In this Bloomberg interview, Andrea Illy, chairman of Illy Caffè, discusses the current and future state of coffee consumption and the company’s strategic direction. He notes that overall coffee consumption remains steady, but the pandemic accelerated a shift from out‑of‑home to at‑home drinking, moving the split from roughly 60/40 to an even 50/50, a balance he expects to persist. Illy’s growth engine is the expanding demand for super‑premium Italian espresso, which is de‑commoditising coffee into an experiential product. More than two‑thirds of Illy’s sales now come from 147 international markets, with the United States positioned as the second‑largest market after Italy and China showing double‑digit growth as it re‑opens. Illy remains a niche premium brand and intends to protect its luxury perception while scaling. He addresses coffee‑bean price volatility, explaining that recent fluctuations are less about supply shortages and more about market balance, and that Illy focuses exclusively on Arabica, using Robusta only when price arbitrage forces roasters to blend. Sustainability is highlighted through Illy’s work with Brazilian growers to improve quality and future‑proof production. Finally, Illy is preparing for an IPO within the next five to seven years, having secured Rhône Capital as a 20% shareholder and appointed a new CEO to craft an equity story.
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TranscriptAuto-generated · 8 min
I have to disclaim that coffee, especially in a newsroom that wakes up at 3:00 in the morning, is more of a national obsession. How do you see our consumption of coffee changing through lockdown into the next 2, 3 years?
Coffee. We always drink coffee. Good time, bad time. Coffee is always there because with good time you celebrate and with bad time you encourage yourself. It's good for the dynamics, the You know, professional and social life. So consumption is always steady.
You're not worried about the trend? No, no, no. Coffee differently than we used to.
A little bit more at home.
Yeah.
Because thanks to, you know, smart working, people maybe go less often to office and they stay home and they consume more at home. So they're seeking for better homes, well-equipped with coffee machines, portioned systems. So we used to be 60% out of home. 40% at home. Now it's— during COVID this has been reverted. Now it's 50/50 and we think we will stay there.
So, Andrea, where's your biggest area of growth? First of all, when you look at— I imagine that it's different because you have many more Italian coffee shops in Italy that people drink at the bar very quickly, that the composition of how much you sell in bars compared to at home is different, for example, in the UK, in Italy, or in the US.
Well, super premium Italian espresso is growing internationally because it's also leading the kind of a driver for growth for premium coffee altogether. This interesting decommoditization of coffee from a pure functional beverage to an experiential one is really so dynamic. And this is why we export more and more. More than 2/3 of our sales are now internationally in 147 countries.
Right.
So we are definitely the most global coffee brand and there is so much room for growth for the future.
Yeah. So first of all, this is exactly what I need at 5 in the morning, a super premium Italian espresso. Is there a danger that if you become too big, you become less luxurious, so you lose a bit of that super premium aspect?
Illy is still a niche brand and we want to stay niche. The demand is growing. So that means that even though the maybe the niche becomes the same. The market is growing because the demand for premium coffee is growing. And as far as diluting, let's say, the brand equity, I don't see this as a problem. And for sure, we will never compromise on quality. I'm coming back from Brazil now where I'm constantly working with growers in order to improve their sustainable quality and also create the offer for production for the future is ahead.
So what do you make? And we've been looking actually at the price of coffee beans quite intensely, especially in preparation for this interview. Robusta coffee has rallied in terms of prices. What's the impact of that?
You know, prices of coffee are now volatile. There is a volatility which is now not driven any longer by the shortage of supply, which was 2 years ago as a consequence of this frost in Brazil. Now production is expected to be at least in balance with consumption. But because we don't have a clear figure about how much will be the production, still there is a little bit of volatility. So I predict this price to stabilize during 2023.
But if you look at Arabica, so if the price of Robusta— I mean, look at me, I'm like an expert in coffee, right? You have Robusta and Arabica. If Robusta, the coffee prices go up quite significantly, is it less likely that companies will blend it with the better Arabica?
Hopefully, yes. Even though we don't deal with Robusta altogether. So you don't— super premium coffee is only Arabica. So typically there is an arbitrage. So the other way around, when Arabica is too expensive, some roasters, they use a little bit more Robusta in order to mitigate the price increase.
Andrea, how is the expansion in the US going? Are you getting business? Are you where you are you want to be, or is there going to be a lot more expansion?
We are where we want to be. It's our second largest market after Italy. We seek for the US to become medium-long term the first market altogether. So we are investing in distribution, we are in product development, we are on target and still we will improve our, let's say, penetration in the years ahead.
Will you IPO? I ask you this every time. We ask the chief executive every time.
It's a— it's in the plan. We now have a co-investor, Rhone Capital, with a 20% share. And the plan is that their exit will be within 5 years or 7 years with an IPO.
So are you waiting for like ideal market conditions or is there, you know, in your mind, the IPO
preparing the company? preparing a nice equity story. And so we hired a new CEO, Cristina Scocchia, who took position last year. She already did the first year quite good. And now we are in the process of really preparing the equity story.
Talk to me a little bit about China and the fact that it's reopening quite significantly. Does that impact— does it impact Illy or does it impact the price of coffee beans?
It's not impacting really our performance because we used to sell a lot of coffee during the lockdown period at home. So China is growing double digits. It's a promising market also because there is more and more, let's say, cross-fertilization, cultural cross-fertilization. So getting these Western lifestyle habits. Which is, of course, good for coffee. And we keep growing.
Yeah, I'm sweating because we're going to have a coffee afterwards, Andrea, in our pantry at Bloomberg. So I hope it's to the high quality. You were also telling me, actually, that the first— when did we invent coffee or start drinking coffee? In
the medieval times in Europe, continental Europe. We started drinking coffee around the half of the 17th century. And the good news is that It's the, you know, took modernity because before coffee, people were drinking beer for sanitary reasons, you know, because there was alcohol. So from 3, 4 beers per day to 3, 4 coffee, this is why we got enlightened. And not accidentally, it started the Illuminism, the Cultural Revolution, Scientific Revolution, all the modern trends which created the society we are accustomed to.
But now, I mean, I love that. I mean, beer, you know, from beer to coffee, certainly I'm sure made people a little bit more aware of certainly the news out there. Are people drinking less coffee but higher quality coffee now?
No, they typically don't drink less coffee. Also because there is a kind of self-adjusting dosage with higher coffee means higher quality means lower caffeine. So this is why people have an incentive to incentive to drink more because they can have more caffeine. You know, and more flavor.
Okay. There you go. Sponsored by Andrea Illy. Thank you so much. I'm not even going to ask you about Starbucks, I think, putting olive oil in their coffees, because I know that you need to be sedated. That was Andrea Illy, the chairman of Illy Caffè.
