Takeover of Barista Lavazza breaks down

A potential takeover that would have seen the merger of Barista Lavazza and India Hospitality Corp (IHC), has, in the past couple of days, seemingly fallen apart, dealing a huge blow to Lavazza who are looking to offload their retail arm in India.

Barista Lavazza was initially founded at the turn of the millennium, simply as Barista. After establishing a small foothold, long before the current growth that the sector is now seeing, the chain was taken over by the Italian manufacturer Lavazza in 2007 – but that honeymoon period now seems to be over.

Lavazza has now constituted a new M&A team to continue driving the sale of Barista with its over 200 operational stores.

Besides their presence in thirty cities across India, Barista Lavazza also has a presence in Sri Lanka, Bangladesh, Oman and the United Arab Emirates.

“We have no comments,” said a Barista Lavazza spokesman made to the Economic Times of India, whilst Ravi Deol, IHC chairman, apparently offered a more candid response via text message when he told the newspaper that his company had no interest in acquiring the chain.

With a recent boom in the coffee sector in India, the westernised coffee culture is beginning to take off with Café Coffee Day being the prime beneficiaries whilst Costa Coffee, Dunkin’ Donuts and Starbucks both making strategic inroads.

In comparison, Barista has found things tough when going toe to toe with these new faces on the Indian coffee scene.

Lavazza has managed to cut down the coffeehouse’s losses – from $3.8m to $1.7m in the period between March 2011 and March 2013 – revenues have also fallen sharply, dropping by around $2.5m to $13.3m over the past couple years due to the increased competition.

One reason mooted for the failed takeover is Lavazza’s asking price which is rumoured to be perceived as slightly too high, thus putting off potential investors.