E25: The Perfect Cup with Andrea Chiaramello of Lavazza Canada

This podcast is brought to you by Ginsler Wealth. The information discussed today is meant to be general in nature and not tailored to your specific investing circumstances. This means that you should talk to your regular Gensler wealth advisor or your own advisor before acting on any information we discuss today. Nothing in this podcast is intended to be a solicitation and past performance does not guarantee future returns. This episode will contain a high caffeine content, so digest accordingly. Today on the unlimited podcast, a Little Bit of a Change. Coming to you live from the Truffle Kings Media Preview at the Hazelton Hotel in Yorkville. We are speaking with Andrea Chiaramello, president of Lavazza Canada. We talk about the world of coffee, how, how it's made brewing a perfect cup and why coffee continues to be a growing industry. Let's go. Well, welcome everybody, to the unlimited podcast. This is an interesting one. This is a first time for our podcast live. We're recording live at the Truffle Kings Media Preview here at the Hazelton Hotel in Yorkville in Toronto. So unlike regular podcasts where we can make tons of mistakes and no one actually knows, now you may actually get to see some of the mistakes that I make. Excited to be here with my guest, Andrea Chiara Melon, the president of Lavazza Canada. Throughout the podcast and throughout some of my other messaging, you might have gathered a little bit about me. I love tennis, I love music, I love camping and canoeing. But there's one love that gets me up in the morning every day, and that is my espresso and my coffee, which I have twice a day. And so when I had the opportunity to meet Andrea, I was very excited and convinced him to sit down with us for a few minutes here and teach me and, and some of our listeners about real coffee and how the coffee culture and how we're supposed to do it right, and anyways, all that sort of stuff. So, Andrea, thank you very much for being with us today. Really appreciate it.

Thank you, Brian, for the invitation to be here today and for this conversation and for the introduction. It's really a pleasure.

Good. My pleasure. So let me tell the listeners just a tiny bit about you and then I'll actually turn it over and maybe you could elaborate. Andrea, born and raised in Turin in Italy, which happens to be the hometown of Lavazza. He has been a coffee addict, he says, for decades, after spending most of his working life as an export manager bringing Italian products into international markets. And Andrea joined Lavazza and moved to Toronto in 2017 and leads the Canadian operation across all Channels for the company, maybe. Andrea, that was a quick intro. Maybe give a little bit more for our listeners and it'll let everyone know that you are the coffee and you'll help us decipher the secrets of great coffee. So maybe, and actually if you wouldn't mind, then also explaining a little bit about Lavazza history and all that everyone knows, maybe some of the other coffee companies out there like to learn a little bit about Lavazza as well.

Absolutely, absolutely. Brian, it's a pleasure. First of all, thanks for labeling me coffee experts. By far I'm not an expert, but luckily at Lavazza we have a lot of coffee experts that enable the company to bring to market an amazing variety of blends in all the markets we operate in the world. As you mentioned, my coffee addict, I think my addiction started when I was a little kid and coffee was part of the family ritual early in the morning, preparing a mocha pot for the family. And as soon as I was able to do so, I like to be in charge of the process. So I definitely fell in love with the ritual and what goes around coffee from a very early age and definitely something that accompanied me for the rest of my life until now. I had the pleasure to join Lavazza in 2017 and to move to Canada to expand the Lavazza operations in this country. Lavazza has a long history. We are now over 125 years as a company. We started in 1895, is still to date a family business which was started by Luigi Lavazza in a very small shop in the center of Torino where he started pioneering the world of coffee by creating coffee blends. Until then, coffee was known to the market mainly as a single origins. So green beans from a specific plantation, from a specific country that were then sold mostly as green coffee for people to roast at home. And Luigi Lavazza had the intuition of first of all creating value for consumers by pre roasting the coffee and also creating unique blends by mixing different types of origins in order to sell to the market something unique, something unique for his store. So, and that's how the Lavazza journey started in creating blends. And today Lavazza supplies the world with a large variety of blends. Sourcing coffee beans from over 35, 40 countries of origins.

Is it, is it common now to do blends or is sort of a pure single country type of bean better? What, you know, in wine, I think I'm not a wine connoisseur, but, you know, people tend to want grapes from a single vineyard and as opposed to mixing, I Think you'll know better than me maybe on that too. How does it work in the world of coffee?

So the world of coffee, you see both situations. Let's say you see single origin products that are of course very trendy with a lot of storytelling from that specific origin. But also the blending of coffee is now become very popular for the reason also because by blending different origins, you are able to create the perfect blend of coffee for whichever taste. And by perfect, I don't mean the best blend of coffee because ultimately is a matter of personal preference. A big meat in coffee is the many consumers think one blend is better than another one, but is very subjective at the end of the day because what is better for someone not necessarily is better for somebody else. We all have different tastes and that's why Lavazza brings to the market a very large variety of blends, a very large assortment to cutter for all the individual tastes.

Okay, well, we're going to talk a little bit more about how these all sort of get developed from the bean all the way through the cup. Just a few more pieces on Lavazza. I understand Livaza is a private company and how big is the company? Whatever you, you know, don't disclose anything. You can't disclose. But you know, what's the breadth of the company, where is it operating and what's happening in Canada.

Absolutely. So Lavazza, Yes. Is a family owned company, entirely private. Now we have the fourth generation LDM of the. Of the company. We are a 2.7 billion euro company and this is public information in sales, in turnover. In sales.

Yes, sales.

We operate in over 95 countries around the world selling coffee and we source the coffee in approximately 40 different countries of origins. So we are definitely a global player. We are the third largest coffee group in the world and number one coffee only company in the world. Here in Canada we are among the market leader as a group in. In the coffee only in roasting ground only perimeter. We are the number one player when it comes to including also single serve in the category. We are the number three player.

Number single serve meaning what the pods.

Yes, both K cups and espresso compatibles and other systems. Okay.

And so you say the word coffee and using to describe what Lavazza does. Coffee, you know, coffee I think covers a bunch of different things maybe and maybe in Italy it means one thing, in Canada it means another. On a podcast we always like to go back to basics. And now coffee I think is maybe much more understandable than some of the financial stuff that we normally talk about. But can you define, when you say coffee, what does coffee mean? What does coffee mean here? What does coffee mean in Italy, if you go to different cafes and you say, can I have a coffee, what do you get? Because I think it may be different in different parts of the world. Just for the, just for the listener, what's, what's coffee mean?

Oh, absolutely. This is a very interesting question and it will be a very enjoyable exercise to travel the world and order a coffee in each single country and see what you just say.

Like a coffee please.

Just a coffee please. Exactly. And see what you actually get. In, in Italy, I'm on the percent. Sure you'll get a couple of espresso, right? A single espresso shot. If you ask the same question here in Canada, you'll probably get a drip coffee or what they define regular coffee. If you go to Brazil, you probably get a cafesino, which size wise is like an espresso but is brewed low pressure. So indeed in Turkey, you, you, you get a Turkish coffee and the journey will go, will go on. Right? So definitely there is a different meaning of the word coffee across the world. They all come from the same ingredients, but the method of preparation and the rituals around it are indeed different.

Right, okay. So speaking of all coming from the same ingredients, again, I think a lot of people, I mean, it's a huge industry. You know, I see the lineups at all the coffee shops every morning and throughout the day, people are really enjoying their coffees. I would love to learn how does it, how does it start, like start to finish from the time, you know, the, you know, the germination of whatever's going to create the coffee all the way to me drinking it, what, without going into, you know, four hours of detail. But what's the process so people understand what it takes to get that coffee every morning?

The cup of coffee? No, of course, it's a very interesting questions and probably four hours wouldn't be enough to go into all the details.

We'll do that on part two.

Yes, in a nutshell. Well, green coffee. Coffee is an agricultural product, Right. So there is a farming component that is the foundation of what we drink in, in our cup every day. So it all starts in the countries of origins where the coffee is farmed, then is collected by the local communities and then treated. There are several steps involved in the process from the, the picking of the coffee that can, can be either automated or manual in many countries due to the terrain and the environment. And then the coffee berry coffee is actually looks like a Berry when it's picked up.

Yeah.

Needs to be treated and cleaned from the skin and the pulp around the coffee beans.

We are familiar it every single little coffee bean.

Correct. Every single coffee bean is inside like. Looks like a cherry.

Right.

Imagine a cherry which inside contain the coffee bean. So you need to remove the skin and the pulp around the the bean and then you need to clean it and then you need to transport it to where the roasting will take place. Then the blends are created. Some blends are created prior to roasting after some other after the roasting process. Then depending whether it is delivered as ground or all beans, it might need to be grounded by the. By the grind by the industrial grinders. And packaged packaging is a very important component because coffee is a very sensitive product. Very especially very sensitive to humidity and to oxidation. So you need a packaging that protects the coffee until the moment it is used.

Right.

Then before it gets into your cup, the coffee needs to be transformed is an ingredient still at that point here when it the know how on. On the process and the method of preparation comes into play. Not only the know how but also the equipment. Equipment that needs to be properly maintained, cleaned and operated. Yeah. Until it delivers the. The coffee cup up to your expectations. So it's a long journey. So it's like many players touching the.

Coffee, very labor intensive to get the single bean out of the cherry like.

It is still there are processes, tools, equipments available these days, but ultimately there is a lot of labor involved.

Are there different because coffee comes from a variety of different countries. You know, again, I'm not a wine connoisseur, but I know certain areas are deemed to have the highest quality grape, et cetera. What type, what areas of the world I guess is are known for some of the best coffee beans. And if you had a choice and you had a lineup of, you know, coffee beans from all these variety of countries, is there one or two that you would gravitate to and you you would suggest listeners gravitate to?

So first of all, coffee only grows in certain areas of the world. It grows in say, tropical climates. So basically all the countries that are around the equators are suitable for growing coffee. So countries like Colombia, Brazil, India, Vietnam, Ethiopia, Congo, Hawaii. All those countries are amazing growers of coffee plantations. Cuba, there's a Mexico.

Yeah.

And we source our coffee from all those countries. Some countries they do grow higher quality coffee, mainly due to the development that the agricultural techniques have reached and evolved to over the years. In some other countries, perhaps still lagging a Little bit behind, but catching up quickly. So the beauty of coffee is to have these great variety of options available. And my suggestions to consumers is to explore and have fun rather than be focused on a single country or a single origin. I mean, do that if that pleases your palate. And once you find your go to cup of coffee, go to origins, by all means. But it's fun to explore different varieties just like we would wine.

Right. One thing you mentioned when you were talking about the process is, you know, all this happens and then it gets to the end place where it's going to get brewed. I guess, if I'm using the right term, what needs to happen at that stage to, you know, there's so much work that happens and maybe doing something wrong at that end stage just, you know, negates all the hard work that's happened to get to that point. So what, what's. What makes a good cup of coffee from the time the beans come out of the bag and then to get that into the cup, whether they're grounding would be part of that process, I guess.

Basically, there are three macro components in making the perfect cup of coffee. First of all, the blend. And that's our responsibility to make sure we take care of sourcing, selecting the right beans to make the desired blend and prepare it and transport it and package it in a way that it arrives at the point of consumption in the perfect shape. The second component is the equipment, the brewing machines or the brewing device that are going to be used. They need to be perfectly cleaned and maintained and in good operational orders so that they can perform the job they're supposed to. And the third component is the human factor is, is the hand that prepares the coffee. As you said, you can buy the best possible ingredients and then completely destroy them in a kitchen, in preparing a meal.

Right.

And that happens very often in my house when I cook, so.

Me too.

So definitely it's very important. And Lavazza likes to play a very active role, even on this last point, by providing training, as much training as we can to make sure that all the hard work that has been done before is then transformed in a good cup of coffee at the end. So that's why Ilavatsa opened a network of training centers, which is now the largest training school in the world, with over 50 locations. And we have one here in Toronto, by the way, that opened two years ago. Data that is available and no charge to all our customers.

Customers, meaning like businesses that are businesses for the home drinker?

I mean, no, no, no, no, no, for consumers, even though they are also welcome, like if they reach out to us, our doors are always open to talk about coffee and to show how coffee is prepared and talk about the different method of preparations. But the role of these training centers is exactly to make sure the coffee is prepared correctly. Right.

So, and actually speaking of the home consumer, I guess so, you know, you've got trained, you know, lots of trained folks, whether it's through your facility or just in general around the country, around the world, serving coffee at, at cafes and elsewhere. Once the person is at home though, and wants to have their own sort of coffee made at home, what's the best way for the home consumer to, you know, make the perfect cup of coffee? Some people like, you know, the, the, the drip coffee, some people do the pods, there's different pods on the market. But any advice for the home consumer? And then I actually do want to talk about your specific Lavazza Blue system which, which we use at the home and the office because I think it's a little bit different than what people are used to. But. Long question, but I'll turn it over to you.

Long question, but very clear. So first of all, again is a matter of personal preference. You know, we don't have the arrogance to tell consumers which is the best blend that they should buy. And that's why we have so many they can choose from. So everybody has the freedom to choose their personal favorite. And equally, we don't have the arrogance to tell consumers how they should prepare their coffee at home, which is the absolute best way to do it. Whether it is a French press, a mocha pot, espresso machine, a different device or a single serve system is entirely their preference. And we provide the options, the coffee options for all of those. So it's really a matter of personal choice whether they wish to have an espresso shot or more drip coffee kind of drink or a milk based beverage like a cappuccino, latte, etc. That will determine the device that they should have at home. Favoring also factors like convenience and speed versus control and fine tuning of the cup of coffee that they wish to have. So having perhaps a traditional sophisticated espresso machine that enables you to control every single variable of the coffee making, like the quantity of water, the brewing time, the pressure, the temperature, everything. Or a single serve system where you put a pod, fill the water tank, press a button and drink your coffee. And there you go again, a lot of personal choices to be made. And of course we are happy to guide consumers to, in the choice leading to the last part of the question, you mentioned our blue system.

Right.

So Lavazza is a proprietary single serve system called blue, which stands for Best Lavazza Ultimate Espresso. So there's no reference to the color.

Okay.

But it means Best Lavazza Ultimate Espresso and is a system designed to deliver a traditional espresso experience. Also, first of all, the pod, comparing to many other pods in the market, our blue pods have exactly seven grams of coffee.

And what's the, what's the significance of.

7 grams is exactly the, the amount of coffee in the espresso recipe that is that you'll find in any Italian coffee shop.

Right.

Seven grams are used for a single shot of espresso and that's why our pod has that amount of coffee. And also the shape of the pod resembles the, the Portal Filter Operational coffee machine.

And, and other pods typically would be.

What, around 5 grams? There are other systems in the market that have 5 grams of coffee and obviously 5 to 7. There's a 40% difference.

Yeah.

And the ultimate result is obviously very different.

Right. Amazing. And those blues, that blue system though is as you say, it's proprietary to Livaza. So different, different machine, but different ultimate experience when it's done.

Correct, Correct. They are widely used in food service because they carry the advantage of single source system which does not require a high level of training of the staff. You don't need a professional barista to use this type of machines.

Right.

And technology. So anybody can do it. And that offers great flexibility.

Got it. One thing you mentioned before, when we're talking about the consumers at home or in general, you know, there's also the whole milk based coffee drinks, the cappuccino, the lattes, the cortados, there's a whole variety. My understanding is, you know, in Canada here I go for a lunch with my friend Marco and I order a cappuccino after lunch and he yells at me because you're not allowed to do that. That's, that's against the rules in Italy. What is sort of the general, you know, maybe we're doing it wrong in Canada. I don't know. Are there any norms or rules around what you can drink and when, when it comes to espresso and coffee?

Well, yes, for sure. The, the, there is the meat or the, let's say the, the unwritten rule that you shouldn't drink a cappuccino after a certain time in the morning.

Right.

Even though these days even Italy is becoming much more flexible around that. And but you, you can see from the data that the consumption of those type of drinks later during the day is clearly declined.

Right.

But definitely North America, a cappuccino is around the clock drink is not surprising to see drinking cappuccino at night. And you know, that's fine again, ultimately it's about freedom, so.

Right, sure. So speaking of other sort of norms around coffee, what have you seen the difference between Italy, Canada, maybe some of the other countries that you clearly have a lot of global experience. But what's the difference from a culture perspective? Because coffee is pretty important to folks every day. But I sense it may be a little different in other countries.

A very good question. Definitely coffee is a strong cultural component in many countries. In Italy a coffee is often more than a coffee. There is for sure like in North America, a functional component. People drink a cup of coffee to get going with their day, to start their daily routine, etc.

The caffeine jolt or.

Correct. But there is also a social component, an emotional component. In Italy, very often within a family is the morning ritual in the family to. To share a mocha pot together or there is a component, let's say when two Italians see each other and say let's meet for a coffee, they don't really want to meet for the coffee. They want to meet because they need.

To talk something serious.

Something serious. Something off the records. So the.

Yeah. Here I. I sense in Canada when I say let's meet for coffee it's let's just have a chat, get to know each other better, catch up. In Italy you're saying it's a little bit more of a serious.

Serious or off the records or you know, just spend some time together.

Right.

Is really depend on the contest of and the way that is being asked. But for sure that there is more than the cup of coffee. Its the other key difference is espresso in Italy is drinking is drink mainly standing and it's a very quick drink. You enter a coffee shop, you order a coffee.

So that's not going for a coffee that's with somebody else that's just getting the coffee solo.

You go there.

But this and the espresso shots in Italy my sense is very, very small. Yes. Like one, one. I mean if they're hot, you can't just gulp it but like one gulp basically.

Basically, yes. Yes. And ideally should be. And there is a reason why is drank standing up because you, you get right away, right away at the coffee counter as soon as the second comes.

Out nice and hot. Yeah.

So by the books, the shelf life of a brewed espresso. To get the. The real experience is like the. 20 seconds.

20 seconds. Like 20 espresso within 20 seconds.

20, 30 seconds.

These are the tricks that I want to share on this podcast. Amazing.

That's how you show.

I do it too. Yeah. It's funny because I'll go to. I'll have a lunch, I'll meet someone, I'll order an espresso or even a cappuccino. It'll come. And before the other person's even picked up their drink, mine's finished. And people will say, you know, how'd you drink that so fast? Like, got to get the taste right away.

Absolutely, absolutely. Not only the taste, but the creme on top will vanish after a while, will deteriorate. So you don't get the real experience if you drink it after a long time. Right.

So drink fast. What are you seeing in terms of price? And we're in an inflationary. We'll talk a little bit about business. Here we are. This is a. I do run a financial wealth management firm. You know, inflation is up when I go to get a. Actually much more. I'm enjoying your blue capsules at home because frankly, to go to a cafe and get a cappuccino or a latte in, in some instances is approaching $8. Now, what are you seeing in your industry from an inflation cost perspective, and what do you think that means for consumers?

So that's a very interesting question. Our industry, as you can imagine, has not been isolated from the inflectionary era that we are living in. And we are subject at many levels, all the cost increases that every company is facing. We discussed before the journey from the coffee plantation to the cup of coffee, how many players, how many steps are involved, and with the increasing cost of everything from fuel, transport, packaging, labor, operations in general, the. The final coffee cup costs more and more.

Right.

So I'm not surprised that the operators are increasing their. Their cost, their price to consumers. Unfortunately, we are living in very difficult times. From an inflation standpoint, are you seeing.

That impact your sales or turnover or the industry's sales, or is this a daily ritual that people are going to forego other expenses because they. They need their coffee? Because I know I'm not giving up my coffee every day, but, you know, maybe finding ways to enjoy it at a. More.

Exactly.

Economical.

Exactly. From a consumption standpoint, from a volume standpoint, there is not a contraction of the market.

Right.

So people drink the same amount of coffee or actually more. The Coffee is growing with a CAGR of about 5, 6% per year overall in the world. So there is a upward trend. But there are definitely shifts within the different channels and with within different venues where coffee is consumed. Over the last few years which were heavily influenced by the pandemic, we for sure witnessed a shift from out of home consumption that was both food service and office environment to home consumption. So more people drinking coffee at homes for the simple reason. Well, first of all, during the worst times of the pandemic, they were not allowed to go out right from their home in many countries. So that's the only place they could have a coffee. And also our new working routines and habits have still a very strong work from home component that perhaps to some extent will be permanent. Right now we have problems in envisioning a future in which we will be back 100% of our time in the office. I don't think that ever going to happen again. So there will be always a home, a strong home components and being coffee part of the daily diet that we all have. The home consumption will always be strong if not dominant.

Right.

Versus out of home.

One thing you mentioned was the, the growth rate of coffee, 4 to 6% give or take, something like that. In a, you know, even in this inflationary environment. I know Lavazza is a private company. I'm not sure if you, if you focus on this again as a investment and wealth management firm, we're always thinking about how do we grow our clients wealth. Any advice for investors who may want to, you know, benefit from this industry, the sort of recurring nature, because it's a daily thing, the growth that you're talking about, how would, how would investors sort of get access to that if that's something you've thought about.

So first of all I thought about it to some extent. Lavazza, yes, is a private company and these days to enter the coffee market, the coffee business, in terms of being a roasters and sourcing the coffee, the barriers of entry are very high. Basically you can divide the players in two big clusters. The huge companies, we are one of them that have a global presence and then the smaller local rosters. However, there are a lot of opportunities at the point of consumption to create value for consumers. So coffee shops or service companies playing in that segment definitely are still a good opportunity. We see that still underdeveloped. So that's probably where I would.

And I guess there's a few public companies that are some of the larger companies.

Correct, correct. So looking at the public companies and see the Ones, one that best fits your investment profile. That would be the best advice.

Final few questions. As I mentioned at the beginning, I'm a big tennis fan. I know Lavazza has a partnership or a sponsorship. I'm not sure what the right phrase is with the Grand Slam tennis tournaments, which is amazing. I may hit you up for some Wimbledon tickets later, maybe just for our listeners, just for fun, talk a little bit about that. Why. Why partnering with the tennis world and. And, you know, how's it going?

Absolutely, absolutely. Why Tennessee? So tennis is a sport that is very much aligned with the. With the Lavazza values, let's put it this way, and is a. Is a sport that brings people together, people together that go in a venue to watch a great game of tennis in a very friendly and relaxed way for the sake of watching a great match. There are many other sports around that kind of create a division between the demographics. So soccer fans, they don't necessarily agree and enjoy a match for what it is, but they're there cheering for their team and their team to win, and they scream terrible words at the other team. Right. Tennis is not like that. Tennis brings people together to watch an amazing game. So that's the main field to us.

Yes. Good. That's great. Okay, so last question we ask everybody. And you know, for folks that may be listening to this podcast for the first time today, because this is a little bit of a different topic for us, even though it's one of my favorites, we're a wealth management firm. We look after clients and are able to help them with anything that really touches them financially, from tax planning, estate planning, insurance. And obviously, you would imagine investing is a big portion of what we do. And because we're independent, we're not limited by certain constraints that maybe other firms have. And so our tagline is your wealth unlimited. And so I always like to ask my guests at the end of the podcast, if you weren't sitting here today talking to me, you've probably many better things to do. If you weren't running Lavazza Canada, you could. The world is unlimited to you. You can do anything you want. Is there something you'd be doing right now, maybe different than what you're doing today, or maybe you'll do what you do today?

I'll be probably playing golf today if I have to be 100 honest.

Is that right?

Yes.

That's a big love for you.

Yes, for sure. A big passion of mine. Yeah.

Amazing. And so if you weren't the president of Vaza Canada, you'd be Winning the. The Canadian golf that just ended the other day.

Let's say that I better sell coffee rather than play golf for a living.

Very good, Very good. Okay, Andrea, thank you so much. Really appreciate you being here. Wanted to, you know, hopefully share some good insight with our listeners on coffee. How it, how it's made, how to, how to extract the best brew and enjoy something that everyone probably enjoys. A lot of people enjoy every day, but may not know everything that goes behind it. So thank you very much for your time. Really appreciate it. And let's go see this live event and find out what's happening at Truffle Kings.

Absolutely. Thank you so much, Brian, for having me here.

Okay, great.

Thank. Thank you so much.

The unlimited podcast is hosted and produced.

By Brian Ginsler and is edited and mixed by myself, David McMillan.

This podcast is not to be taken as investment advice. If you like what you heard, don't forget to rate the podcast and follow us on Social medianslerwealth. Thanks for listening and see you next time. Well, hello, listener. You made it all the way to the end, which is fantastic. And so we have a special treat for you. Our partner, trufflekings, where you can get the Lavazza Coffee system and Lavazza Blue Capsules, amongst a whole other variety of wonderful treats, is offering Gensler wealth clients a 20% discount on everything in their shop. And while we know listeners aren't all clients, because you made it to the end, you get the benefits as well. So if you go to trufflekings co, not.com, but trufflekings co and you enter the code ginsler20 when you check out ginsler20 in all caps, 20 being the number 20, you'll enjoy 20% off. So enjoy and we'll speak to you next time on the unlimited podcast. Bye bye.