Introduction:As global coffee brands compete for a foothold in the Chinese market, Yum China’s strategic pivot has drawn attention. On one hand, the company is accelerating the rollout of Italian Lavazza coffee shops, aiming to reach 1,000 stores by 2025; on the other, it is gradually phasing out operations of its mid-tier COFFii & JOY brand. This article delves into the market strategy behind this decision and explores how Lavazza is carving out a niche in the fiercely competitive below-30-yuan price segment with its authentic Italian craftsmanship.
The competition in China’s coffee market has reached a fever pitch, with various brands scrambling for market share, while some players opt for strategic adjustments. Yum China’s latest moves reveal that the group is actively expanding the store network of Italy’s century-old coffee brand Lavazza, planning to open up to 1,000 outlets in China by 2025. At the same time, it announced the gradual termination of its mid-range COFFii & JOY brand, focusing on more promising segments of the coffee business.
According to reports, Yum China had opened over 20 new Lavazza cafés nationwide in the third quarter of 2022, bringing the total number of stores to 78. This Italian brand, founded in 1895 in Turin, currently sells its products in over 80 countries worldwide, with an annual production of 86,000 tonnes—equivalent to approximately 14 billion cups of coffee—and is one of the key players in the global coffee industry.
Looking back at the partnership, Yum China and the Lavazza Group announced the establishment of a joint venture in May 2020 to jointly develop the Chinese market. In September 2021, the two parties further invested an additional US$200 million to accelerate store expansion, setting a target of 1,000 stores by 2025. Currently, Yum China and the Lavazza Group hold 65% and 35% equity stakes in the joint venture, respectively. The company also serves as the exclusive distributor of the Lavazza brand in mainland China, responsible for introducing more international products.
As of the end of August 2022, Lavazza had established 22 stores in major Chinese cities such as Shanghai, Hangzhou, Beijing, and Guangzhou—a twofold increase compared to the second quarter. It is expected that the total number of stores will at least double again by the end of the year, with an annual sales target of 130 million cups of coffee.
In contrast to Lavazza’s rapid expansion, Yum China announced during its third-quarter 2022 earnings call that it would gradually phase out operations of its COFFii & JOY brand. Established in 2018, COFFii & JOY focused on freshly ground specialty coffee, with a price range of 20 to 30 yuan per cup, initially targeting first-tier cities such as Beijing, Shanghai, and Guangzhou. According to previously disclosed data, the brand had 42 stores by the end of 2020, but no further growth has been reported since then.
Analysts point out that the below-30-yuan price segment where COFFii & JOY operates is the most fiercely competitive in the Chinese market. A research report from CITIC Securities shows that this price range is crowded with both domestic and international brands, including Luckin and Manner, resulting in high market saturation and fragmented consumer brand loyalty. As COFFii & JOY failed to establish a strong market presence or competitive edge in this segment, its future development faces significant challenges.
Lavazza, on the other hand, leverages its traditional Italian craftsmanship and authentic coffee experience—emphasizing Italian style in everything from store design to product presentation—to fill the gap in China’s premium Italian coffee market. It focuses on offering high-quality espresso, caffè latte, and other classic beverages, with an emphasis on precise control over roasting and extraction techniques. This has become a key competitive advantage in the current market trend that prioritizes differentiation and quality.
Industry observers believe that Yum China’s move reflects a shift in strategy from broad deployment to targeted investment, choosing to concentrate resources on Lavazza, which has clear brand recognition and market potential, while retaining K Coffee as a quick and convenient coffee option. However, to achieve its 2025 target of 1,000 stores, Lavazza still needs to significantly accelerate its expansion pace. With only 78 stores currently, the gap to the target remains substantial. Maintaining quality and brand consistency during expansion will be a critical challenge going forward.
The above content is compiled by CoffeeHunters, a coffee news website.
