Illycaffè was founded in 1933 in Trieste by Francesco Illy.
While illycaffè originated in Italy, its presence has expanded to many countries around the world, including South Africa. Illy's journey in South Africa reflects the company’s global expansion and commitment to offering exceptional coffee experiences.
Illy’s introduction to the South African market likely took place in response to the country’s growing interest in coffee culture and the demand for premium coffee products.
South Africa’s evolving coffee scene, characterised by a burgeoning coffee culture, the rise of Specialty coffee shops, and a discerning clientele, provided fertile ground for Illy to establish a presence. Over the years, Illy has likely formed partnerships with local distributors, coffee shops, and hospitality establishments in South Africa to make its coffee products available to a broader audience. Illy has partnered with SPAR to distribute affordable, ready-to-drink coffee.
Today, it is led by the third generation of the family. Andrea Illy is the Chairman, and Cristina Scocchia is the CEO. Anna Rossi Illy, Ernesto’s wife (the founder’s son passed away in 2008), is honorary Chairman. Anna Illy jr continues her father’s work and handles relations with coffee growers. Andrea Illy is the CEO of the global premium coffee company that bears his family’s name.
As one might expect, he is passionate about coffee – its science, its health benefits, its taste, and its beauty. Illy also has a dream that someday soon, the coffee market might be transformed into something approaching the market for wine.
Where connoisseurs discuss the fine points of various origin coffees and blends, where customers are willing to pay a premium for the finest examples of the coffee-making art, and where the growers, roasters and baristas will be compensated fairly for the expertise they contribute to every cup.
Unfortunately, the current coffee market differs from such an ideal. Coffee growers in most parts of the globe work at a bare subsistence level.
One bad harvest (made all the more likely by the ravages of climate change) or a sudden decline in the commodity price of coffee can drop them below subsistence to hunger. Even in good times, growers have little incentive to improve their operation – they have minor contact with the roasters or customers and no knowledge of how their crops get translated into the cup. This disadvantages not only the grower but also the consumer – coffee sourced from good quality beans is hard to find.
Illy believes that the solution to the sad state of affairs is to initiate a “virtuous circle” that draws the grower, the roaster, the barista, and the customer together. Growers with better knowledge of the market will work to improve their crops or experiment with new varieties.
Roasters and preparers will educate their customers as to the qualities of various beans, roasts, and preparations. Customers, in turn, will be willing to pay more for the best beans, and that premium will be sent back up the chain to pay for even more quality and variety. And so on.
Certainly, there have been some positive signs. Indeed, many observers argued that a “third wave” of transformation in the coffee market was already starting. (The first wave is said to have occurred when Maxwell House and Folgers made coffee a mass commodity, and the second wave was when Starbucks initiated a move to quality and higher prices.) Specialty coffee roasters had worked to build cafes and brands around origin-based beans sold directly to the roasters without reference to the commodity prices of coffee. With these third-wave roasters, every coffee came with a story of its origins, and growers could count on occasionally eye-popping premiums for their beans.
As yet, Specialty coffee represented a small slice of the overall market, and there were other signs that it might not ever grow beyond a small circle. New trends like coffee-based drinks and single-portion coffee in pods (e.g. K-cups, Nespresso) shifted more of the value-added towards roasters without a premium for growers. A consolidation was taking place among mass roasters that were even sweeping up third-wave roasters in its wake.
Observers argued that this could lead to greater uniformity with even less emphasis on origin-based, direct-traded coffee.
Illy hopes that someone would come up with an innovation that would solidify the beginnings of the third wave and help reshape the market. Such a change would not necessarily have to involve Illycaffè; Andrea Illy believes as the world’s premium brand, an increased emphasis on quality in the market would only help his company. The most important thing was to make the coffee supply chain more equitable and coffee better-tasting.
Identify and research five (5) contextual issues that you, as a business analyst, would need to consider in executing the new strategy for illycaffè.
1. Market Trends: As a business analyst, you would need to research and consider current market trends in the coffee industry in South Africa. This includes analyzing consumer preferences, competition, pricing strategies, and emerging trends such as sustainability and ethical sourcing.
2. Supplier Relationships: Understanding and evaluating the relationships Illycaffè has with its coffee bean suppliers in South Africa is crucial. Assessing the quality, reliability, and sustainability practices of these suppliers will be essential in executing the new strategy.
3. Distribution Channels: Analyzing the distribution channels through which Illycaffè's products are brought to market in South Africa is important. This includes assessing the efficiency, cost-effectiveness, and reach of these channels to ensure that the new strategy can be effectively implemented.
4. Regulatory Environment: As a business analyst, you would need to consider the regulatory environment in South Africa, including any laws or regulations that may impact Illycaffè's operations. Understanding and adhering to these regulations is essential for successful execution of the new strategy.
5. Brand Reputation: Evaluating Illycaffè's brand reputation in South Africa, including customer perception, brand loyalty, and overall market positioning, will be vital in developing and executing the new strategy. This includes assessing feedback from customers, reviews, and social media presence to ensure that the new strategy aligns with and enhances the brand's reputation.