. This sudden increase was caused by consumers stocking their pantries as stay-at-home orders were enacted across the country, paired with supply chain disruptions throughout the world.

With customers stuck at home due to the pandemic, at-home consumption has been on the rise. According to the Spring 2021 National Coffee Data Trends survey, 85% of consumers are having one cup of coffee at home, up 8% from 2020. A recent survey from Nestlé also found that 48% of respondents said they would continue to have their first cup of coffee at home, even when life returns to “normal.” 

With tough competition, the focus on sustainability — a top concern for consumers — in its new facility could help Lavazza to stand out from its competitors. By having the capacity to source directly in America, this will allow Lazazza to work toward its goal of becoming carbon neutral by the end of 2030. It will also help reduce shipping costs. The site will also be landfill free and is Leadership in Energy and Environmental Design Gold certified.