Case Study Illy Cafe

About Illy Company background and description The history of illycaffe is tie in to the lives of the ac clubs fo low, Francesco Illy, and his family. Francesco in 1933 set up a air in the hot chocolate berry berry and c send offee bean bean sector, and then decided to concentrate exclusively on burnt umber. present tense the illy group is made up of several companies located in northerly America, France, Germany, Spain and Benelux. Product Illy serves burnt umber to its customers. They insist on the detail that in that respect argon non selling basic drinking chocolates sightly now the unmatched which is a lead of Scientifics look.They require to serve the best hot chocolate due to a dissolver of a long experience, knowledge of chocolate biology and chemistry, very acceptable skill at roasting, enabling technologies, and besides a familys entrepreneurial hotness. They argon also selling products which fit to the deep brown world alike, cable cars, caps ules and also accessories. R thus farue In 2007 turnover amounted to $221. 000. 000. In 2011 the turnover was $342. 000. 000. in that respect is a real increase over the social classs. Customers 70% of its sales circuit cafes, hotels and restaurants, 20% for persons and 10% in companies, these atomic number 18 illys customers.Illy has developed solutions for keen restaurants, sm wholly hotels, cafes and early(a) places of conviviality where coffee consumption is low but as yet want a perfect coffee. The company offers machines meeting the conveys of its barter customers. To match with its image of eccentric coffee Illy is increasing partnerships with the biggest names in tourism Meridien and Hyatt. The company also Illy customers offices, employees may have during their break espresso from the gull. To do this, Illy provides the I-Espresso and offers a complete range.Also Illy protest its knowledge bars called Illy bar, so the customer fucking go there and have a coffe e in the companys atmosphere. It is also possible to buy coffee brand for personal use at home. The website offers the purchase of cafe, cafe machine but also derivatives (eg cups). Most of its customers are the professionals (served in to a greater extent than 50,000 public places) but Illy is growth the Illys bar to score an atmosphere for the company. localization of function Illycaffe was founded in Trieste in Italy. Nowadays the Illy group is a multinational musical arrangement that operates in more than 140 countries across the 5 continents.The main commercializes for Illy are US, Europe and Japan. Employees The company has about 700 employees. Industry With a turnover of 695 gazillion and a growth of over 30% per year since 2001, the European draw in espresso is Nespresso. The level of competition that Illy faces differs according to the sectors, for example in the Hotel, restaurant and Cafe sector the main competitors are Starbucks and Lavazza. Whilst in the coff ee machines and coffee capsule systems the main competitor is Nespresso from Nestle group. The competition in two sectors is quite intense with Starbucks and Nestle having global reach.The advantages these companies have over Illy are their vast economies of scale, stronger brands and higher customer reach. Mission and peck The mission create and deliver the best coffee that nature can offer for connoisseurs and those who bequeath appreciate it with a special assist to methods of growing and processing the some suitable and sustainable. They want to create an emotional experience through the taste of their coffee. The vision being an innovative company, proud of its history rooted in the contemporary and future-oriented.Combine art, science and experience to offer the best products. They have for vision to be recognized as a world reference for coffee culture and excellence, ti be the starting time choice of professionals. The values passion for excellence, the pursuit of per fection and ethics, the valuation of individual talent and teamwork. The desire to improve the lives of all those involved in the coffee concatenation. Attention to people and the environment. Illy drinking chocolate Alternatives Selection 1)Problem definition how to become more amenable (=sustainable) coffee maker without losing the revenues/customers/ flavour.The original goal of Illy was to provide best coffee to customers, but the steady-going tincture coffee does not necessarily mean responsibly produced coffee. So many coffee growing countries use un h angiotensin converting enzymest growing practices which skips the bell of 1 kg of coffee from the farmer, but jeopardizes the company? s estimable image. Thus now Illy needs to balance three aspects caliber, profitability and ethical aspect, which is a difficult problem, since it involves the integral allow train and for the company of such(prenominal) scale of operation to solve this problem go away be super d ifficult (140 countries on 5 continents).Plus this challenge is also perseverance control all big coffee companies are moving towards sustainability of supply chain, and great awareness of the customers about these issues nowadays can give a coffee company supernumerary competitive advantage. 2)First of all before we outline alternatives and solutions, we need to clarify, what responsible coffee air fashion. Although sustainability has been defined in a diversity of ways over the past several decades, the Brundtland Report (1987) has provided the most widely- authentic and countenance definition at the international level.According to the Brundtland report Sustainable discipline is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.. In relation to coffee business Acting Responsibly involves a complex activity spread over whole supply chain -Environmentally related bear in mind environmental impact s of coffee exertion (technified or mono-culture growing practices impact, rain forests, pesticides, waste water and etc. -Social aspects social welfare of farmers and their families (minimum fair price limits, no price dumping, child labor prevention) -Business-wise when all actions and decisions taken are analyzed in terms of long-term goals of the company, flowing and future benefits for stakeholders and preserving viability of the company. With responsible business and supply chain model in mind a multinational like Illy might choose one of few alternative pathways -Marketing based approach market the imagination under a good sauce to your customers.Might involve working with few sustainable/ organic pilot farms and making public aware of this, or introducing your own quality standard, like own CAFE standard of Starbucks. This alternative does not involve additional costs, or reengineering of supply chain, it is more like developing of Responsible practices idea. But it m ight create additional revenues due to the fact that company can sell responsible coffee with even bigger price margin. Time wise this idea might be implemented quite quickly. -Supplier related approach.This involves responsible purchasing outline control and opinion on the level of bigger supply chain units cooperatives/processing plants/exporters. Does not require complete reengineering of whole supply chain or additional costs related to withdraw farmers support/educational programs. More epoch consuming selection, assessment of existing and new suppliers might take time. Does not really fit with Illy, since its strategy has always been close work with separate farmers. -From bottom to top strategy every level of supply chain needs to be re-thought.Company needs to realize the importance of each individual farmer (f. ex through payment of Fair trade or responsible farming bonuses to ensure the sustainable existence of farmer communities), not only(prenominal) use quality control (Illy is already working with ISO quality control standards) but rather keep an eye on whole production and processing process. Moreowever, the efficiency of packing, logistics and transportation should be analyzed and amend which lead result in eliminating or reducing the costly, non-environmentally-friendly steps.But doing this Illy might stupefy additional costs (because now it ordain have to pay more for raw material), which can however be scratch line not at the expense of the responsible customer (who is ready to pay more for responsibly produced coffee), but rather through improving the efficiency of the whole supply chain, which will reduce the average COGS. This strategy involves ample cooperation with all other stakeholders in coffee business working on and adhering to commonly accepted quality and sustainability standards (like Fair Trade label, Utz coffee, RA and etc. , cooperation with local inquiry institutes to introduce demote and more sustainable farming practices for growers, or even bringing to urinateher all main players like Sara Lee, Nestle and the European branch of Kraft did in 2002 by creating of the Common Code for the deep brown Community, a multi-stakeholder initiative aimed at increasing sustainability and responsibility awareness in the coffee sector. 3)While choosing the alternative, we have been guided by Illy? s strategy, code of pay and long-term benefits of the decision to the company.We do not want any satisficing decision, we want to preferimize the whole system company has a lot of strengths, we can use them to build up more powerful structure. We want our customers to get only the best coffee, but we also want to do it responsibly. If there is any decision to be taken, which will involve not only additional costs or revenue growth, but also extensive long-run improvement of the whole business model, we will chose this decision. Meaning, that we will opt for alternative number 3. 4)Implementing the d ecision.Improve the technology and introduce Integrated Process focus to cut production and logistics costs and reduce business complexity to offset the costs of high quality coffee. The company buys coffee beans directly from farmers that reduce the higher prices in the spot market. The shipping and the supply of coffee beans from farmers to the company is carried out by company under strict supervision and inspections. This shows that the negotiate power of suppliers is low with companys commitments to provide higher quality coffee to the customers.There is a need to create a strategy for the developing economies especially the BRICs (Brazil, Russia, India and China) which will in future become come upon markets. A safe bet would be to create an alliance with a local partner who has expertise in the local markets, cultures and politics for example in India and China which are very big geographically, population-wise and culture-wise the local partner will add immense value in l aunching and growing the Illy products in a way that best suits that particular market. 5)Results Evaluation might be performed in several steps.On one get hold of, we will analyse the actual carrying into action if the revenue and market share is growing, if COGS are decreasing due to better efficiency, this means the strategy has been chosen and implemented right. On the other hand we need to understand the degree of customer awareness of our strategy that means answering the question did all these changes happen because we turned to more responsible business, or it was just due to other favourable factorsIn this model customer opinion must be collected and analysed.Competitors reaction and Illys response What can the competitors do? There is a wide medley of ways from fair competition by improving the quality or reducing the price to unfair battle, consisting for example of running a magisterial smear and defamatory campaign against a competitor, both directly and indire ctly (on the internet and through certain machine distributors), inventioned to put consumers off buying Illy? s coffee.Some competitors try to do their own investigation to scupper the unsustainable practices within supply chain (sometimes a company itself has no idea what sub-sub-suppliers are doing) and make sure that it leaks to social networks. Illy should in its turn double-check the standards and practices within its supply chain to avoid bad rumor spread, and be proactive have active campaign in social media to create awareness of its brand and customers loyalty. SWOT Tangible Product The product which is coffee is very fine.So the foundation of the brand which is the basic product is solid fundamental Brand Illy brand is is a red background with white lettering. You will also find Illy in plain bold red lettering. I believe is to attract the attention of the people. This logo has been used since (1980). The core elements for Illy are a strong brand name, high quality, attractive packaging and design The Augmented brand Illy has added value to their brand by selling angelic beans in sealed cans, also giving the consumer the option to have it eat into whether they want it bold, decaffeinated, caffeinated. hey also have tablet which goes inside espresso machines sold in any illy location. . The main factor is that along with high quality the brand is also associated with high price and hence is getting restricted to a niche market only The Potential Brand When consumers only trust their morning coffee on the Illy brand than Illy has made their mark, even though in many other call markets like Italy it has been a major(ip) success, but it still needs to win other important key market like Japan and China.There are in all sextette products that will be analysed here, premium coffee, coffee pods for machines, ready to drink tin coffee, Agrimontana, the confectionary products, Domori the chocolate business and Dammann Feres the tea brand. Leader C offee Try Harder each the small brands come under this sector but mainly the pods of coffee business Double or Quit Coke has partner up with the Illy brand to make up a canned coffee business in which the coffee will be sold to the consumer.Custodial Is similar to the funds cow concept in BCG, this would be the chocolate business notes Generator this is undoubtedly the premium coffee business Phased withdrawal this is a difficult one to point but it seems the confectionary business is the most belike candidate as it is not generating as much growth or profits as it should Divest Again a difficult one but once again the wine or confectionary products in the Illy portfolio distinguish Points compendium Illy has a strong brand and is associated with high quality and premium price The company has shown impressive growth despite recession The key strategic partnerships like the one with Coca Cola company for canned coffee are proving to be the real winners The group needs to focus its attention on the sister brands and needs to extend the well-established Illy rand image to these sister concerns There is an urgent need to improve the sales and awareness of the sister companies The company applies to its R, supply chain and marketing expertise to grow its coffee products like coffee pods and machines There is a need to create a strategy for the developing economies especially the BRICs (Brazil, Russia, India and China) which will in future become key markets The company needs to constantly re-invent the ways to sustain customer saki in its brand and its products, just like the Universita del caffe. Strenghts Strong retail put in operations50,000+ events in which illy is involved annually worldwide and more than 6 million cups are consumed each day. -Wide geographic presence 140 countries where illy is acquirable -Top-quality final product 4 major certifications for quality and sustainability, 4 company-founded research facilities, 4 of 8 major worldwide co ffee industry innovations, This is a known and appreciated throughout the world for high quality and unique taste. The company has followed a strategy, which has a high focus on quality and consistency of their products -Experience created in 1933 Innovation The first,pressurized packaging, came in 1934, just one year after the companys founding. By adding inert nitrogen blow under pressure, an oxygen-free environment forms as illy cans are sealed, preserving essential aromas and promoting mingling of coffees naturally occurring oils. Result coffee that not only stays fresher longer than under any other packaging method, but whose flavor is actually enhanced over time by its surroundings. The second, came just one year later, in 1935 the Illetta, precursor of the modern espresso machine that, for the first time, separated pressure and heating elements.Result espresso that is consistently round, rich and balanced, not virulent or burnt-tasting. 1974 saw illys third revolutionary invention pre-tamped, pre-dosed, expertly ground espresso in single serve paper pods. Result elegant espresso in reach of anyone, anywhere at home, at the office, or at a favorite cafe or restaurant. The system, called ESE (Easy Serving Espresso) became an industry standard. Another strength is the strong supply chain right from the coffee bean farmers to the suppliers, Illy has maintained strict quality control and good relations creating value for everyone involved.Weaknesses sluggish growth rate / Investments needed (coffee machines that support the branded Opportunities -Business expansions Gruppo illy includes Domori premium chocolate (acquired July 2006) Dammann Freres the legendary French purveyor of tea (March 2007) Mastrojanni critically lauded wine maker in Montalcino, Italy (September 2008) Agrimontana high- quality jams and marron glace (stake acquired December, 2005) -Rising hotel and food service industry in Italy Rising trends in coffee exports 56% share o f illy coffee enjoyed exterior of Italy, 200+ espressamente illy coffee bar locations worldwide -10% rate growth market -Been recognized from the market as the dominating market -Scientific research genetics, agronomy, botany, physics, mathematics, chemistry, biochemistry, biology, engineering, physiology and psychology. all told areas explored in the four laboratories illy. -Quality and sustainability Sustainability has three-fold implicationsat illy economic, social and environmental. Ready to drink coffee business partnering with Coca Cola will attract global customers and create newer segments for the companys products -There is a need to create a strategy for the developing economies especially the BRICs (Brazil, Russia, India and China) which will in future become key markets. Threats -Highly competitive market Key competitors Caffee Negro Group, Luigi Lavazza, Segafredo Zanetti, Starbucks Corporation -Risk of battle in dominating the market by multinationals Nespresso -Economic crisis Most of the global markets including nearly all the major markets that Illy perates in have suffered from recent credit crisis and economic downturn -While expanding globally the major assay involved is the supply of high quality premium coffee beans -The discrepancy in the growth of the sister brands and their chare in the portfolio creates a real affright of losing these brands at some point if they get totally overshadowed by the coffee business. At this point, Illy needs to consider the growth rate and growing strategies of these pertly acquired brands to keep them profitable.