Lavazza’s Irish coffee trade impacted by volatility in sterling

Coffee giant Lavazza says its Irish business has been hit by the recent volatility in sterling ahead of the Brexit vote.

The company, which has a 24 per cent share of the Irish coffee market, sells into the Republic via a distributor in the UK.

Vice president Guiseppe Lavazza said the pound's slide in value against the euro posed a problem for the firm.

Speaking at the EY Entrepreneur of the Year event in Monaco, he said, however, the business had measures in place to manage exchange rate fluctuations in all its markets.

Sterling/euro volatility is now at its highest level since the financial crisis.

Earlier this week, the British currency fell to another three-week low against the euro after a string of polls put the Leave camp in the lead.

Lavazza has been steadily increasing its share of the instant coffee market here, which is valued at €42 million.

Reduced supply

Mr Lavazza said the company’s brand had a “fashionable image” in

Ireland

and that its new Prontissimo product, launched last year, was selling strongly through its retail network, which includes SuperValu,

Dunnes

and

Tesco

.

Speaking at the EY event, Mr Lavazza said the company was not overly worried by rival Starbuck’s imminent entry into the Italian coffee market.

"I don't really see Starbucks as a real competitor to us as they're selling a totally different proposition from what we are doing," he said.

In March, the US coffee giant announced it would open its first Italian branch in Milan in early 2017.

Another big issue affecting coffee producers is climate change. Higher temperatures and more persistent droughts are combining to reduce supply in many coffee-growing countries, while at the same time global consumption is skyrocketing.

Mr Lavazza said demand was expected to grow by 20 million bags over the next 10 years, equivalent to nearly two thirds of the supply coming out of Vietnam, the world's second largest coffee grower.

However, he said the land use devoted to coffee was likely to remain relatively static, meaning the extra supply would have to come from more intensive production techniques.

“The quantity of soil at our disposal will be the same. So while this is a limit, it is also an opportunity for the coffee growers to increase their productivity,” he said. “The great challenge was to make the small farmers more resilient, more productive and more entrepreneurial.”