From the growth of the American market to the “conquest” of China: the interview by Affaritaliani.it to the CEO of IllyCaffè Scocchia
“We are very satisfied Of these results and we proceed on the basis of ours strategy which has three priority precise: USA, Europe and China”. Cristina ScocchiaCEO of IllyCaffècomment with Affaritaliani.it excellent results obtained by the Trieste company. All the main indicators are seen on the rise and, above all, the growth prospects they remain positive despite an international geopolitical context that is becoming increasingly complex. All while always keeping an eye on sustainabilitya topic that Illy began to address before it became a mantra for any company, especially for those operating in a particularly complex industry such as that of coffee.
Shock, really significant results: was there some situation that gave you such an important boost or were you very good?
There is no point in hiding it, we are very satisfied with these results. We have a Ebitda up 18% and a Net income which leaps forward by 67%. This was possible thanks to due driver: improvement in the main markets in which we are present and aincreased operational efficiency. In fact, we managed to develop Illy, as per the strategic plan, primarily in American market, a fundamental segment because it loves quality Italian products: it was a precise objective of ours to be able to increase penetration. We had better operational efficiency than previous years, so much so that the profitability grows more than proportionally to revenues.
Have you been affected by the price increase?
Yes, if you consider that in November 2021, shortly before my arrival (Cristina Scocchia became illy’s CEO in January 2022) coffee cost 110 cents per pound. In March 2022 we had reached $235 with an unprecedented inflationary flare-up. Today we are no longer at those levels, but the price is still 70% higher compared to that of November 2021.
What are your priorities?
We have some at the moment Three: the first is to bring the American market to have the same weight as the Italian one. Currently the domestic market is worth around 33% of turnover, while the USA reaches around half. The second objective is to grow in European countries: we already have branches in France, the United Kingdom, Spain and Germany, but we want to grow significantly thanks to a more widespread distribution of our products. The third pillar is the Chinese: it is currently very focused on tea, but it has a huge market and therefore even a small percentage of the population turning to coffee actually means an increase of millions of consumers.
However, China is very complex: do you use local partners?
We just signed a distribution agreement with Chancemate, which allows us to sell our products both in e-commerce channels and in large-scale organized distribution. This is important to us because we will keep our branch in Shanghai, but we will be more capillary. We provide knowledge of the product, our partner that of the local market.
In Italy, coffee is a ritual, an opportunity for socializing, almost a way of saying “let’s have a coffee together”: is this concept exportable?
There is no doubt that it is a moment of energy, of sharing and this is also spreading abroad. If anything, what changes is the type of coffee you have in mind: we think above all of espresso, in other countries they also imagine different types. We Italians may turn up our noses, but it’s obvious that if you want to grow abroad you have to develop products that meet global tastes. For example, in China theinstant coffeethat is, the soluble coffee. And we are also focusing on the so-called “cold brew”, a cold-extracted coffee that is becoming increasingly popular in Anglo-Saxon markets. We remain the standard bearers of espresso, but our presence in 140 countries around the world stimulates us to find new solutions.
Does the restaurant channel remain important for you or do you prefer domestic consumption?
It is certainly of great importance: the Ho.Re.Ca. it grew by 8.2% thanks to the segment that we call “super premium”. Our strategy, in fact, is to focus on exercises (bars and restaurants especially) of excellence. We don’t want to be everywhere, but to be served in places in line with our high positioning.
Have you also grown in the portioned systems segment?
Yes, it is a sector that is growing a lot. If we look at the data globally, land capsules are the type of coffee that has recorded the most significant increase. And, with them, also coffee machines. Among other things, Covid has greatly accelerated this dynamic because people, who were closed at home, invested heavily in these tools to be able to continue enjoying a coffee like at a bar.
Coffee is an industry that has historically had problems with sustainability and working conditions. However, for many years, before these issues became “mainstream”, you have concentrated on improving in this aspect too. Do you want to remind us what you are doing?
We started to deal with sustainability when the term had not yet been coined or almost. Also in 2023 we have focused a lot on these aspects and have worked a lot with both producers and consumers. We have collaborated with the European Institute of Oncology to support cancer patients who wish to receive a second opinion. And we have renewed our commitment to everything related tocircular economy, also encouraging what in jargon is called regenerative agriculture. Last October 1st we launched the first coffee entirely produced using this cultivation method.
Last question: the Anglo-Saxons say that “sky is the limit”. More modestly, what goals do you set for 2024?
Let’s continue look humbly to the future, but, after two years of very strong growth, we expect 2024 with a “+” sign. We are optimistic, even if this optimism clashes a bit with a geopolitical context that has many clouds on the horizon. However, I like to say that the role of companies is that of take off against the wind. For this reason, last year we launched a 120 million euro investment program in Trieste which will allow us to increase our production and logistics capacity, with positive repercussions also on employment. And this effort is confirmed, with a five-year horizon.