As a child, Massimo Zanetti says that he would go down to the port in Venice with his father to watch the cranes unloading cargoes of coffee. And, a bit like the scions of champagne houses who are given a thimbleful of their family’s fizz before they even taste mother’s milk, he says that he first drank coffee at the age of two, and had graduated to espresso by the age of five.
Now grey-haired, the head of the third-generation Italian coffee company has transformed the family business from importing to a brand – Segafredo – and a network of retail outlets which includes Puccino’s in the UK, Boncafe in Thailand and Chock full o’Nuts in the US. Now he is taking his family’s firm into uncharted waters: he is planning to float about 40% of the business on the Italian stock exchange. The IPO is expected to raise €200m, which would value the company at around half a billion euros.
Why? Because the world of coffee has seen massive consolidation over the past couple of years and the top 10 producers have more than 50% of the market. That includes the Massimo Zanetti Beverage Group, although given that accounts for just 0.2% of sales, you might be forgiven for predicting that it is a matter of time before a bigger group downs it like a ristretto. For the Zanettis, it’s a case of expand or die.
The IPO ought to mean that the business remains family-controlled for some time yet – 11% of MZBG’s shares went to retail customers, meaning that the impact of any activist investors will be dampened.
The really interesting question, though, is whether a successful flotation tempts others to follow his example. Two other well-known Italian coffee businesses, Lavazza and Illy, are still owned by families. Lavazza’s turnover is similar to MZBG’s, while Illy makes about a third as much. If they decide that they too need a boost to survive there would no doubt be many a private equity firm keen to take a look, not to mention giants like Nestle and Keurig.
But then again, a well-capitalised, Italian, family-run coffee business with a long pedigree wouldn’t make a bad strategic partner. Does anyone know where one of those can be found?