Lavazza buys Mars coffee business in a US$650m deal

02 Oct 2018 --- Italian coffee maker Lavazza is set to buy the coffee business of US food giant Mars Inc. to expand its sales in the US, in a deal estimated at US$650 million. The companies announced yesterday (01 October) that Lavazza had agreed to buy Mars Drinks, a business which includes Flavia and Klinx systems, two brands in the office coffee service (OCS) and vending machine segments.

Introduced in 1973, Klix is a brand of drink vending machines and Flavia, launched in 1984, offers single-serve coffee makers for offices. Lavazza’s latest deal follows last year’s acquisition of Italy’s Nims, which specializes in selling coffee capsules and machines door-to-door in Italy, and the purchase of Canadian organic coffee maker Kicking Horse Coffee, as well as French brand Carte Noire.

The acquisition follows the purchase of Australia’s Blue Pod Coffee which was announced by Lavazza last July and comes after a handful of deals the Italian group struck between 2015 and 2017 to boost its revenue above €2 billion (US$2.3 billion).

Financial details of the deal have not been officially disclosed, but sources point to an enterprise value of around US$650 million. Under the agreement, which is expected to close by the end of this year, Lavazza will acquire Mars’ coffee businesses in North America, Canada, Japan and in Europe, including its production plants in the UK and North America.

Lavazza was founded in 1895 by Luigi Lavazza, in the northern Italian city of Turin and is currently the market leader in Italy and privately owned by the founding family.

BNP Paribas, Intesa Sanpaolo and UniCredit provided a €400 million (US$463 million) loan to the coffee maker for the deal, according to Reuters. 

“This acquisition strengthens Lavazza’s position in the OCS and vending segments, which offer considerable opportunities for growth and development,” says Antonio Baravalle, Lavazza CEO.

The deal comes amid a time which has seen Coca-Cola recently acquire UK coffee chain Costa from Whitbread for US$5.1 billion and Nestle agreeing on a US$7.15 billion licensing deal for Starbucks’s retail business, earlier this year. You can read more on this here and here. And last month, Dunkin’ Donuts announced its plans to invest US$100 million in a brand refresh which would see the coffee and donut chain unveil around 50 pilot stores across the US that focus on to-go and mobile ordering. As part of the trial, customers are able to order on mobile devices making it easier for them to grab-and-run as well as installing dedicated pickup areas, digital kiosks and drive-thru windows that prioritize orders via a mobile app. You can read more on this here. 

Last month, a partnership led by illycaffè and Lavazza, together with Istituto di Genomica Applicata, IGA Technology Services, DNA Analytica, and the Universities of Trieste, Udine, Padova, and Verona, released the results of the Coffea arabica Genome Sequencing Project. This unique achievement in genome research will accelerate scientific efforts to ensure the future of coffee agriculture, which is threatened by climate change. The study was initially coordinated by professor Giorgio Graziosi of DNA Analytica Srl. The partnership of Italian researchers, along with world coffee market leaders illycaffè and Lavazza, is an important example of collaboration between the private and public sectors.

“We are proud of having contributed to the unveiling of the Arabica DNA, an incredibly important initiative for the coffee sector conducted by a multi-functional team of researchers. The results of this project highlight the importance of working in a pre-competitive approach, which in turn will help improve the entire coffee production supply chain,” comments Giuseppe Lavazza, Lavazza Vice Chairman. “The sequencing of the coffee genome gives us the ability to ‘read’ the plant and precisely identify its origins as well as determine, for example, the genes that give it a certain resistance to diseases or infections. This could result in a superior quality coffee end product based on objective criteria. Indeed, excellent quality is the ultimate goal our company has always pursued, and which is the focus of our ongoing research projects.” 

Coffea arabica is one of two species in the Coffea genus consumed globally. It is renowned for its high quality and represents over 60 percent of coffee production in the world. You can read more on this here.