This is an English adaptation of a FoodBud historical article originally published on September 23, 2021.
Yum China, which sold more than 100 million cups of coffee through KFC in the prior year, was increasing its commitment to coffee.
On September 23, 2021, Yum China and Italian coffee brand Lavazza announced plans to accelerate the expansion of Lavazza's cafe network in China through their joint venture. The target was to open 1,000 stores by 2025. The two parties planned to jointly inject $200 million into the joint venture to fund future development.
The joint venture would also become Lavazza's exclusive distributor in mainland China, bringing in more products from Lavazza's international portfolio.
Yum China and the Lavazza Group, an Italian family-owned company, formed the joint venture in early 2020 to explore and develop the Lavazza cafe concept in China. Yum China held 65% of the venture, while Lavazza held 35%.
In April 2020, Lavazza opened its first flagship cafe outside Italy in Shanghai. By the time of the article, Lavazza cafes had expanded to more than 20 locations across Shanghai, Hangzhou, Beijing and Guangzhou. In the first half of 2021, about half of Lavazza's overall sales came from member sales.
As of August 31, 2021, Lavazza had 22 cafes. The company expected the store count to at least double by the end of 2021.
For the next stage, Lavazza planned to expand in China through multiple store formats, continuing to build density in higher-tier cities and serve different consumption occasions.
The joint venture said it would continue strengthening capabilities in store operations, brand management and marketing efficiency.
In addition to cafes, the joint venture would handle distribution, sales and marketing in mainland China for Lavazza retail products, including coffee beans, freshly ground coffee and coffee capsules.
Yum China CEO Joey Wat said the partnership with Lavazza could capture what the company saw as a major opportunity in China's coffee market as store openings accelerated. She pointed to Yum China's supply chain, digital capabilities and consumer insights as tools to bring Lavazza's Italian coffee experience and products to more Chinese consumers.
At the time, Yum China had built a coffee brand matrix that included KFC's K Coffee, COFFii&JOY and Lavazza.
Compared with emerging coffee chains such as Manner and Seesaw, which had recently been raising capital and opening stores rapidly, COFFii&JOY and Lavazza were expanding more slowly in China and remained concentrated mainly in first-tier and new first-tier cities.
At Yum China's investor day, Joey Wat also outlined broader company plans:
Note: store targets, capex plans and other forward-looking figures are historical statements from September 2021.
