Magorzata Zubiel

Ewelina Sotysiak
Piotr Bartenbach
Bartomiej Staszczyk

GENERAL INFORMATION ABOUT COMPANY

LAVAZZA - is an Italian manufacturer of coffee products, which was

founded in Turin in 1895. This company hires about 1700 employees and
specializes in bean coffee merchandise. They import coffee from many
countries, like Brazil and Colombia in South America, Guatemala, Costa
Rica, and Honduras in Central America, Uganda in Africa, Indonesia and
Vietnam in Asia and the United States and Mexico in North America, which
makes their coffee special. Today, Lavazza is one of the most important
roasters in the world, a leader in Italy with a 47% share of the retail market
(in value, source: Nielsen). It operates in over 90 countries, in the Home
and Awayfrom-Home sectors (Foodservice, Vending and Coffee Shop
Business). In 2008, turnover exceeded 1,12 billion.
They are still developing, recently they have entered the Indian
coffee market by buying out the entire stake of the Chennai-based Sterling
Infotech group, which owns the coffee chain The Barista Coffee and the
coffee vending business Fresh and Honest.
What is more and it is even said on their website they focus on the
quality of the products, thats been built up over a century of experience.
They have cycle of checks to ensure that quality standards remain the
same at each stage of the production chain starts with the purchase of raw
materials and the testing of coffee by specialised technicians, through to
packaging and distribution.
Just as important as market share and growth success, is the image
of the brand. Lavazza has long been associated with style and
sophistication and this is epitomised by our involvement in the L'Oreal
Melbourne Fashion Festival and the Italian Film Festival. Further a field,
organisations such as the Queensland Performing Arts Company and the
Victorian Racing Club have entered into partnerships with Lavazza,
recognising the importance of the premium coffee brand to their audience.
Passion, quality and knowledge are fitting description for the Lavazza story
in Australia.
If we talk about professional technology and design, only Lavazza
with its reputation for producing coffee in Torino Italy since 1895 can offer
you the excellence of an authentic espresso, a creamy cappuccino or a
delicious latte. Manufactured in conjunction with Saeco, leader in the
Italian home coffee machine market, Lavazza A Modo Mio capsule
machines use a revolutionary brewing process, replicating extraction

pressures found in professional machines. A powerful steam wand delivers

dense silky froth, perfect for all milk based coffees.

SWOT Analysis
Strenghts:

best quality coffees from many countries: Brazil and Colombia in

South America, Guatemala, Costa Rica, and Honduras in Central
America, Uganda in Africa, Indonesia and Vietnam in Asia and the
United States and Mexico in North America.
Tierra! project, a sustainable agriculture program in Honduras,
Colombia, and Peru, which improve the quality of coffee as well as
the environmental and working conditions of those communities.
rooted and very strong position in Italy, the company claims that 16
out of the 20 million coffee purchasing families in Italy choose
Lavazza.
wide services: they have retail shops (similar to Starbucks)
services in over eighty countries
widely available
variety of products, for example, they make espresso machines of
exceptional quality
good reputation among customers
latest machinery installed

Opportunities:

they have a chance to develop in other, new countries, in which they

do not have headquarters
moving into new market segments that offer improved profits
a market vacated by an ineffective competitor
arrival of new technologies
moving into new, attractive market segments
lower personal taxes

Weaknesses:

more expensive than most coffee brands

not so recognizable among less affluent customers

Threats:

on the market appears new companies, which have similar services,

so competition is growing all the time

demographic changes
a competitor may have a new, innovative product or service
competitors may have superior access to channels of distribution
taxation is introduced on your product or service
new regulations
changing customer taste

PEST Analysis

Lavazza, a company which was founded 115 years ago has come to
a state in which it can conquer all. The results of the PEST analysis are as
follows:
Political factors:
Lavazza is a company based in Italy; therefore it does not have to
worry about distribution in the EU since it does not call for tariffs among its
members. Overall it can be said that the company is in a stable political
environment, the only reason for the cooperation of countries being in
danger would most likely be war or in some cases, imposed taxes or fees
for the distribution of the product in foreign countries. One of the positive
factors which influence internationalization of Lavazzas products is the
simplification of procedures and documentations in international trade.
Economic factors:
Some of the economic factors which should be taken into
consideration are: the transport costs are falling, therefore, Lavazza can
expand. The company ships its products overseas; mostly to retail coffee
shops which bring most profit into the organization.
Socio-cultural factors:
Lavazza is a company which is known all over the world. It produces
not only coffee, but a wide range of products such as tea, coffee machines,
calendars, desserts, mugs, paper cups, clocks, ashtrays, and umbrellas.
Lavazza promotes the fact that you can drink its products at home, in the
workplace; at coffee shops and so on therefore it is attractive to customers
from different backgrounds. The company also started a project Tierra!
which may appeal to many of the customers and could influence their
choice of coffee. Especially since most consumers taste the brand in local
coffee shops and are used to the taste.
Technological factors:
Improvement in distribution plays a significant role in the
internationalization of Lavazza. New technology which cleans coffee beans
and tea leaves makes Lavazza produce faster and higher quality products
therefore it satisfies deadlines and always has high demand for the
product.

BCG MATRIX
STARS

coffees
teas
desserts

QUESTION MARKS

CASH COWS

calendars
coffee machines

paper cups
mugs, cups

DOGS

umbrellas

Lavazza creates a wide range of products. While using the Boston

Consulting Group Matrix, we as a group estimated the portfolio of the
company based on the product market life cycle.
The stars of the company are good which are made by the company
that bring the most profit but also consume a lot of money. Coffees, teas
and desserts are this sorts or products because the company invests most
of their money into plantations and technology which take care of the
production process.
The question marks are the products with a low share of a high
growth market which consume a lot of resources but do not generate
much profit. Examples of this are paper cups because the company has
them custom made, but they do not bring the main profit into the
company. At this point it is unclear whether the company loses money on
these products or is Lavazza at a break-even point.
The cash cows are the calendars produced each year made with the
assistance of fashion icons, musicians and idols. Although a lot of money is
spent on producing the calendars and the coffee machines, they generate
more than is invested in them. Coffee machines come with coffee packets

which have to be used; therefore once a customer buys a Lavazza coffee

machine, he or she has to buy the coffee packets.
The dogs are the products which do not generate cash and Lavazza
should get rid of them. An example of this is an umbrella sold by Lavazza
with the original logo. As a promotion strategy this could be profitable,
however, nowadays customers would rather focus on the main products of
Lavazza instead of those on the side such as the umbrella.

Ansoff Matrix

Market Penetration

Current Markets

Current Products

Introduction of a loyal-customer program

Temporary reduction of price
Agree with retailers on better shelf position for Lavazza products in
their stores
Coffee-tasting in markets connected with presentation of coffeemachines
Introduction of product-based promotion strategies

This strategy is used to push already present products in market in

which company is already fully established. Market penetration aims
to increase market share and increase revenue. Steps or methods
that we presented here will allow Lavazza to better penetrate the
market.

New

Market Development
Current Products

Development in other countries

Development in institutional market
Advertising campaign focused on new target groups

Markets

As developing the market, we would recommend to develop into

other countries as well as entering in institutional market. Moreover,
they can prepare an advertising campaign focused on new target
groups, that will be potentially interested in buying Lavazza
products.

Ansoff Matrix
continuation

Current Markets

Product Development
New Products

Introduction of new types of coffees

Introduction of cheaper coffee-machines
Sales promotion of new products along with existing products
Introduction of wider range of accesories

Here Lavazza might introduce new blends of coffees to attract new

customers from current market. Here also we would recommend
manufacturing cheaper coffee-machines for houses.

New Markets

Diversification
New Products

Introduction of regional products

We do not recommend diversification as Lavazza is performing really well in

current form. Howevew, they might analyze whether it will be profitable to
introduce some regional products to attract directly people from specific region.

Porters Five Forces Analysis

The Degree of Rivalry
The intensity of rivalry, which is the most obvious of the five forces in
an industry, helps to determine the extent to which the value created by
an industry will be dissipated through head-to-head competition. Lavazza,
because of high range of the products and services introduced to the
markets in which they have rivals specialized only in their own branch,
strives with numerous strong competitors. Basic companys action is
serving various types of high quality coffees in their own coffee shops,
retail shops or public points and business locations. The coffee is made by
their own coffee machines and being served with the firms dishes. What is
more, company is constantly developing in many branches and entering
new markets with products like for example Lavazza Lipton Tea.

The Threat of Entry

To enter coffee market, create innovative company and develop position
among other competitors in eyes of potential customers one would have
to collect big budget. It should be invested mainly in latest technologies of
coffee machines, techniques of its preparation and creation of wide
distribution channels just like Lavazza is doing all the time. This market
seems hard to both, enter and quit. Even that it is easy to switch to other
brand the distribution channels are rather restricted and besieged by big
corporations. When leaving the market we have to sell specialized
machinery, close accounts with many unrelated coffee plantations etc. so
basically the costs of closing the business are quite high.

The Threat of Substitutes

Coffee market seems to be hard in participating because there are
numerous beverages that people can switch to instead of drinking this
particular one like tee, coke, etc. That is why Lavazza is all the time
searching for new products and expends markets which are currently in
hands of firms specialized in their branch to stay competitive and expand
market of their potential buyers with new products like e.g. latest one:
Lavazza Bullion.

Porters Five Forces Analysis

continuation

Buyer Power
Coffee is in top likely bought drinks all over the world and its been
developed for several centuries so the market is full of big coffee
corporations and small businesses. Furthermore, switching costs are quite
small there are various sellers and potential customer has a broad
market to chose from. Problem occurs, when company has a contract with
big corporation, they posses e.g. Lavazzas machinery and they want to
switch to a cheaper company. Coffee machines do not have standardized
types of the refills and only by buying original parts we are able to use
their product.

Supplier Power
Lavazza has a credible forward integration threat by suppliers because
they are supporting some of the coffees plantation in exchange of coffee
quality improvement and coffee. Relationship between companies
exporting coffee beans and their customers, which is likely firm serving
final customer with ready product e.g blend coffee are rather tight and
supplier switch is pricey and hard to achieve. As mentioned before,
Lavazza has a program called TIERRA! which main task is to improve
quality of the coffee beans by patronage. That kind of behavior is another
example of keeping close business connections.

References for future development

Our group analyzed Lavazza using several marketing analysis tools.
We came to conclusion that Lavazza is well managed and developed
company. They have wide range of products connected with coffee and
coffee preparation. They also run retail shops (similar to Starbucks). Their
position in markets, in which they are present is strong, especially for
espresso market. Their main chance to grow is to develop in new countries
and try to increase market share in markets in which they are present.
However, they should be aware of changes in customers taste, actions of
competitors, new upcoming technologies, market niches. Lavazza should
also try to hold their position in distribution channels.
As we mentioned above, in order to increase their market share they
should introduce product- and price-based promotions (i.e. loyal-customer
program). As they are present in the coffee-machines market, they can
develop by creating a line of accessories

Sources:
http://www.lavazza.com/corporate/en/
http://www.italtrade.com/spotlight/lavazza.htm
http://www.lavazza.com/export/sites/www.lavazza.com/en/pressarea/press_kit.pdf
http://www.lavazza.com.au/