The Wall Street Journal: Lavazza and Illy work to shore up their businesses as Starbucks enters Italy

Two of the best-known names in Italian coffee are bolstering their businesses, hoping to secure their independence as global coffee giants Starbucks Corp. SBUX, +2.90%  and Nestlé SA NESN, +0.10%  make incursions into their turf.

Lavazza and Illy recently had to absorb the arrival of Starbucks, which opened its first store in Italy last month. Before that it was Nestlé announcing it would distribute Starbucks coffee around the world, including in Italy. And for the past several years, the popularity of Nestlé’s Nespresso machines has posed a growing threat in the land of espresso.

The Italians are responding with deals of their own. Last week, Lavazza acquired Mars Inc.’s coffee business for $650 million, including debt. Illy this week announced that JAB Holding, the European holding company behind Peet’s, Krispy Kreme and other American brands, will sell Illy pods that work in Nespresso machines.

The coffee business is booming. The $83-billion market for fresh and instant coffee has grown by a quarter in the past five years and is expected to advance another 16% in the coming five years, according to market research company Euromonitor International.

An expanded version of this report appears at WSJ.com.

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