Yum Group fully invests in lavazza Coffee! Stop COFFii&JOY operation in China

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The competition in the coffee market is becoming more and more fierce, especially in this year's coffee track, which has not been fully expanded, if there is a stage, it will naturally come to an end. There is a desperate influx of cross-border brand bosses Huawei, Special step, Li Ning, China Post and brain platinum.

There are also defeated coffee brands, such as the Philippine catering group Happy Bee, which recently announced that it would end its Donndole coffee business in China and raise nearly 100 million yuan. Now there is only one store, and coffee brand COFFii & 喜悦 has been announced by Yum China that it will gradually withdraw from its operations in the Chinese market.

According to media reports, Yum China has opened more than 20 Lavazza cafes across the country in the third quarter, bringing the total number of stores in China to 78.

Lavazza Coffee is an Italian brand, founded in Turin, Italy in 1895. At present, it has been sold in more than 80 countries, with an average annual sales of 86000 tons, or about 14 billion cups. It is one of the endorsement brands in the global coffee industry.

In May 2020, Yum China Holdings Limited (Yum China) and Italian coffee brand Lavazza announced a joint venture to operate Lavazza-branded coffee stores in China. The two sides also announced in September 2021 that they would inject $200m into the joint venture to accelerate the expansion of Lavazza's coffee shop network in China, with a goal of opening 1000 stores by 2025.

Yum China and Lavazza currently own 65 per cent and 35 per cent of the joint venture, respectively, which will become Lavazza's exclusive distributor in mainland China, bringing in more products from the Lavazza brand's product portfolio in the international market.

By the end of August this year, Lavazza had 22 stores in Shanghai, Hangzhou, Beijing and Guangzhou, tripling the number of stores in the second quarter, and is expected to at least double the total by the end of the year, with a target of selling 130 million cups of coffee.

While doing its best to lay out Lavazza stores, the other revealed at its financial results conference in the third quarter of 2022 that it would gradually withdraw or even terminate the operation of its coffee brand COFFii & 喜悦 in the Chinese market, and continue to develop its other two coffee businesses, focusing on fast and convenient K Coffee and authentic Italian coffee Lavazza.

COFFii & 喜悦 was founded in 2018, specializing in hand-made coffee, the price is 20-30 yuan price band. At the beginning of its establishment, it opened stores in first-tier cities such as Beijing, Shanghai and Guangzhou. According to the company's previous disclosure, COFFii & 喜悦 had 42 stores at the end of 2020. This number has not been updated since.

In recent years, the domestic coffee market continues to be hot, and the price belt in which COFFii & 喜悦 is located has become quite competitive. Citic Securities Research Department pointed out in a report that at present, less than 30 yuan is the most competitive zone in the Chinese market, and this price belt is crowded with coffee brands. The price range of COFFii & 喜悦 has been occupied by brands such as Lucky and Manner, while COFFii & 喜悦 did not establish a strong market awareness and position a few years ago. I am afraid it will be very difficult to turn around now.

More importantly, Lavazza has its own brand characteristics-it focuses on traditional espresso, copying the old-fashioned Italian model from store decoration to product experience-something scarce in the Chinese coffee market today.

So giving up COFFii & 喜悦 putting energy and money into Lavazza may be a higher-return decision for Yum China. However, according to the current market conditions, Lavazza still needs to speed up the opening of stores, after all, the current store size is still a fraction of its target.

Photo Source: Internet