ILLY CAFFE

balance between the legitimate current achievements of modernity and the possibility that those who come after us can have at least the same opportunities.

Tuesday 25 October 2011, by Aaron Ji, Diletta Livi, Jackie Tang, Paola Arduini

1 inspired

A-The main facts about the activities of the company.

Established in 1933 by Francesco Illy, the company produces and markets worldwide a single, leading-quality blend of espresso coffee, made using nine types of pure Arabica. The Illy blend is destined for HoReCa channels (hotels, restaurants, caf?s), for consumption at home and at the office; it is available in tins, pods or capsules, according to the channel.
Illy set up Universita Del Caff? world around from 1999, when the first centre was established in Naples. This foundation was created to raise the level of coffee industry, to spread the culture of coffee and to provide a wide range of courses tailored to meet the needs of different types of user. The first Universit? del Caff? in China was established in Shanghai in 2007 but the company is planning other several establishments all over the country.
In 2003, moreover, the company launched ?Espressamente Illy? (expressly Illy) for its international costumers: it is a chain of Italian-style bars with a commercial formula similar to a franchise. 2005 saw the First illy Bar Concept (IBC) in Chinese mainland settled down in Shanghai Jinmao tower.

B-The Ethical challenges this company is addressing

since 1991 the company started to focus on the development of a total new relationship with the Brazilian coffe producers, which is basically based on the combination of innovation and quality, and on the knowledge transfer. These two main points establish the whole Illy?s sustainability strategy and the supplier?s relationship drive. Thanks to this, Illy created a system able to generate benefits for both the business and society, and to create value through values.
We think that the creation of value trough values may be the most ethical challenge for any kind of business: feeling social responsibility as the priority, which has to embrace the other goals like profit, and making it as the business drive instead of just a duty shall result very challenging. In particular in the coffee industry companies have to deal directly with the farmers and so to daily interact with the local society. This is not as easy as it might be perceived because the company still is a foreigner which enter a new country and start to use its natural resources. What can really make the difference is if you enter the market as exploiter or if you enter the market as a guest that actually has the possibility to develop the local society and sustainably partner with the community, like in this case with the coffee producers. Moreover nowadays agricultural and product?s treatment systems may result very harmful for the environment, and so might challenge agricultural companies in developing new and innovative ?environmental friend? systems.
We believe Illy has been able to achieve theses aims, based on the fact that the company understood sustainability in a threefold sense: economic, social and environmental. In the economic sense, sustainability is pursued by the creation of value through the entire supply chain and so for all the stakeholders, from the farmers to the end users. Value is not understood as simply economical value but also as personal value as the social sustainability shows. According to this second meaning of the business, in fact, Illy wants to provide personal growth and self-fulfillment. Moreover one of company?s main focus is the environmental sustainability which is pursued by the usage of recyclable packaging and practices that do not pollute or at least reduce it at minimum.

C- What makes you believe this company is really ethical and why you trust it

Illy has been always creating a system of direct relation with its suppliers, wich is based on three main pillars: 1- select the best coffee producer possibly through the system of quality awards, 2- transfer to the agronomies and the locals all the knowledge the company gained in eighty years through the University of the Caf?s and the Illy?s specialists, 3- buy the product directly from the farmer providing them an higher price in order to reward the quality and to support future improvement. The first pillar aim at establishing long and durative partnership between the company and the producers, at giving them quality rewards and so at stimulating in them willingness to learn, grow and improve. In order to give them the right tools and skills to improve and excel, the second pillar wants to provide knowledge and awareness of the all aspects of the business and the Illy?s culture of quality. Illy wants farmers to grow and people to learn because it strongly believes that ?study is for growing together?. To ensure this aim Illy opened the university of the caf?s in Vicosa, Brasil, in collaboration with the agronomy faculty of the business university of San Paolo. Thanks to this project, Illy was able to provide a cultural center where Brazilians could learn, research and generate new technologies like the construction of a very modern plant breeder useful for didactical aims too. Moreover Illy can count also social projects in terms of building houses and providing services to the farmers, not only in brazil but also in Guatemala, Colombia, Costarica and Ethiopia. We think that this is how a company can make a change into a poor country: give them tools to create their own business, create rewards systems to push them into the excellence and quality concepts, and so provide them job opportunities. In this way it is possible to generate a real value for the local persons and so for the entire society. So if in one side the company provides a personal value of growth and learning, in the other side wants also to provide economic values through a pay system that ensures a price higher than the market?s one (almost 30% higher).
So if the social responsibility has gained a main position in the company?s culture, also the environmental issues takes a priority position for Illy. The company in fact works respecting the earth and reducing the ecological impact through the entire productive process, from the coffee plantations to the plant of Trieste. Illy wants to protect forests and save resources through the innovation of cultivation, production and treatment processes of the coffee. In fact the company uses a post-harvest processes techniques, which used to be obsolete but much more ecological, that was modernized and improved by Illy: the semi-washed method. This method can save more than 90% of the water used by the other methods, reducing in the meantime the potentially polluting waste water. The efforts in reducing environmental impacts are visible in the Trieste plant too. In fact the facility continues to increase recycle waste and to reduce energy consumption. Moreover in 2003 the plant inaugurated a new roasting unit able to reduce atmospheric emissions up to one-twentieth of the legal limit, while constantly increasing production capacity. These efforts in environmental policies are well recognized by the authorities too: Illy received UNI EN ISO 14001, which certifies the company?s system of managing environment issues, and EMAS certification, which require from companies who voluntarily committed to put efforts in managing emissions, energy consumption and waste recycling.
But Illy?s aim goes much further than this: this company is actively involved in providing worldwide conference about ethics, it participates in student?s formation through presentations and discussion in global universities. Moreover Illy collaborates with the environmental center of Oxford University (OUCE) in a three years project that aims at identifying and developing a new agro-production system more environmental sustainable than the ones used now. The project?s objective is to create an innovative model able to evaluate the most sustainable system regarding the different phases in the coffee production.

We believe that it is possible to assess Illy as a ethical company not only because of its support and effort in terms of environment and society, but mainly because of the whole business concept it pursues. This company uses profit both as a mean and as an end: profits are a mean for developing new technologies able to reduce ecological impacts, for providing sustainable support to poorer countries growth, for creating both economical and personal value to all the stakeholders involved in the company, for arising global awareness of ethical matters, and also are an end for the company which using profit as a mean can gain excellence in terms of quality and relationship, which can provide to the company both economic and personal growth too.

D- The possible challenges facing the company in the future and how you think this company may improve.

Coffee is the most consumed beverage in the world after water and each adult usually drinks an average of two coffee a day. Coffee consumptions have been changed over the years, and actually they are still transforming. As a matter of fact, this is a market that has already reached its maturity in the major countries and it would be difficult to obtain an higher penetration of the product enlarging the customers basis. Doubtless Illy is facing a challenging competition: many aggressive actors populate coffee market and implement innovative strategies. One of the most important challenges Illy is experiencing is about differentiation. If Starbucks has done an excellent job in raising consumers? interest in coffee, now Illy is trying to communicate a new idea about this beverage: coffee is not a commodity anymore but a gourmet product, a form of accessible luxury. Nowadays, the ?massification of luxury? is a broad trend which should portend a boom in the number of people willing to buy expensive coffee. As a form of luxe, in 2006 Illy launched a promotion called ?Beauty has a taste? during the New York Fashion week. The event featured a range of collectable cups designed by leading artists, a book launch and, of course, free espresso. There was also a display of pictures of smiling workers in the various countries that grow Illy caffe’s beans. The photographer was Sebasti?o Salgado, a Brazilian who is well known for his painful images of exploited workers in the developing world. The message was clear: like Starbucks, Illy caffe is keen to reassure customers that its coffee is produced according to the highest ethical standards.
Its main business is roasting and distributing a single blend of arabica coffee. Its customers are individuals and professional caterers, and the company reaches them by mail and through upmarket retailers. Andrea Illy, the boss of the family coffee firm, is convinced that the growth of the market in gourmet coffee has only just begun. The society has quadrupled in size in the ten past years by becoming a global brand: it has gone to 144 countries which together account for 52% of revenues.

Illy has always fed an obsession for technical innovation that is one of the critical success factors on which lies company?s improvements. In the past century, Illy has been responsible for three of the seven big innovations in coffee-making which allowed a traditional Italian craft to transform into an industrial process. Nowadays, the company has just implemented what it regards as a big innovation: this is a two-stage espresso-making process involving ?hyper-fusion? (which intensifies the drink’s aroma), and ?emulsification? (which makes it smoother).
Another interesting point that should be stressed by Illy to increase coffee?s consumption lies in the beneficial effects this beverage can have on people. Advertising should reinforce the growing belief that coffee is good for consumers. From scientific studies, as a matter of fact, has emerged that coffee is a powerful anti-oxidant, and can help in the fight against cancer, diabetes, Parkinson’s disease and Alzheimer’s disease.
As it appears, nowadays, Illy caffe is facing many binding challenges and one of the most difficult may be to increase the demand of high-quality coffee, all around the world, while standing the fervid competitions that featured coffee market.
The group claims an authentic sustainable strategy that makes itself different from the others coffee manufacturers. For these reasons is important to emphasize the nature of this plan in order to spread the image of a responsible society which really care about economic, social and environmental problems. This is the most appreciable aim a company should carry out as well as the first step through which Illy can maintain its strategic competitive advantage.

Bibliography

www.illy.com
http://www.luxury24.ilsole24ore.com/EcoCharity/2008/07/illy-anniversario-coltivazioni-ecocompatibili_1.php

Location: trieste (Italy)

Sector: Accommodation and food service activities

Official website: http://www.illy.com

Key figures:

number of countries served: 140
daily cups sales worldwide: 7.000.000
number of employees: 700
consolidate sales: 305.000.000
net profits: 3,5%
exports: 56% of total sales

Nbr. visits: 3550

Nbr. inspires: 1