QuattroR acquiring Zanetti shows Italian roasters are trying to stay in the fight

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  • Massimo Zanetti Beverage Group was recently partially acquired by QuattroR, a private equity fund, in a bid to strengthen its global presence
  • Despite its Italian origins, the Italian market today represents less than 10% of the Group’s turnover – showing that legacy brands will need to find new ways to stay market-relevant
  • Brand premiumisation and diversification will help secure market staying power – a departure from putting all their eggs in the “heritage basket”

ITALIAN COFFEE roasters have historically been industry leaders, shaping the sector and spearheading trends over the years. The recent acquisition by QuattroR of a 50% stake in Massimo Zanetti Beverage Group S.p.A. prompts the question of whether this reputation still holds true.

Amidst the dominance of global giants like Nestlé and JDE, Italian roasters and legacy brands are facing challenges in keeping pace and retaining market share. 

QuattroR is a private equity fund dedicated to providing capital for the development of outstanding Italian companies with solid fundamentals. It is partly owned by the Cassa Depositi e Prestiti (CDP) – effectively the investment branch of the postal savings bonds issued by the Ministry of Finance. 

Its partial acquisition of Zanetti’s extensive portfolio of Italian brands reflects Italy’s efforts to build its own conglomerates capable of competing on the international stage. 

The sizable capital increase will be entirely dedicated to pursuing several growth opportunities, with the main objective of consolidating the Group’s European leadership and further strengthening its global presence.

“My guess is that they got into financial troubles during a period of rapid expansion, not least through acquisitions, and were impacted by the covid market collapse,” says Jonathan Morris, Director of Research Culture and Environment at the University of Hertfordshire and Research Professor in Modern European History.

“Its own attempts to recapitalise the company have failed to convince the banks, hence the turn to QuattroR to inject the capital – which it hopes to recover with a return to a public listing in four years time.”

How to win back market share?   

Italian legacy brands continue to generate high profits. Segafreddo continues to be a leading brand of the Zanetti Group, for example. However, Italian legacy brands, once revered for their rich heritage and traditional coffee craftsmanship, are now struggling to remain relevant in a changing market. 

Their marketing and positioning strategies have come under scrutiny for appearing somewhat disjointed, with sponsorships and branding initiatives that raise questions for some on their ability to effectively communicate their brand identity and engage with modern consumers.

By leveraging Zanetti’s diverse brand portfolio and distribution networks, QuattroR aims to drive growth, expand market reach, and enhance its product offerings to appeal to a broader consumer base, starting with international acquisitions and appeal.

Starting from Italy, the Zanetti Group was able to enter the largest consumer markets in Europe, America, Asia and in the Middle East, achieving a commercial presence in 110 countries and a portfolio of over 40 brands. But despite its Italian origins, the Italian market today represents less than 10% of the Group’s turnover. 

“I don’t think Zanetti is seen as a heritage brand in the same way as say Gaggia or even Lavazza,” says Jonathan. “It’s more representative of the successful use of Italian branding and distinctiveness to achieve dramatic growth outside the country. Ironically, its US brands like Chase and Sanborn, Chock full o’Nuts and Hills Brothers are those that have a greater heritage value.” 

For other more “heritage” Italian coffee brands, the turnaround strategy to win back market share could be to diversify its consumer base through brand premiumisation. The idea is to shake off the dust of a commercial, “lower quality” reputation and to bring a sense of luxury to the masses through strategic marketing and better products. 

German companies Melitta and Tchibo acquiring Italian legacy brands Caffé Corsini and Molinari respectively are examples of a premiumisation strategy, according to Maurizio Giuli, Chief Strategy Officer at Simonelli Group

“These acquisitions help build a higher level of quality and tap into the premium market segment,” he says. “Their role is to help Italian coffee brands become more international with a higher level of visibility and differentiation.”

All eggs in one “heritage basket” no longer works

The endless innovation and growth of multinational corporations like Nestlé and JDE has intensified competition, compelling Italian roasters to rethink their strategies and reinvent themselves to remain relevant.

In contrast with the innovation led by brands like Keurig and Nespresso with their groundbreaking product developments – K-Rounds and Vertuo capsules being cases in point – Italian heritage roasters have struggled to keep pace in terms of innovation. 

Once renowned for their strong marketing and quality products, many Italian brands are now often perceived as lower quality products relegated to supermarket shelves. Even iconic brands like Illy and Lavazza are faced with the challenge of reinventing themselves to regain market share and establish a distinct position in the global coffee market. 

“Acquired US heritage brands like Chase and Sanborn demonstrate the problem of what happens when perceived brand heritage doesn’t align with perceived brand value,” says Jonathan. “They are all well-known and were prominent in the earlier period of US coffee history, but are today perceived as outdated grocery store blends of inherently low quality.”  

In the same way, while Italy’s pioneering coffee roasters’ historical significance and commitment to quality remain undisputed, the need to adapt to modern consumer preferences and technological advancements is imperative for these brands to maintain their competitive edge.

Are Italian legacy brands now following trends, rather than setting them?

As Italian roasters navigate the complexities of the evolving coffee industry, strategic innovation, cohesive marketing strategies, and a renewed focus on consumer engagement will be essential in securing their future success and reclaiming their position as leaders in the global coffee market.

Coffee Intelligence

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