In Singapore, the Massimo Zanetti Beverage group is currently launching the San Marco compatible coffee capsule from the Segafredo Zanetti brand on the market. At the same time, he was the first to start a local production of capsules in Thailand to open up a market that is still marginal today due to high import taxes. These are just some of the latest moves in a complex Asian expansion strategy which involved the acquisition of the Boncafé Group in 2014 for 85 million dollars, the inauguration of the group's first roasting plant in Vietnam at the end of the same year and in 2015 the signing of a commercial agreement for the opening din 50 “Segafredo Zanetti Espresso café”. “Asia accounts for 5% of our turnover. In five years we would like to double the current weight on revenues. The goal is grow in Horeca (bars, restaurants and hotels) and in the mass market”, explains Pascal Héritier, Coo and M&A manager of Massimo Zanetti Beverage Group who in an exclusive interview with FIRSTonline explains the group's strategy on the Asian markets in the round.
How the coffee market in Asia?
It is less fragmented than in Italy but there are still different actors. The first players are giants like Nestlé because it must be remembered that 50% of the world still drinks freeze-dried coffee. Espresso remains a niche. In any case we are talking about the markets of the future. In the Philippines and Vietnam the growth of coffee consumption is about 10% per year. In China there are no reliable data, but we see the increase in demand every day.
Which What was your expansion strategy in Asia?
The purchase of Boncafé is part of the strategy that we have been pursuing around the world for some time, since the 80s when we began to expand into Europe: to buy very local but very strong brands in the country, alongside which we add Segafredo as an Italian specialty. We are a lay producer: we are experts in coffee consumption, but we don't want to impose Italian coffee. It's the same with Boncafé. Boncafé is the local brand, recognized and appreciated by the local customer and Segafredo is the "Italian" brand, the specialty.
What are the turnover objectives on the Asian market?
Asia accounts for 5% of our turnover. In five years we would like to double the current weight on revenues. The goal is to grow in Horeca (bars, restaurants and hotels) and in the mass market. Boncafé has a strong anchor in Asia with an orientation towards the Horeca segment where it makes about 90% of its turnover and is recognized as a high-end brand. With more than 50 years of history, in Thailand it has over 30% of the market shares of this segment and is present in Singapore, Cambodia, Malaysia, Middle East. Furthermore, service is very important in the Horeca business. In Italy, for example, we have 50 depots and more than 330 vans that deliver our products or move for repairs. In this sense Boncafé was very similar to Segafredo. Furthermore, we are thinking of trying to create a Boncafé concept, a series of cafés that are more modern, for example with a roasting facility inside them.
You might think about listing Boncafé in Asia?
It is not in the plans but we have no preclusions to do so.
Is China also an attractive market?
In China, our Group still has a limited presence but it is an evolving market that has accelerated in the last 2-3 years. The numbers for now are still modest in comparison with the major consumers. In Finland, which is the largest consumer of coffee, 12 kilograms per capita are consumed per year, in Italy around 6 kilograms, in line with France and Germany. Japan, the most mature market in Asia, has a consumption of about 4 kilograms. In China we are talking about 60-70 grams per capita per year. If Japan is not matched, however, we think that consumption will increase significantly. We are witnessing a boom especially in coffee shops. However, it must be remembered that espresso coffee remains a niche in total coffee consumption. Even in China, quantities reward longer, filtered coffee.
How are you moving in the country?
In addition to Boncafé, on which we want to push for greater penetration in the country, we have just signed an important commercial partnership through the Segafredo brand with Tnpi, a leading group in Asia in the Food & Beverage sector, for the opening of 50 coffee boutiques " Segafredo Zanetti Espresso café”, of which 25 by the end of 2015. This is a great success for a group like ours. Tnpi also evaluated other Italian brands but they chose us because we are the most global.
In how many countries are you present?
We are the most global café in the world, we are present in 110 countries where we have always maintained the various local brands. In any case, it is the Segafredo brand that is more international. Of the 110 countries in which we are present, Segafredo is the only one to be present in all of them, while there are countries in which we are present only with Segafredo.
Which the strategic significance of the agreement for the coffee shops?
It is fundamental for brand awareness, knowledge of the brand. We have more than 400 coffee shops in the world with our brands, the most important chain (more than 330) is Segafredo Zanetti Espresso, the world leader in "Italian coffee". The idea was born because we realized that many around the world were asking how Italian coffee is made. The coffee shops will help the Segafredo brand to grow in a huge market like the Chinese one. Of course, espresso remains a niche here too, but thanks to roasting in Vietnam, we can't rule out the possibility of creating a local brand directly under the Segafredo brand in the future, which will meet the tastes of the Chinese.
Why did you build a roastery in Vietnam?
We are the only ones in the world that go from production to cafeteria. And here we wanted to be close to the markets of the future. With production close to the consumer we are more efficient, the cost of transport decreases and the product is fresher. Vietnam is the second largest producer of coffee in the world. Furthermore, from 2016 January XNUMX, thanks to Tpp and Afta, there will be no more taxes for exports to other Asian countries. Local roasting also allows us to have the flexibility to create products that appeal to consumers in the Asian area.
Where do you place the cafés?
We try to be in places where there are people and the ability to pay for our coffee, therefore in malls, stations and prestigious places. We also have one inside the Bank of China headquarters in Shanghai.
What were the difficulties major in China?
Find the serious distribution partner who invests in your brand and has knowledge of the Chinese market.
Speaking of globalization, what do you think of the landing of Starbucks in Italy?
We need a coffee for everyone, if Starbucks thinks the Italian market is ready, so be it. Our group is also developing and will continue to develop the historical brand “Chock Full o'Nuts” in Italy, where we are already present, and beyond the American borders.
Do you plan to continue with the acquisitions?
In the DNA of the group we have always made acquisitions, today with the notoriety of the Stock Exchange we receive one offer a week. We discard proposals that are not in line with our expansion strategy, which means growing in coffee and not diversifying into anything else. The idea is to continue paying with cash flow as we have always done but we are not precluded from an important operation, always in the spirit of growth and of being an important player in the world of coffee.
Do you still have room on the debt front?
With the expected level of debt at the end of the year, there is room to make acquisitions but it is not an absolute priority, they must have a strong economic sense and sustainability. We don't want to change the face of the group just to make acquisitions. However, if there is an opportunity for an important operation with a major competitor, we are ready to take the field. Now that's not the case, but if the opportunity arises we will evaluate.
Right now you are launching a new product on the Asian market. What is it about?
In Singapore we are launching the San Marco compatible capsule by Segafredo Zanetti. But in Thailand we have also started the production of our Boncafè-Segafredo capsules to create a market that today is very marginal due to import taxes which raise the cost of a capsule to one euro. We are the first to produce locally, without import taxes, to be more competitive than our competitors with the aim of creating the market.
