Andrea Illy, president of Illycaffè, explains that he has just written a letter to employees and shareholders: «I want to thank because the excellent results for 2023, announced by our CEO Cristina Scocchia, are the fruit of everyone’s passion and dedication. I want to maintain a privileged relationship with Trieste which we consider one of our stakeholders. Our goal is to improve the lives of our consumers, customers, employees, suppliers and the city in which we operate.” Illy is aware that a feat has been accomplished: «We are competitive and we can invest more. It wasn’t easy if we just think about the paralysis of two years of the pandemic.”
Andrea Illy, it seems that in the meantime a perfect storm has been unleashed on coffee according to roasters and wholesalers. Robusta coffee has risen by more than 90% in six months.
«The coffee market is suffering the heavy consequences of climate change. Prices increased by 20% overnight. It’s a worrying long-term scenario. The climate effect has compromised the harvest in the two most important producing countries in the world. In Brazil there were rains of an intensity never seen before, while Vietnam was hit by drought. Hence the surge in prices. At the origin there is a precise climatic phenomenon.”
Explain.
«It’s called El Niño, a phenomenon that occurs at intervals of years, which, moving like a pendulum, causes the surface waters of the equatorial Pacific Ocean to warm, causing record heat waves, then moving from the South American coast towards South East Asia with the opposite phenomenon (La Niña) with extreme and incessant rainfall”.
Other possible causes?
«I don’t see direct consequences from the logistics crisis due to the blockade of Suez to avoid passage in the Red Sea with consequent increase in travel costs. Rather, the unfavorable exchange rate could have an impact due to the strengthening of the dollar against the euro. I wouldn’t rule out speculative phenomena either.”
And what predictions can we make now? What will be the impact on Illycaffè’s production and revenues?
«No impact because Illycaffè works with the best producers, selected in around twenty countries, who are resilient and capable of neutralizing climate damage thanks to their knowledge. By improving regenerative agronomic practices, biodiversity increases and coffee becomes resistant to climate changes, from floods to excessive heat. We are very satisfied because our regenerative agriculture model is working very well and we recently launched the first Arabica coffee coming entirely from this practice also adopted by Brazil when the conflict in Ukraine caused a surge in the cost of mineral fertilizers (of which Russia and Kiev are the two largest producers in the world)».
This coffee crisis is reminiscent of that of 2001 when, contrary to what happens today, the overproduction of coffee in Brazil and Vietnam caused the price of beans to drop to 45 cents per pound, impoverishing farmers.
«The market must reward the most sustainable producers and in this sense the Illycaffè model is a winner. In our experimental plantations such as in Ethiopia and Guatemala, we are minimizing the use of mineral fertilizers, pesticides and herbicides. We have committed to becoming carbon-neutral by 2033 through the use of renewable energy and circularity. Our coffee university, with an average of 15 thousand members per year, this year celebrates 25 years of existence.”
The New York Times says in one of its reports that the coffee culture in Ukraine has become a form of resilience against the war: in Kiev alone there are 2,500 small cafés that have become part of the urban landscape. What do you think?
«Coffee has always been an inclusive drink and unfortunately also the official drink in wartime because it helps you stay awake and alert. The spread of Italian espresso globalizes our lifestyle and our culture, although often without guaranteeing its quality.”
What is it referring to?
«There are Italian sounding phenomena in our world too, just look at the large American chains and the “cafés” that have spread globally from Korea to Australia to Eastern Europe. On the contrary, we are witnessing a new phenomenon such as the birth of tens of thousands of small roasters (this also happens for craft beers) for which companies like Illycaffè are a constant reference for quality.”
Illycaffè closed the 2023 financial year with the main indicators showing strong growth. Predictions for the year?
«We confirm a self-financed investment plan of 270 million euros, and of these 120 are destined for the expansion of the Trieste factory where we aim to double the production capacity in five years: in a few months we will begin the construction of a large roasting plant and new warehouse. We are aiming to develop new markets and want to grow in the USA (+15% in revenues) and China. We have always invested in Trieste over 90 years and we will continue to do so.”
And in 2024?
«While confirming investments, we maintain a prudent financial structure considering a risky and uncertain geopolitical scenario. As announced, we are preparing the listing on the stock exchange no earlier than 2026.”—
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