Leading Italian coffee roaster Lavazza expects London's recently-volatile futures prices to stabilise as new crops from the world's two biggest growers start to flow. Prices in London charged to seven-year highs on Tuesday as fears over future supply were exacerbated by news of damaged exchange stocks in Italy.
Lavazza's director of supply chain and coffee buying department Mario Cerutti dismissed the recent price surge as purely speculative and expected good crops ahead from both Brazil and Vietnam.
"I believe in the mid-term the market will return to a normal supply and demand logic," Cerutti told Reuters in an interview at Lavazza's main plant on the outskirts of Turin, one of Europe's largest roasting plants.
"From the point of view of global demand and supply the situation is fairly balanced. There is enough coffee. Demand is growing but only slightly," he said.
He did not think the latest suspension of over 3,000 5-tonne lots of coffee stocks in the Italian port of Trieste due to moisture damage was particularly significant. Nor did he expect Lavazza's accounts to be hit by the turbulent market as the company had hedged its bean purchases.
Revenues at Lavazza, which also provides coffee machines for domestic, office and bar use as well as coffee vending machines, rose 8 percent to 867 million euros ($1.11 billion) in 2005, while net profit came in at 64 million euros. "We are thinking to slightly increase our sales of the final product. We are hoping to add a few percentage points in sales," Cerutti said.
He said Lavazza would keep purchases at around 2.0-2.2 million 60-kg bags of green coffee a year and did not plan any big changes in stocks. He would not be drawn on more specific forecasts.
Lavazza, which is rated by Swiss trader Volcafe as Europe's seventh biggest coffee roaster by purchases, bought 2.3 million bags of green coffee in 2005 and sold more than 100,000 tonnes of roasted coffee.
The roaster, whose blend is made up on average of 70 percent arabica and 30 percent robusta, has not raised prices to final consumers despite soaring futures prices, Cerutti said.
London robusta futures are up by some 33 percent since the start of the year as worries about supplies from Vietnam, the top producer of robusta beans which are largely used to make soluble coffee, attracted investment funds to buy.
The benchmark November contract rose $22 to $1,524 a tonne by 1015 GMT on Friday.
The family-owned company, founded in 1895 as a grocery store, now sells coffee in 80 countries and Lavazza has been closely watching nascent demand in China, although for now it has only a symbolic presence, Cerutti said. "The big questions are: whether the Chinese would consume coffee? and if yes, then how, what types of coffee," he said.
Lavazza is active in east European markets and Russia where coffee consumption has been growing rapidly, but Italy remains the main market, with foreign sales accounting for 37.5 percent of its total revenues.
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