MILAN (Reuters) - Two of Italy's biggest coffee houses are reinforcing their brands with flagship cafes in Milan near the spot where US rival Starbucks is set to begin an invasion next year.

Lavazza opens its first flagship cafe in the coffee-obsessed city on Tuesday, not far from the renovated 19th century palazzo where Starbucks will open its first Italian store.

Another top Italian brand, illycaffe, opened its own luxury cafe close to the Starbucks site in May.

Milan's battle of the coffee palaces reflects global competition among major brands to capture a growing market for people prepared to pay a premium in upmarket boutique cafes.

Nestle last week bought California-based Blue Bottle Coffee, one of the top boutique US chains whose single-origin and cold-brewed coffees have made inroads into the Starbucks franchise.

JAB Holdings, the investment vehicle of Germany's Reimann family, has also been buying up independent start-ups selling premium brews around the world, from Europe to the Americas.

Starbucks will open in Milan in late 2018, seeking to attract tourists, young Italians and the business crowd. If the move succeeds, the company and its local partner could open more than 200 stores in Italy over six years.