Ten-year-old Emilio Lavazza, heir to Italy’s 115-year old Lavazza coffee business, prefers Coca-Cola to the drink that transformed his ancestor’s grocery store into a €1.1 billion (about $1.55 billion) empire.

But he certainly appreciates the corporate perks that come with being part of the Lavazza family. This year Lavazza entered a lucrative three-year sponsorship deal with Wimbledon, the quintessential British tennis competition. To mark the occasion it created a limited edition strawberries-and-cream frozen latte. As I interview his father, vice president Giuseppe Lavazza, Emilio begs us to hurry up so he can catch the action on centre court.

Giuseppe shrugs and smiles apologetically: “He loves Sharapova. He wants to see her win.”

The Lavazza Coffee empire is buzzing. From a tiny coffee shop run by Luigi Lavazza in the backstreets of Turin, to the international conglomerate in 100 countries selling everything from frothy Capuccino to conceptual fashion photography, Lavazza has grown exponentially. And with a new flagship distributor in China and armed with plans to double its Indian coffee shops, the firm is in expansion mode.  

Lavazza is best known in Italy where it dominates the retail coffee market with 48 per cent, according to Nielsen. It is “the Starbucks of Italy,” says Giuseppe Lavazza. Last year it registered net sales of €1.1 billion—up slightly on 2009’s €1 billion. The recession hit almost all the large coffee vendors: larger rival Starbucks, for example, was forced to close 200 stores in the UK last year as the inflationary environment dampened appetite for little luxuries.  

Expanding outside Italy has not been without its challenges however, particularly during the financial crisis, he says.  But certain tactics have helped. Avoiding a retail presence in the UK (Lavazza has one coffee shop in the UK, in Harrods, compared with Starbucks’ 600-plus) has stood it in good stead during the crisis. “The UK market was fully saturated by coffee shops in the UK and we have lots of independent customers. We decided to go indirectly to the market.”

Instead of coffee shops, Lavazza distributes through a range of outlets ranging from five-star hotels to budget drinking hole JD Wetherspoons – and the diversification buoyed revenues. 

“The recession hit coffee consumption everywhere," said Giuseppe Lavazza. “Although Germany, France and the UK were stable, our business in Spain, Ireland, Portugal and Greece were high risk. But we were well diversified regionally. Also we aim for the mass market. So you are guaranteed of quality whether you drink Lavazza coffee in a Wetherspoons or Harrods,” he adds.  

Its strong position has allowed it to spend around €235 million hoovering up smaller peers around the world, like Italian company Ercom, Argentinean company Coffice, and the Bulgarian company Onda. It took a 6 per cent stake in the American company Green Mountain Coffee Roasters this year. Lavazza has steadfastedly resisted takeover proposals from a number of firms including Procter & Gamble, Sara Lee, Kraft and Nestlé. “Everybody has approached us. But we are completely private and want to maintain our independence,” says Giuseppe.

Turning to Asia

But Lavazza is not resting on its laurels. To boost profits, the family is sticking to its strategy of diversification and now turning to Asia’s growing pool of affluent consumers in a bid to introduce coffee to their daily diet. It has plans to grow in Thailand and South Korea, and made its first inroads into China last month when it bought a small distributor, subject to regulatory approval.

But its main priority will be India, says Giuseppe.

“Indians are virgin coffee drinkers, which makes it a very interesting market.  It is one of most important coffee producing countries in the world, but like Britain it is a primarily tea drinking country and coffee culture traditionally has not existed,” says Giuseppe.  

India’s wealthy population surged at a rate of 21 per cent per cent last year, according to Merrill Lynch and Capgemini most recent World Wealth Report, but a quarter of its 1.2 billion people still live in poverty. The majority of adults still dilute their coffee with bitter chicory or water it down with milk. “For us, a country like India which is so huge in terms of people and yet is a virgin coffee drinking nation, is a dream. For this reason we decided to invest in the country more and more. The pleasure of having a hot coffee or ice beverage, they will become addicted.”

Tough in India

But the absence of coffee from its heritage also makes India one of the toughest markets to crack. Not even the ubiquitous Starbucks has a presence, although it recently announced plans to enter. After acquiring two branches in 2007, Barista and Fresh & Honest, Lavazza is now seeking to double its stores to around 400 in the next three years. 

Lavazza is not specific about the target audience in India that he is aiming at. “The brand will always be premium but always accessible to everyone. We inject a touch of glamour, romanticism, a part of our brand values as an Italian company.” Giuseppe adds that he thinks the fascination with Western premium brands and luxury logos will be a huge pull in Asia.

And since Starbucks announced an entry into India earlier this year, will that pose a threat?

“The fact that other players are entering in this market, demonstrates that expected growth is a common opinion, and in this way more consumers will be exposed to the coffee offer. It is a good thing,” concludes Lavazza. I am handed the Wimbledon special – an ice-cold strawberries-and-cream flavoured latte served in a frosted glass.

And what of Emilio, who is now bursting with impatience as Sharapova weighs in against Petra Kvitova. Are he or his siblings being groomed to take over the family business from his father, aunt and second cousins, to keep the family firm in safe hands?

“We decided we won’t educate them to succeed us in the business. Of course we would like them to be interested, but they have to be independent and have their own experiences, make their own mistakes and take on responsibilities. That is the only way to run a family business.”